BAKKEN OIL BUSINESS JOURNAL

Nov/Dec 2012, Jan 2013

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Oil Price Information Service to Process Bakken Crude LATER THIS YEAR IRVING OIL'S ST. JOHN REFINERY By Edgar Ang Northeast and the wide $23/bbl Brent- WTI price spread. An Irving spokeswoman declined to com- Photo by Travis DeWitz, DeWitz Photgraphy Irving Oil's 300,000-b/d Saint John refinery on the eastern seaboard of Canada is expected to begin to re- ceive regular supply of Bakken crude from North Dakota later this year after buying a test load in June, in- dustry sources told OPIS on Friday. Besides securing a stable supply of price-advantaged Mid-Con crude via barge delivery, the Canadian refiner is also eyeing the possibility of mar- keting Bakken crude to Northeast refiners, they said. This will depend on the prevailing prices Irving pays for delivered West African crude ver- sus Bakken. Saint John refinery is the third refinery in the Northeast to receive Bakken crude after Phil- lips 66's 238,000-b/d Bayway, N.J., refinery and Philadelphia Energy So- lutions' 330,000-b/d Philadelphia, Pa., refinery. The Bakken light, sweet crude de- livery is expected to complement the refinery's feedstocks, which could in- clude both sweet and/or sour crude. The introduction of Bakken crude should help boost St. John refinery's margin, with Bakken crude priced at about $1.25-$1.50/bbl under West Texas Intermediate. Despite the only slight price discount to WTI, the re- finer would still enjoy comparatively better refining margin after factor- ing in another $12-$15/bbl of rail and barge charges for delivery to the ment on the Bakken crude delivery. OPIS reported that Buckeye Part- ners signed a multi-year deal with Irving Oil to provide it with crude services at its terminal located in Albany, N.Y., that will include off- loading unit trains, storage and throughput. The roughly 1.8-mil- lion-bbl storage facility located within the Port of Albany along the Hudson River is expected to begin han- dling crude oil on Nov. 1, 2012. Buck- eye plans to make modifications to the Albany terminal that, once completed, would allow the terminal to handle both crude and ethanol unit trains with a to- tal capacity in excess of 135,000 b/d, the company said. Sources said that the Albany terminal will allow Irving to build bulk for barge delivery, and the deal with Buckeye allows Irving to get involved in crude logistics without increasing its footprint or infrastructure investment. FIRST TASTE This Bakken crude delivery deal may not come as a surprise as Irving's refin- ery got its first taste of Bakken crude in June as reported by OPIS. The re- finer received a total of about 72,000 bbl of Bakken crude onboard 104 unit railcars in June. The Bakken delivery was made by Florida-based supply and logistics company World Fuel Services via rail directly to Irving's refinery from North Dakota. This 100% rail delivery in- volved some switching on the domestic rail systems, including Canadian Pacific and Pan Am Railways. Pan Am Railways took deliveries of the crude railcars at Mechanicville, N.Y., from CP or CN rails. Mechanicville is located just north of Al- bany. It delivered the crude on its south- north rail line to Mattawamkeag in New Brunswick, and CP took it from there on the final leg to St. John refinery. Fol- lowing the first delivery by World Fuel Services, Irving also bought more train 36 | BAKKEN OIL BUSINESS JOURNAL Nov/Dec 2012, Jan 2013 loads from Statoil via the same rail de- livery route. It is unclear if Irving would continue with this rail-only delivery after the barge supply kicks off at year-end. COST EFFECTIVE However, this 100% rail route was considered less cost-effective than the new Buckeye rail-barge delivery deal, industry sources told OPIS. The Buck- eye's Bakken crude delivery will involve a dual-rail-line delivery on both BN and CSX for delivery to Albany before loading the crude on barges for delivery to Saint John in New Brunswick, they said. Rail transits and intermodal transits add to the freight cost for final delivery. Albany is also a Bakken crude transload site for Global Partners, which delivers about 50,000 b/d via rail. Global delivers the Bakken crude on a single CP rail line to Albany, and the crude is loaded onto barges for delivery to Phillps 66's Bay- way, N.J., refinery. Global's recent acqui- sition of a 60% membership interest in Basin Transload LLC, which operates two transloading facilities in North Dakota with a combined rail loading capacity of 160,000 barrels per day for $80 million, is also expected to increase the com- pany's competitiveness in the Bakken crude logistics arena. Meanwhile, U.S. July crude oil export to Canada jumped to the highest level in the past 14 years, according to the latest monthly data is- sued by the Energy Information Admin- istration. July crude exports to Canada soared to 2.388 million bbl. The highest ever monthly exports to Canada were pegged at 2.933 million bbl in February 1998. In July, OPIS reported that the U.S. Bureau of Industry and Security is- sued a total of 37 crude export licenses so far in 2012. At that current pace, the total number of issued export licenses could rise to as high as 74 by the end of this year. This was compared with the record high of 45 issued in 2011, 39 in 2010, 32 in 2009 and 31 in 2008. ■ Email: eang@opisnet.com

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