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Supplying East Coast crude oil

Hydrocarbon Engineering,

In the latest This Week In Petroleum, the US EIA looks at how rail is likely to supply an increased share of East Coast crude oil.

For the majority of the last 10 years, crude oil runs at refineries on the East Coast have declined as a number of refineries in the region have been closed down. As almost all crude oil processed at East Coast (PADD 1) refineries was imported, the crude imports showed a very similar decline over the same period. However, during the spring and summer of this year, crude runs at these refineries increased year on year, aided by the restart of the Delta Air Lines’ Trainer, Pennsylvania refinery at the end of last year. Despite this modest recovery in crude runs, net PADD 1 crude imports have continued to decline compared with 2012. The decline in net crude imports even as crude runs have increased is likely the result of increasing volumes of domestic crude oil being delivered to the region via rail.

Import methods

Historically, East Coast refineries have relied heavily on imported crude oil that arrives via ocean tanker. Imported crude has been expensive compared to growing volumes of domestic crude. The sometimes significant price premium for the globally traded seaborne crude compared to domestically produced has encouraged refiners and merchant terminal operators to invest in crude by rail infrastructure to deliver domestic crude to the PADD 1 area. During 2013, increased rail deliveries helped reduce PADD 1 refiner crude acquisition costs. Last year, East Coast refiners’ crude acquisition costs were US$ 10.50 /bbl above the US average. During the first half of this year they have fallen to less than US$ 6 /bbl above.

The EIA does no currently collect data on domestic movements of crude by rail, however an examination of EIA data shows that there is a growing supply of crude to PADD 1 that is likely not accounted for by production, imports or other transfers. Crude oil delivered via raid to PADD 1 refineries is likely contributing to the increase in unaccounted for crude oil supply above historical levels.

Adapted from press release by Claira Lloyd

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