Here’s more good news for brownwater freight: Railways are awash with traffic, much of it from the new and growing business of moving North Dakota crude oil to domestic refineries.
Since 2008, the volume of crude oil shipped by rail has risen to nearly 1 million bbls. a day. In terms of barges, this is the equivalent of about 45 jumbo tank barges.
In the beginning, crude by rail shipments were seen as an aberration due to the lack of pipeline capacity. However, the rail crude market has matured into a long-term one, supplying domestic refineries. The market results have been remarkable. Rail’s reported annual revenue from crude shipments has increased nearly 80 times, from $25.8 million in 2008 to $2.15 billion in 2013.
Not all of the news surrounding the growth of the rail crude business has been positive for all shippers. There are reports of railway bottlenecks from the surge in crude oil shipments. One of the larger railways told its customers that, “as our traffic volume has increased, we recognize that our current service is below historical levels and below our expectations.” What this likely means is that rail service has deteriorated from too much crude business.
This suggests that there is plenty of opportunity for the brownwater sector to provide alternatives to rail for the movement of bulk commodities not limited to crude. And barge operators have other opportunities from the large number of terminals for loading and offloading crude on trains built since 2010 and many others that are planned for development. Some of these rail transshipment terminals are located on water in order to specifically use barges for delivery. For example, two facilities near Albany, N.Y., and Philadelphia have combined capacities of nearly 300,000 bbls. per day for transshipment.
In addition to coastal rail transshipment crude oil terminals, there are also opportunities for inland terminals for north to south movements of crude outside of the pipeline network. The advantages over rail movements of crude in terms of delivering the oil to where it can be sold for maximum prices also pertains to inland barge movements. The success of crude oil by rail is also a big opportunity for the brownwater sector.
