December 10, 2013 / 6:38 PM / 4 years ago

UPDATE 1-Tesoro- West Coast crude rail unloading to hit nearly 1 mln bpd

* West Coast offloading expected to reach 910,000 bpd by 2015

* Rail-to-barge project part of growth

By Kristen Hays

HOUSTON, Dec 10 (Reuters) - Independent refiner Tesoro Corp sees rail unloading capacity all along the U.S. West Coast for North Dakota Bakken crude oil growing to nearly 1 million barrels per day through 2015, an executive said on Tuesday.

The projected jump to 910,000 bpd from the industry's current unloading capacity of 218,000 bpd - an increase of more than 300 percent - includes Tesoro's $100 million joint-venture railport project in Washington state, Keith Casey, senior vice president of strategy and business development for Tesoro, said on a webcast of the company's annual meeting with analysts.

Other refiners and logistics companies are building or seeking to build smaller projects to bring in cheaper crude via rail as well.

"Loading capacity is keeping pace with production growth," Casey said.

The growth will accommodate increasing efforts by West Coast refiners to tap inland U.S. and Canadian heavy crudes via rail - cheaper alternatives to imports and Alaskan crude - as no major pipelines move crude to that largely isolated market.

Tesoro's rail-to-barge project with Savage Services is the largest of the offloading projects announced so far.

Tesoro Chief Executive Greg Goff told analysts that the railport is seeking a state permit that would allow handling of up to 380,000 barrels per day of crude.

"That will be the permit," Goff said. "But the way the system is being built, rail shipments we estimate will be around 300,000 barrels per day there."

Tesoro expects the permit to be awarded by the third quarter next year.

Casey said West Coast refiners now receive about 810,000 bpd in what he called "substitutable" waterborne imports and Alaskan crude, or shipments that can be replaced by cheaper crudes received via rail.

The region's expected rail unloading capacity growth to 910,000 bpd will more than surpass that, he said.

Tesoro is committed to take up to 60,000 bpd of crude railed to the Port of Vancouver once the project starts up in late 2014 and early 2015, and the joint venture can offer the rest to other west Coast refiners.

Several also are working on their own rail offloading projects, including BP Plc, Phillips 66 and Alon Energy USA. Tesoro also rails up to 50,000 bpd of Bakken crude to its 120,000 bpd refinery in Anacortes, Washington.

CRUDE FLEXIBILITY

Goff noted that Tesoro doesn't have long-term contracts for imports, so the company can easily substitute cheaper U.S. crude at its refineries.

"In no case do we have long-term contracts that limit our flexibility to take crude" except for a seven-year deal with Newfield Exploration Co to supply the company's 57,500 bpd refinery in Salt Lake City, Utah, Goff said.

"Otherwise, we have the flexibility to optimize on a short-term basis," he said.

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