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UPDATE 1-CSX says East Coast refiners committed to crude by rail
July 17, 2013 / 2:16 PM / 4 years ago

UPDATE 1-CSX says East Coast refiners committed to crude by rail

* CSX says crude by rail to East Coast refiners will continue

* Customers remain committed despite more expensive US crude

* CSX says too early to speculate on regulations post Quebec disaster

By Kristen Hays

HOUSTON, July 17 (Reuters) - U.S. East Coast refiners who receive North Dakota Bakken crude by rail see "no significant need to change" back to imports because of the narrowed discount of U.S. crude to London's Brent, a CSX Corp executive told analysts on Wednesday.

"When we talk to our customers as recently as this week about that, what they're telling us is they don't see any significant need to change," said Clarence Gooden, chief commercial officer for CSX.

East Coast refineries have increasingly tapped Bakken shipments by rail to replace more expensive imports, but the discount of U.S. crude to Brent has narrowed from more than $20 a barrel earlier this year to less than $3 a barrel.

The narrowed spread shrinks the financial benefit of tapping that cheaper crude because moving it by rail to the East Coast can cost $16 a barrel. But refiners, notably PBF Energy, have invested tens of millions of dollars in offloading facilities to receive that crude as more efficient pipelines to move it to the region are lacking and none have been proposed.

And Gooden said refiners have commitments to receive Bakken crude rather than imports.

"We don't see any change right now in their behaviors as a result of the narrowing of the spread," he said.

Crude-by-rail shipments in the U.S. and Canada have grown sharply in light of booming North American crude output and lack of enough pipeline infrastructure to move it to markets.

Such shipments are under scrutiny in the aftermath of the disastrous July 6 crash in Quebec, where a runaway train hauling 72 tanker cars of crude careened, derailed and exploded in the small town of Lac-Megantic. Some 37 bodies have so far been recovered and more remain missing.

When an analyst asked CSX executives if they expect more regulations to be imposed in light of the accident, CSX Chief Executive Michael Ward said it was difficult to speculate as investigations are ongoing.

Canada's Transportation Safety Board is probing the crash, focusing in part on the number of handbrakes that were set on the train, which had been parked for the night on a part of the main line about 8 miles from town.

"I'm hopeful that as they determine the cause of this, if there's something to be learned to make us safer, we want to learn from that," Ward said.

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