CSX says crude-by-rail business poised for growth
NEWTON, Massachusetts Nov 21 (Reuters) - CSX Corp said on Thursday its crude-by-rail business has the capacity to growth seven-fold over the next couple of years, as U.S. Northeast refiners take up growing supply from North Dakota's Bakken oil reservoir.
The East Coast-focused rail company, hard hit by a sharp decline in coal transport, said it currently moves about 70,000 barrels of crude oil per day, mostly between the Bakken region and terminals in New York and Pennsylvania.
"It makes up a small part of our business, about 1 percent, but we do think there's an opportunity to grow it quite significantly over the next couple years," Fredrik Eliasson, chief financial officer of the Jacksonville, Florida-based company, told Reuters on the sidelines of a conference outside of Boston.
"We probably have room to take up to six or seven trains a day - right now it is about one train a day that we're moving," he said, adding each train typically carries about 70,000 barrels in 100 tankers.
Shipments of crude on railways have surged over the past two years, as production of light sweet oil from the Bakken surged. With little refining capacity nearby to process the crude and insufficient pipelines to take it to market, oil companies turned to rail to gain quick access to refining hubs on the Gulf Coast as well as the East and West Coasts.
Eliasson said the company saw little competition from new crude oil pipeline projects, which mostly focus on moving oil to refineries in the Gulf Coast, and said a new effort by TransCanada Corp to move Western Canadian crude oil to Canada's eastern seaboard was also not a threat.
"Most of the Canadian oil is much heavier. With the exception of one or two refineries in the Northeast, they all take light sweet. So we don't think that will make a big difference for us," he said.
The American Association of Railroads said more than 861,000 barrels per day - more than a 10th of U.S. output of 7.61 million bpd - moved by rail in the second quarter this year, up 111 percent from the same period in 2012.
Refineries on the East Coast, which had seen margins crushed by the high cost of importing crude, are taking rising volumes of Bakken oil shipped on rails to help improve profitability. Philadelphia Energy Solutions Pennsylvania plant alone takes one-fifth of Bakken output. Continued...