ND crude begins shipping to Okla. by rail

AP News
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Posted: Jan 04, 2010 1:00 PM

A Texas company that's the No. 1 producer in North Dakota's oil patch has begun shipping rich Bakken crude to Oklahoma by rail.

EOG Resources Inc., of Houston, said the first shipment from its new terminal in northwestern North Dakota is due in Oklahoma on Monday, after a four-day trip. The company has said the terminal near Stanley is capable of loading 60,000 barrels of oil onto one 100-car unit train each day.

Crude from North Dakota's oil patch will be unloaded in Stroud, Okla., and sent through a new 17-mile pipeline to a terminal in Cushing, Okla., the company said in a statement.

EOG officials did not immediately return telephone calls Monday. The company's statement said the North Dakota loading facility will employ up to 45 people, and the unloading facility in Stroud, Okla., will have about 35 workers.

Crude from the rich Bakken shale formation in the western part of the state now is discounted more than $10 per barrel because of difficulty in getting the oil to market, said Lynn Helms, director of the state Department of Mineral Resources.

EOG's new rail facility, along with Enbridge Pipeline North Dakota LLC's pipeline expansion project that went on line last week, will increase the shipping capacity by about 110,000 barrels daily, Helms said. The state is producing about 250,000 barrels each day, he said.

North Dakota sweet crude was fetching $68.63 on Monday, about $12 less per barrel sold on the New York Mercantile Exchange.

Helms said EOG's new rail facility combined with Enbridge Pipeline's expansion should have an immediate affect on North Dakota crude prices.

"We should see that improve by $3 to $4 a barrel, which is good news for everybody," Helms said. "This takes a major risk factor out of Bakken drilling economics."

Helms said EOG is the biggest player in North Dakota's oil patch at present. He said the company produced an average of nearly 47,000 barrels of day in October, the latest figures available. ConocoPhillips recorded the second-highest average for the month, at about 26,000 barrels daily, Helms said.

"EOG is the No. 1 producer and growing fast," Helms said. "They are highly motivated to do things like this rail facility."

The company also is working to capture natural gas, a byproduct of oil production. Pecan Pipeline North Dakota Inc., a subsidiary of EOG Resources, has announced a mid-January completion date for a $45 million pipeline that will feed North Dakota natural gas into an existing line that moves the gas to a Chicago hub.

The Prairie Rose Pipeline will transport some natural gas from the state's oil patch that is being flared, state officials said.