Sawtooth500 Crude is more expensive to get. I also hear stuff occasionally come up about the extraction of shale oil in Canada. Are we running out of oil? No, I really don't believe so. But, are we running out of cheap, easy to extract oil? That may be the case. As all the "easy oil" gets used up oil companies will have no choice but to pursue the harder, more expensive to extract stuff.
Crude is more expensive to get. I also hear stuff occasionally come up about the extraction of shale oil in Canada. Are we running out of oil? No, I really don't believe so. But, are we running out of cheap, easy to extract oil? That may be the case. As all the "easy oil" gets used up oil companies will have no choice but to pursue the harder, more expensive to extract stuff.
Exactly. Bakken oil is great for us to have and it's very clean and sweet, as others have mentioned in this thread. Think of aquifer water as opposed to sewer water. But the oil market influence itself will be negligible since the ability to extract this crude will depend entirely on the market prices.
The USGS estimates there may be 3 to 4.3 Billion Barrels of "technically" recoverable Bakken oil in the U.S. "Technically," because Bakken oil doesn't lie in fields the same way as in many other places. It exists in fields of fractures in the bedrock. Geologists can only tell where the oil should be. Then they'll drill, hoping to hit a fracture. If they succeed, then a reservoir of oil becomes available. But they could happen to drill just 20 feet away and never hit anything. As a result, even confirming fields will be expensive. And once a field has been confirmed, just establishing wells will be much more expensive because of this fracturing.
Right now they've been lucky to hit some well-fractured fields, but the drilling expenses will become greater the less fractured the fields are. And finally, as a method of extracting oil from the very poorly-fractured shale, they'll have to shatter the bedrock themselves to create the fractures that they can then drill into. The technologies for this are prohibitively expensive at the moment because oil just isn't worth enough yet.
One method may be to superheat the bedrock and then flash-freeze it. I can't imagine that being done on the cheap. But by the time it becomes feasible to extract that kind of oil, we'll be pretty much squeezing Earth's oil sponge anyway, so price won't be as much of an object. I shutter to think how much refined fuel will cost at that point.
But as the more expensive oils becomes feasible to extract, that extra oil on the market will have a more stabilizing affect on the already high prices.
A good portion of this formation lies in Canada. CN has a respectable line through, and CP has a myriad of lines within the formation. I wouldn't doubt they're both watching this.
ericsp Who said anything about shipping oil to OK, LA, or TX via the West Coast?
Who said anything about shipping oil to OK, LA, or TX via the West Coast?
Nobody, as I see upon review. I read carelessly -- sorry.
Bakke Crude is more expensive to get. I also hear stuff occasionally come up about the extraction of shale oil in Canada. Are we running out of oil? No, I really don't believe so. But, are we running out of cheap, easy to extract oil? That may be the case. As all the "easy oil" gets used up oil companies will have no choice but to pursue the harder, more expensive to extract stuff.
AltonFan It may very well be that current market prices are what makes exploiting the Bakken field financially viable.
It may very well be that current market prices are what makes exploiting the Bakken field financially viable.
I don't think there's any doubt about that. But then, market prices are what makes basically anything finacially viable. Whatever it is, it has to be worth more than it cost or it's not gonna' be financially viable.
For me, and I've been around for a while, the amazing thing is that this crude oil is moving through to destination by rail. In years gone by the oil would have gone into a barge at the closest river terminal. Either St. Paul or Sioux City. The government would have seen to that by forcing the through rail rate to be high enough to cause the transfer to barge.
They had the idea that they could allocate better than the market. Some of 'em still believe they can hold hearings, listen to lawyers present arguments, and do a better job than the market. They can't.
Has anyone heard if these new terminals will be set up to handle regular tankcars or Tank Train tankcars?
"No soup for you!" - Yev Kassem (from Seinfeld)
Consol Regardless of who hauls the Bakken Crude where ever, it still is not enough to effect/affect market prices for crude oil. As stated above, there are only so many refineries capable of refining the sweet crude. The other side is that with the permit process taking near to five plus years to get a new refinery built...it is very doubtful that regardless of the size of the Bakken field, it's impact on the market place will be marginal at best.
Regardless of who hauls the Bakken Crude where ever, it still is not enough to effect/affect market prices for crude oil. As stated above, there are only so many refineries capable of refining the sweet crude. The other side is that with the permit process taking near to five plus years to get a new refinery built...it is very doubtful that regardless of the size of the Bakken field, it's impact on the market place will be marginal at best.
Dan
I assure you that BNSF will not be shipping Bakken oil (western N.D., eastern Montana) to destinations in Oklahoma, Louisiana and Texas via the West Coast. The unhelpful newspaper stories I have seen, and the BNSF's own web site, are silent on the routing, but BNSF has lots of options east and then south.
No, they are placarded 1267, which is crude oil.
Actually what you are seeing are ethanol cars from the mid-west. Living in the heart of corn country (Northwest Iowa) we see so many, they seem as thick as grain hoppers.
Dick
greyhounds beaulieu: Make no mistake about the motivations of the people drilling and producing oil in the Bakken formation, they are in it for the money, not to lower the price of gas for US consumers. My kind of folks!
beaulieu: Make no mistake about the motivations of the people drilling and producing oil in the Bakken formation, they are in it for the money, not to lower the price of gas for US consumers.
Make no mistake about the motivations of the people drilling and producing oil in the Bakken formation, they are in it for the money, not to lower the price of gas for US consumers.
My kind of folks!
What's also nice is that a lot of the money earned by the folks drilling and producing will be spent in the US and provide tax revenues for local, state and federal governments. While production of oil from the Bakken formation may not lower prices (doesn't make any sense to sell oil for less than it costs to produce), it will help prices from rising much higher.
beaulieu Make no mistake about the motivations of the people drilling and producing oil in the Bakken formation, they are in it for the money, not to lower the price of gas for US consumers.
Sawtooth500 I'm actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP's route from Salt Lake City to LA, but I don't believe that BNSF has trackage right there. Any thoughts?
I'm actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP's route from Salt Lake City to LA, but I don't believe that BNSF has trackage right there. Any thoughts?
If my guesses about the source of the crude oil and trains hauling the tankcars are correct, then it goes west to Pasco, WA then south to the Los Angeles area.
Excellent explanation of the refinery problem. Bakken crude's going all over the place since there's very limited light-crude refining capacity in the region aside from Tesoro's refinery at Mandan, North Dakota. Refining's a tough, tough business that exists on the margin between the price of crude oil and product prices at the pump. Meanwhile, Watco's Stillwater Central Railroad (former Frisco/Burlington Northern) has a crude terminal under construction at Stroud, Oklahoma. Bakken crude will be unloaded from unit trains into a new pipeline to the nearby Cushing tank farm/pipeline hub. Service will start this fall.
beaulieu [snipped] . . . So the owners of the Bakken crude have been shipping their oil to terminals where they can get a better price. . . . The Oil Producers like Rail's flexibility to change delivery locations with the changing price of oil at each market.
miniwyo You won't see the oil producers building any more refineries either. There is not enough oil left to process that would justify that kind of investment. They would never make their money back. [snip]
In view of these facts /opinion, I doubt if a pipeline would be willing to risk either a shortfall of oil or a change in the delivery points, either of which would 'strand' their investment without customers from whom to return it. While the pipeline might seek a long-term contract with the producers, they too might be unwilling to commit to a certain volume that might not be recoverable, or to lock themselves into a specific market when they may be able to get better prices elsewhere. Said another way, they may be gambling on taking advantage of better and rising prices for their 'good stuff' in the 'spot' market, as opposed to locking into a long-term contract at a pre-determined prices to just a handful of buyers in one or a few locations that would be served by an inherently limited and inflexible pipeline.
- Paul North.
Is this business subject to eventual pipeline construction and competition?
Beaulieu saiid; (in part):
"...The price of delivered Light Sweet Bakken Crude at St. James, LA has been enough higher than the Cushing, OK terminal that it more than compensates for the rail freight charge to ship it there. Louisiana Crude Oil is a Light Sweet Crude similar to Bakken Oil, with production of Louisiana Oil failing for the last several years, Refineries set up to process Louisiana Oil have to either get similar oil from the Persian Gulf or have the Bakken Oil shipped by Rail to a location where it can be put into a pipeline for final delivery. The Oil Producers like Rail's flexibility to change delivery locations with the changing price of oil at each market. Gone are the days when the big oil companies controlled product.."
I notice in the above statement by Beaulieu, a similarity to what has been a wide-spread practice in the lmber and building materials industry for a number of years; The loading of a rail car of a specific grade of materials and then sending that car on a routing that would consume much travel time. [ie; Routing to a destination with an infrequent level of service] . That would give the sellers sales department the opportunity to find a buyer foir that load.
The 'game' within that tactic is that, if the price is too high, and a buyer cannot be found, the seller must reduce the price of the product, [the closer the car is to its original stated destination,the more aware the shipper is, of the liablility for demurrage charges] If the carload reaches its destination, then, the seller is faced with 'eating' the demurrage on the car til a buyer can be found, and the car sent to be unloaded. That same car can be handled by a simple re-routing by the railroad if sold in route.
I am not sure if petroleum would qualify under a similar set of rules.(?) That bear in mind the other statement that many refineries are near capacity, and are generally confined to a specialty of grade in their feedstock.
All which makes the proposed facility at Port Arthur,Tx. by KCSR and the Savage Company look like it is well positioned to collect the Bakken Crude and transship to either Texas refineries, by pipeline or to load out onto ships.
The State of NM already owns the line south from Lamy. It had to withdraw from its agreement to purchase the line from Trinidad, CO to Lamy because of current financial constraints.
Shorter in miles is only one segment in efficient operation of a RR. The BNSF people have gained a reputation making very good decisions, at least Warren Buffett thinks so.
I speculate that the legalities and 'politics' of the Raton Pass route may also play a part. BNSF having declared it surplus and committed to sell it to New Mexico (and Colorado ?), it would not look good to have to do another 'Stampede Pass' kind of maneuver and attempt to or have to buy it back to essentially re-open it to freight traffic. That kind of 'need' would leave BNSF in a weak bargaining position and perhaps result in a higher re-purchase price than the sale price, and also bearing a larger share of the maintenance and upgrading costs, etc.
Speaking of which, I believe BNSF hasn't done much heavy maintenance on that line for like 5+ years now, again on the basis that it is now or soon going to be NM's and/ or Amtrak's responsibility. If BNSF wants to run heavy freight trains over it, a lot of that 'avoided' maintenance work would have to be caught-up with rather quickly - don't think that's in the cards, either.
By the way - anybody have an idea or estimate on how much Bakken crude is being produced and/ or shipped out ? Just trying to get a 'handle' on roughly how many trains per day might per involved there. Thanks.
-Paul North.
Sawtooth500 Why would BNSF direct west coast traffic going south from Denver via Amarillo? That significantly adds to the mileage, Raton would cut off many many miles.
Why would BNSF direct west coast traffic going south from Denver via Amarillo? That significantly adds to the mileage, Raton would cut off many many miles.
Simple answer is that the line via Amarillo has much lower grades than Raton Pass. My recollection is that the ruling grade on Raton is 3%, and the cost of the extra motive power needed to climb that hill outweighs the savings from the shorter run
- Erik
[quote user="diningcar"]
Sawtooth500 Paul_D_North_Jr: Sawtooth500: I'm actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP's route from Salt Lake City to LA, but I don't believe that BNSF has trackage right there. Any thoughts? I thought BNSF was granted trackage rights over the former Western Pacific's Feather River Route, but had not yet ever utilized them. (Not at all certain about that, and could well be wrong, though.) - Paul North. Actually, ssuming that there would be a direct rail route south from the Bakken fields I'm pretty sure the fastest way to take the crude there would be via Raton pass - that'd give the line some freight traffic again, but the thing is that there isn't any direct line south from the Bakken fields, you gotta detour either west or east before you go south. That's why I thought maybe going west and then south along the west coast would have been faster. Any thoughts on this? BNSF is directing all southward traffic from Denver with a west coast destination to go east from Pueblo to Las Animas Jct. and then to Amarillo where it then uses the Transcon. They have decided that the Raton Pass line will be left only to Amtrak and have odffered Amtrak the opportunity to use the Transcon instead of the Raton line.
Paul_D_North_Jr: Sawtooth500: I'm actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP's route from Salt Lake City to LA, but I don't believe that BNSF has trackage right there. Any thoughts? I thought BNSF was granted trackage rights over the former Western Pacific's Feather River Route, but had not yet ever utilized them. (Not at all certain about that, and could well be wrong, though.) - Paul North.
Sawtooth500: I'm actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP's route from Salt Lake City to LA, but I don't believe that BNSF has trackage right there. Any thoughts?
I thought BNSF was granted trackage rights over the former Western Pacific's Feather River Route, but had not yet ever utilized them. (Not at all certain about that, and could well be wrong, though.)
Actually, ssuming that there would be a direct rail route south from the Bakken fields I'm pretty sure the fastest way to take the crude there would be via Raton pass - that'd give the line some freight traffic again, but the thing is that there isn't any direct line south from the Bakken fields, you gotta detour either west or east before you go south. That's why I thought maybe going west and then south along the west coast would have been faster. Any thoughts on this?
BNSF is directing all southward traffic from Denver with a west coast destination to go east from Pueblo to Las Animas Jct. and then to Amarillo where it then uses the Transcon. They have decided that the Raton Pass line will be left only to Amtrak and have odffered Amtrak the opportunity to use the Transcon instead of the Raton line.
[quote user="Sawtooth500"]
You won't see the oil producers building any more refineries either. There is not enough oil left to process that would justify that kind of investment. They would never make their money back. But I guarentee you will see Natural Gas facilities pop up all over the place out there.
RJ
"Something hidden, Go and find it. Go and look behind the ranges, Something lost behind the ranges. Lost and waiting for you. Go." The Explorers - Rudyard Kipling
http://sweetwater-photography.com/
BNSF has a combination of Trackage Rights/Haulage Rights from Denver to Stockton, CA. It is always over the former Rio Grande on the eastern end, but on the west end UP will route the BNSF trains over either the former WP or over Donner Pass at their option. BNSF does not have access over the LA&SL through Las Vegas, NV.
Paul_D_North_Jr Sawtooth500: I'm actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP's route from Salt Lake City to LA, but I don't believe that BNSF has trackage right there. Any thoughts? I thought BNSF was granted trackage rights over the former Western Pacific's Feather River Route, but had not yet ever utilized them. (Not at all certain about that, and could well be wrong, though.) - Paul North.
beaulieu [snipped] The Oil Producers like Rail's flexibility to change delivery locations with the changing price of oil at each market.
Clear and informative explanation otherwise, too - thanks !
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