Pipelines take a long time to build. The rapid increase in oil coming out of the ground in North Dakota was leaving producers worried. How could they get all that oil to market? There was so much oil going through the existing pipeline to one location (Cushing) that there was a big discount on that oil.
People who wanted to make a buck stepped in. There’s now enough capacity to get all the oil to market and the discount for Bakken crude is gone.
That’s my summary of RBN Energy’s post, From a Famine of Pipeline to a Feast of Rail – Giving Thanks for Bakken Delivery.
The solution? Build loading facilities to put crude on rail cars and take a hundred or so cars to some other market. Since the first of the year, several rail companies have built a lot of facilities:
With 18 rail terminals of various sizes and capabilities now operating in the North Dakota Bakken production area, the logistics challenge to find routes to market has come full circle from a famine of pipelines to a feast of rail.
(“From a famine of pipelines to a feast of rail.” Wish I could write half that well.)
The article says there is now enough capacity to cover production increases until 2014. If more is needed, I’m sure the rail companies can build more. And do so before they hit a capacity limit.
I’ve heard from my source on the scene that there has been a lot of new main rail lines going in since the first of the year. That has paid off.
Look at the creativity and ingenuity in play:
As far as destinations for Bakken crude go, the number of options has broadened with all the rail terminals. One of the most impressive consequences of this year’s effort to get increasing crude production out of landlocked North Dakota is the number and variety of routes and destinations that ingenious marketers are devising to accomplish the task.
By pipeline there were previously two destinations for N.D. oil. The post lists 15 new destinations served by rail today. That not only allows a means to get crude out of the state, but provides a lot of options so producers can choose whichever destination is paying most at the moment.
Cool. Take a severe capacity limit. Add technical creativity, marketing ingenuity, and capital in a capitalist system with a functioning rule of law. Problem solved in 10 months. Very cool.
And all by people who merely wanted to make a buck. And everyone is better off.