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Editorial comment

This year it’s been very difficult to avoid the debates surrounding Keystone XL, a pipeline system to transport synthetic crude oil from the oilsands in Alberta, Canada and from the northern US primarily to Texan and Gulf Coast refineries. Yet, what we can’t ignore is the importance of rail transportation and in some instances barge.

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At the moment US refining companies are turning to railroads to bring crude from the oilsands down to refineries along the Gulf of Mexico. In 2008 9500 carloads of crude was shipped on the railways of America which jumped to 234 000 last year and this year, crude shipments are expected to double to 200 000 bpd. Valero has recently invested in 2000 rail cars for moving crude oil to its refineries and a portion of these new investments will make the journey from Alberta to a multibillion dollar processing unit being designed specially to process heavy crudes from the oilsands in Louisiana. The journey of a barrel of oil can cost US$ 20 by rail, which is double what it would cost by pipeline, however, US refiners are still keen to get their hands on this relatively cheap source of crude, so railroads are becoming ever more important to them.

Valero are not the only company to jump on the railroads, PBF Energy Inc. is going to invest in a US$ 10 million project to increase offloading capacity of Midwestern Bakken crude by rail at the Delaware City Refinery. At the moment, the plant receives 105 000 bpd which will increase to 125 000 bpd when complete. Also, next year the expansion of the Canadian oilsand crude offloading unit is due for completion which will allow rail capacity to the Delaware facility to hit 205 000 bpd. Philadelphia Energy Solutions has also embraced the method of transportation by officially opening its rail line project in early October which is being used to ship Bakken crude from North Dakota to the Philadelphia refinery. 160 000 bpd is being received by the plant thanks to the railway and the addition of a high speed unloading facility.

Moving on, barges are also an important transportation method, especially for US petroleum products reaching northwest Europe, however, according to a recent report from the US Energy Information Administration (EIA), this has run in to some problems recently. In the first eight months of 2013, average exports of petroleum products to the Netherlands fell by 24 000 bpd compared to 2012 figures. This is quite a knock considering that the Netherlands is the third largest export destination for US petroleum products. Heavy rains and widespread flooding along the Rhine River, Germany, as well as low river levels during the summer forcing lighter loads to be transported and strikes by German canal operators have caused delays in deliveries. These events were of concern for the oil market as a whole as while the Netherlands receives vast quantities of US petroleum products, only 27% is used domestically. The Netherlands is basically one of the major hubs for shipping US products to the rest of northwest Europe as it is home to the ports of Amsterdam and Rotterdam, the latter alone being home to 80 million bbls of crude oil and petroleum products storage capacity.

Rail and barge are of course important to the industry, however, they will always play the underdog to pipelines which provide a cheaper mode of transport. However, for the US at least, until Keystone XL is cleared for construction, it looks like the railway is going to keep on growing.

Finally, the Hydrocarbon Engineering team hope you enjoy the festive season and have a healthy and happy new year.