We Start The Day At Record Low Active Rigs In North Dakota, 44 -- February 3, 2016

Well, actually, I start the day snowed in, in northern Kansas. And what a beautiful day it is. 

Active rigs:

	2/3/2016	02/03/2015	02/03/2014	02/03/2013	02/03/2012
Active Rigs	44	143	188	187	202

RBN Energy: Crude By Rail Decline Picks Up Pace. Archived.

With crude prices below $30/Bbl and the price spread between U.S. domestic crude benchmark West Texas Intermediate (WTI) and international equivalent Brent trading in a very narrow range – the economics of moving Crude-by-Rail (CBR) rarely make sense any more.  Rail shipments are down across all regions and railroads are reporting sharply lower revenues from CBR shipments.  Today we start a new series revisiting the regions where CBR traffic boomed a couple of years back and contemplating its future value to shippers and refiners.

We’ve been covering the CBR scene ever since RBN started posting blogs back in 2012 – including our seminal series “Crude Loves Rock’n’Rail” that described how producers turned to rail over pipelines – first in North Dakota and later in other shale basins. Historically, crude-by-rail transport dominated the early oil industry in North America - underpinning John D Rockefeller’s monopoly.

But it’s use declined after WW2 once pipelines were built to ship larger volumes of crude over longer distances. Pipelines have been almost always preferred since then because (once built) their freight costs are generally lower than using rail or trucks. More recently however, surging crude production from shale overwhelmed existing pipeline take-away infrastructure leading to significant constraints and price discounting – particularly in the Midwest – while producers waited for the build out of new pipeline capacity that is typically a relatively slow process taking up to 3 years.

As a result, at the end of 2010, producers (led by innovators EOG and railroad BNSF) turned to the rails to deliver crude past congested pipelines to coastal markets where netbacks (crude sales price less transport costs from the wellhead) were considerably higher. The resulting surge saw total U.S. CBR shipments (not including Canadian imports) increase from 33 Mb/d in January 2010 to a peak of 928 Mb/d in October 2014 (as measured by the Energy Information Administration – EIA – see A Look At The Crude By Rail Track Record).