Global Partners Boosts Bakken Shipments to East Coast

Fuel marketer Global Partners LP is more than doubling rail capacity at its Albany, New York, terminal to boost shipments of cheap Bakken crude from North Dakota to struggling refiners in the U.S. Northeast.

The terminal, which currently can receive 80-car unit trains, will be able to offload two 120-car unit trains a day when the expansion is complete by late summer, Eric Slifka, chief executive officer of Waltham, Massachusetts-based Global Partners, said in a telephone interview yesterday.

Access to discounted North American oils may improve the outlook for East Coast refiners that have shuttered or are for sale, such as Sunoco Inc.’s 355,000-barrel-a-day Philadelphia refinery and ConocoPhillips 190,000-barrel Trainer, Pennsylvania, plant.

“The rationale behind the acquisitions of both of those refineries is bringing in price-advantaged crude from the mid-continent,” said John Auers, senior vice president of Turner Mason & Co., a Dallas-based energy consulting firm. “The reason why these East Coast plants have suffered so much is a high crude supply cost. If you find out a way to lower those, you can make a rationale that those refineries make sense in the supply picture for the East Coast.”

The discount of West Texas Intermediate crude oil to Brent oil, the benchmark grade for U.S. imports from Europe and Africa, widened 75 cents to $14.89 a barrel at 2:36 p.m.

Trainer’s Future

Delta Air Lines Inc., whose daily 2011 fuel bill was $32 million, may buy the idled Trainer plant to help save 10 percent on a significant portion of its fuel needs, a person familiar with the matter said April 12. Sunoco has said it will close the Philadelphia operation by July unless it can attract a buyer. Four East Coast refineries with about 580,000 barrels a day of capacity have closed since early 2010.

The discount for Bakken oil at Clearbrook, Minnesota, versus Brent has averaged $27.75 a barrel this year, according to data compiled by Bloomberg.

Marathon Petroleum Corp., an independent refiner with a network of pipelines, barges and rail operations, estimated in November that the cost of moving Bakken crude to the U.S. East Coast would be about $18 a barrel.

Even considering the cost to ship Bakken by rail and barge, the savings from Brent crude would help East Coast refiners, Cory Garcia, an analyst with Raymond James and Associates Inc. in Houston, said today in a telephone interview.

Heavy Crude Glut

“It’s something that obviously needs to happen,” Garcia said. “With all this pipeline capacity heading to the Gulf Coast, it’s going to get flooded with heavy crude. There’s no way around that. So you need to find other markets for light, sweet crude.”

Global Partners’ Albany terminal received 15 unit train loads of Bakken oil in the first two months of this year, according to an April 11 investor presentation, and accepted 13 unit trains in the fourth quarter of last year. The company said in October it would ship Bakken oil from the terminal by time-chartered barge to refiners along the East Coast.

A single unit car typically holds about 30,000 gallons of oil, according to Slifka. The terminal could accept between 160,000 and 170,000 barrels a day of oil when the work is done, according to calculations by Bloomberg.

“We are not just taking Bakken, we are also taking other crudes” including oils from Canada, said Slifka. “Bakken so far has been the primary one but as things are dialed in, that is going to change.”

The average transit time by train from North Dakota to Albany is four to five days, although the trip has been done in 2 1/2, said Slifka. The Albany terminal is serviced by Canadian Pacific Railway Ltd.

Global Partners has storage oil tanks in North Dakota and Albany and can blend oils to a refiner’s needs, according to Slifka. The Albany terminal has 1.4 million barrels of ethanol, refined products and oil storage capacity.

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