Tanker Carrying Bakken Oil to Canadian Refinery Runs Aground

An oil tanker carrying Bakken crude to Irving Oil Corp.’s refinery in Canada from Albany, New York, ran aground yesterday in the Hudson River, delaying the first of what is expected to be many voyages on the route.

The 600-foot (183-meter) vessel Stena Primorsk returned to the Port of Albany today from an anchorage point near Stuyvesant, New York, said Richard Hendrick, general manager of the port, in a phone interview. Hendrick said the cargo of about 11.7 million gallons (279,000 barrels) of oil would be offloaded to Buckeye Partners LP’s terminal and then be loaded on barges for shipment over the next few days.

U.S. federal law requires companies to obtain licenses from the Commerce Department to export crude oil. The department’s policy is “to approve applications for exports of crude oil to Canada for consumption or use therein,” according to the department’s Export Administration Regulations. U.S. crude exports averaged 57,000 barrels a day in the first nine months of this year, the most since 2000, Energy Department data show.

“Exports to Canada will probably pick up quite a bit in the next year,” Amrita Sen, chief oil market analyst for Energy Aspects Ltd., said yesterday in London. “The repercussions will have more to do with how much the U.S. continues to displace West Africa. That’s the one that really competes with Brent.”

Double-Hulled

The outer hull of the double-hulled tanker was breached, the U.S. Coast Guard said in a statement today.

The accident occurred about 10 miles south of Albany at about 7 a.m., Coast Guard Petty Officer 2nd Class Erik Swanson said yesterday. Swanson said earlier today that divers were assessing the damage at Stuyvesant Anchorage, where the vessel stopped after the grounding. He said the assessment was the Coast Guard’s priority at the time, rather than determining the cause of the accident.

“We’re still investigating whether it did run aground or hit something in the river,” Swanson said.

Demand to ship crude abroad is increasing as domestic production surges. U.S. crude output rose last week to the highest level since January 1994, Energy Department data show. The gains have been primarily light, low-sulfur oil from Bakken and Eagle Ford shale formations in North Dakota and southern Texas. Refiners including Valero Energy Corp. (VLO) and Irving are seeking to use North American crude in eastern Canadian plants to replace cargoes from across the Atlantic Ocean.

Bakken Discount

Bakken oil in Clearbrook, Minnesota, was about $27 a barrel less expensive than North Sea Brent crude, the benchmark for overseas imports, according to data compiled by Bloomberg.

A glut of oil in the upper Midwest, where North Dakota output has jumped 57 percent in the past year, has led producers to ship oil out of the region to the East and West Coasts by train. Rail shipments in the third quarter have jumped almost fourfold from a year earlier, according to the Association of American Railroads.

The vessel was en route to Irving’s St. John refinery in New Brunswick, Canada, Hendrick said yesterday. Shipments from Albany were scheduled to take place every eight days, which would make the daily rate about 35,000 barrels.

“This is the first of a long string of planned shipments from the Port of Albany to Irving,” Hendrick said.

Valero Approval

Valero has received approval from the Commerce Department to ship crude from the U.S. Gulf Coast to its Quebec City refinery, Bill Day, a company spokesman in San Antonio, said in an e-mail.

At 131 feet across, the Stena Primorsk is somewhat wider than other Hudson River-going vessels, Ian Corcoran, vice president of the Hudson River Pilots Association, said yesterday.

“I haven’t spoken to the pilot yet, but if the ship loses the ability to steer, the width doesn’t really matter,” Corcoran said. He called it an unfortunate coincidence that the first tanker shipload of Bakken from Albany ran aground.

Buckeye (BPL) said in October it reached a multi-year agreement with Irving to provide crude services at Albany. Buckeye has 1.8 million barrels of storage there, and is making modifications to increase its rail capacity to 135,000 barrels a day.

Hendrick said Buckeye and another terminal run by Global Partners LP (GLP) receive more than one unit train a day of crude from North Dakota at the port.

Spokesmen from Irving and Buckeye didn’t respond to an e- mailed request for comment.

To contact the reporters on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net; Eliot Caroom in New York at ecaroom@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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