By Dow Jones Business News, February 21, 2013, 02:14:00 PM EDT
--Number of rail cars delivering oil in U.S. more than tripled in 2012
--Refiners expanding use of rail as pipeline construction lags
--Kinder Morgan Energy Partners business will build Houston oil rail terminal
(Updates with Kinder Morgan Energy Partners rail announcement in seventh paragraph.)
By Ben Lefebvre
The use of rail cars to transport crude oil in the U.S. reached a record in 2012 and continues to rise, the
Association of American Railroads said Thursday.
Refiners increasingly depend on rail cars to bring in the oil being produced in increasing quantities throughout the
U.S. and Canada. Innovations in drilling techniques have allowed oil companies to cull oil from shale formations in
South Texas, North Dakota and elsewhere faster than pipeline companies have been able to connect the wells to market.
A record 233,811 carloads of crude oil traversed the U.S. in 2012, up from 65,751 carloads the year before, the
association said. In January, crude oil and fuel shipments via rail averaged 13,043 carloads a week, up 54% from the
2012 weekly average, the association added.
"There's never been a year when they've been 250% plus up," said Kevin Sterling, analyst at BB&T Capital Markets. "The
tank car manufacturers, they're building tank cars as fast as the orders come in."
In Canada, rail shipments of crude oil and finished fuel reached an average of 6,838 carloads in January, up 35% from
the 2012 average.
Rail shipments of oil will continue to rise as PBF Energy Inc. ( PBF ), Phillips 66 ( PSX ) and other refiners increase
their demand for oil from West Canada, Cushing, Okla., West Texas and the Bakken shale formation in North Dakota,
analysts have said.
Kinder Morgan Energy Partners LP ( KMP ) said Thursday its joint-venture project KW Express LLC would build a 210,000
barrel-a-day crude-by-rail project on the Houston Ship Channel, a major conduit for oil coming to the Houston refining
belt.
The use of rail cars is also expanding further to the east coast, where PBF runs two refineries that had been
dependent on more expensive imported oil.
"We're convinced this is a very, very long-term trend," PBF Chairman Tom O'Malley said of railcar-oil delivery during
a call with investors.
--Alison Sider contributed to this article.
Write to Ben Lefebvre at ben.lefebvre@dowjones.com
(END) Dow Jones Newswires
02-21-131414ET
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