By Janet McGurty
NEW YORK (Reuters) - PBF Energy said on Friday it plans to expand its crude shipments by rail to its 180,000 barrel-per-day Delaware City refinery to take advantage of cheaper North American crudes at the expense of more expensive foreign crudes.
PBF plans to double its crude by rail shipments to its Delaware City refinery to 40,000 barrels per day by September, with total crude by rail capacity exceeding 110,00 bpd by January 2013.
The company currently runs 20,000 bpd of North Dakota Bakken and Western Canadian Heavy crude at is refinery.
North American crude oil production has increased substantially as new drilling techniques has opened up new supply in places like the Bakken formation, which stretches over several western states and southern Canada.
Lack of traditional pipeline infrastructure has forced producers to move the crude out by truck or rail.
Substantial acreage surrounding the Delaware City plant has allowed PBF to increase its on-site rail facilities, giving it the only on-site rail discharging capacity in the region.
"Delaware City is the only PADD 1 refinery with sour crude coking capability that can run lower-cost, Western Canadian Heavy crude oil, giving us a competitive edge," said Tom Nimbley, chief executive officer of PBF.
Western Canadian Heavy is a heavier, more sour crude priced at a $37 a barrel discount to Brent and a $20 discount to U.S. crude benchmark.
PBF is opening an office in Calgary, Alberta to further expand its upstream sources.
"We are also keeping our options open by barging Bakken from regional third-party terminals into Delaware City and Paulsboro, backing out more expensive Brent-based crudes," Nimbley said.
PBF's 182,000 bpd Paulsboro, New Jersey, refinery is across the Delaware Bay from Delaware City.
Bakken crude from the Williston Basin in North Dakota and southern Canada is a light, sweet crude which will be able to replace some of the expensive North Sea and West African crudes, currently trading at about a $17 per barrel discount to North Sea Brent benchmark.
(Reporting By Janet McGurty; Editing by Marguerita Choy)