Railing crude oil to coastal markets costly for producers

But facing steep discounts for their landlocked oil, companies turn to an old transportation method

January 21, 2013

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Persistent discounts in the United States for western Canadian and North Dakota Bakken crude oil has the industry hunting down ways to solve this problem.

The discounts are the result of surging light oil production from unconventional basins in the United States and Alberta’s oil sands, coupled with not enough pipeline capacity to handle it all. One solution industry is increasingly turning to is railing the crude to markets that will pay more for it. The rail solution is costly, however. According to data compiled by Calgary-based investment bank Peters & Co., here is the approximate cost per barrel to move crude oil by rail from Western Canada and North Dakota to North American markets at tidewater.

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Source: Peters & Co.

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