Exxon's new oil-by-rail terminal in Canada gears up for U.S. shipments

BY JARRETT RENSHAW

An Exxon gas station is pictured in Arlington, Virginia January 31, 2012.

CREDIT: REUTERS/JASON REED

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(Reuters) - Exxon Mobil Corp's new joint-venture oil-by-rail terminal in Canada, set to be the nation's largest, will begin shipping crude directly to its own refineries in Illinois and Louisiana by March, another reminder that pipeline delays are not stopping the rise in oil sands exports.

Production from the company's Kearl field project is expected to ramp up later this year, when Exxon would hope to move the crude via pipeline, including the controversial Keystone XL pipeline.

But delays led Exxon's Canadian subsidiary Imperial Oil Ltd and pipeline giant Kinder Morgan Inc to announce plans a year ago to build the rail terminal in Edmonton, Canada. In August, they said they would expand capacity to 235,000-barrel-per-day, with first shipments from the $232 million terminal this quarter. But they had not detailed who would buy the oil.

Previously unreported federal documents reviewed by Reuters reveal two of the prime buyers: Exxon's 238,000-bpd refinery in Joliet, Illinois and its 502,500-bpd refinery in Baton Rouge, Louisiana, both aided by major new offloading rail terminals.

In papers filed with the U.S. Surface Transportation Board in December, logistics firm CenterPoint Properties said ExxonMobil would send crude through a newly constructed rail terminal owned by its unit Joliet Bulk, Barge & Rail LLC.

Trains run by Canadian National will be unloaded at the facility and sent via a 210,000-bpd pipeline to the ExxonMobil refinery in Joliet, four miles (6.4 km) away, the filing said. CenterPoint, of Oak Brook, Illinois, declined to comment.

A different facility, being built by Genesis Energy LP, will allow Exxon to bring the crude to its Baton Rouge plant, the third largest in the United States, where it could be used to replace imports from Saudi Arabia, Chad or Mexico.

ExxonMobil spokesman Todd Spitler said that the company also plans to bring the crude to Baton Rouge port. Spitler did not say where the crude at the port would eventually head, but it could be re-exported or sent to other U.S. refineries.

The new terminals will allow ExxonMobil and Imperial Oil to start moving more quantities of sand-oil out of their multibillion-dollar joint project in Kearl, Canada. Delays on pipelines, including the Keystone XL, have forced the companies to pursue rail transportation.

MORE FOR CANADA

ExxonMobil has already upgraded its Joliet refinery to run the heavy Canadian crude. The refinery receives roughly 65,000-bpd of crude imported from Canada in recent years, the majority of which is heavy sour, according to U.S. data.

The Canadian crude will also be sent to a rail terminal owned and operated by Genesis in Port Hudson, Louisiana. The terminal, dubbed Scenic Station, is connected to a pipeline that runs to the ExxonMobil refinery complex.

ExxonMobil will be given preferential treatment, but does not have exclusive rights to the terminal, Spitler said.

He said the Genesis terminal project will expand the refinery’s access to a wider slate of feedstock, which EIA data shows currently consists mostly of medium to heavy crudes, including large imports from Saudi Arabia and Africa.

“This project helps us ensure the refinery stays connected to the best available supply sources and will benefit from logistics flexibility for North American crudes,” Spitler said. “Some Canadian oil will be transported into the rail terminal and port facility.”