Archive for Oil and Gas

Confused by crude oil by rail tank car choices? Contact STARS for practical solutions

There is a great deal of confusion about the technical choices facing shippers as to what to do with their tank car fleet.

The basic choices are to 1) buy all new tank cars at prices probably north of $130,000 each?  Which means writing off maybe as much as $90,000 in the value of each existing tank car?

Or 2), modify with safety appliances the existing tank cars with perhaps 30 years economic life left on them at a cost upwards of $40,000 each?

The regulators like the FRA and the NTSB or the STB can not help you.  They draft and issue safety rules.  They give you no economic or technical help in making the choice of “how to execute”.

There is, however, a specialized independant company composed of experienced former railway tank car professionals and FRA inspectors that you can turn to for help.

STARS

This Maryland based consultancy called STARS can give you the technical help that regulators can’t.

The company’s formal name is “Specialty Transportation and Regulatory Services”.  The President,Wendy Buckley, and her skilled staff has already found ways to help both crude oil and chemical hazmat shippers execute safety improvements in ways that represent a significant return on investment for their fees.

I have interacted directly with STARS and found their client business cases to be exceptional examples of “value delivered.”

Contact me if you need a specific reference.

Or contact STARS directly at their web site www.STARSConsulting.org.

 

 

 

 

 

Can China finance Eurasia Railway One Belt & One Road Strategic Plan?

The mid year 2015 Chinese stock market fundamentals and the overall Chinese structural debt may put a crimp in this debt financing of proposed rail/road foreign projects.

This cited Journal of Commerce report remains extremely optimistic about China’s willingness to write the necessary big foreign investment checks.

Time will tell. Time is always the acid test of any strategy.

Even if financed, these Chinese sponsored rail projects may not see the first trains until well after my death.

But the maps look “cool”.

See the map and JOC story at http://www.joc.com/international-trade-news/investment-floods-china%E2%80%99s-one-belt-one-road-strategy_20150703.html?mgs1=b66dkpfYOY

Union Pacific announces about $1.70 barrel surcharge on rail tank cars

From multiple news sources.

Rail companies apply market pricing to get shippers to pick safer equipment tank cars.

BNSF previously had imposed a similar surcharge on older tank cars.

Now the Union Pacific has published a seperate price adjustment when shippers select older tank cars.

Sometimes the commercial markets are more affective in promoting safety and operational changes than are government regulations.  Let’s keep our eyes on this trend.

http://seekingalpha.com/news/2611855-reuters-union-pacific-imposing-big-surcharge-on-older-crude-railcars?app=1&uprof=44#email_link

Bloomberg reports negative China steel growth.

From Bloomberg, Jun 18, 2015

“Chinese steelmakers are deepening the first production cuts in a quarter century”…

As manufacturing steel production drops, there are economic signs to look for.

Possible “dumping” of finished steel.

Stockpiling of Chinese imported iron ore and coke.

More investor uncertainty about emerging nation blueprints for new mines, ports, and railways.

To read the entire Bloomberg news report, go to http://bloom.bg/1GTU0PI

Crude steel output will shrink as much as 2 percent this year, according to the China Iron & Steel Association. That is the first contraction since at least 1990.

A recent up tick in raw material costs for steel and a collapse in steel prices has pushed the Bloomberg Intelligence China Steel Profitability Index to the lowest in almost seven years.

To understand more about the prospects for adding more to the supply side of global trade, we need to know even more about the market demand side.  As China’s growth slows…    …so too will the need for more and more imported resources from greenfield projects.

So which greenfield projects will still be needed?

Are North American Freight Car Orders heading towards down cycle as crude oil production sags?

A previous near consensus 86,000 car forecast earlier for this year is dropping.

80,000 to 84,000 level may now be more more likely.  Or lower?

Tank cars, frack sand cars, and coal cars most likely to fall off the pace based on current spring railroad traffic reports.

From Bloomberg, 16 June

The agency reports that Greenbrier Cos. fell the most in almost seven months after Stifel Financial Corp. analysts estimated that railcar demand will be hurt by a decline in oil prices.

To read the entire article, go to http://bloom.bg/1FkFoDo

Stifel estimated production will be 84,000 railcars this year, less than transportation consultant FTR Associates’s outlook of 86,000.

History shows us how volatile the year to year North American rail car market can be as this SUPPLY SIDE changes to reflect DEMAND SIDE economics.

U.S. Drivers are using more gas as the supply price stays relatively low and the supply steady

BASIC LAWS of SUPPLY — PRICE — & DEMAND are at work in this Bloomberg report Jun 16, 2015

Oil supplies are abundant. America’s refiners are running the hardest in 10 years. So why isn’t the country awash in gasoline?

Because driving is way up.

To read the entire article, go to http://bloom.bg/1cZ65Ha

High lights

Back in January, the Energy Information Administration forecast Americans would burn 8.71 million barrels of gasoline a day in the first quarter. We actually used 100,000 barrels PER DAY more than that.

Collectively, we Americans drove a record 720.1 billion miles. That’s about 3,900 return trips to the sun.

AAA projections in May suggested the average gasoline prices would range from $2.55 to $2.75 this summer. Looks now to be a bit higher as we approach summer’s first day.

Yet motoring demand is still up.  Some of the increased driving comes from commuting to the office after the U.S. added 3.1 million jobs last year. That is the most jobs added since 1999.

While US gasoline prices are still almost a dollar below year-ago levels, we are finding it affordable to take more trips.    The market is obviously still sorting all of this out.

For Railways?  Will the new price levels result in a market share shift of commuters from train to auto?  And from trucks to trains?  Probably.  But by how much is hard to calculate.

Fuel by rail using empty coal or ore wagons with “bladders” as a market opportuity

RAILWAY FREIGHT MAREKTING – using a bladder technology for backhaul

https://www.linkedin.com/pulse/bladder-technology-alex-pey

Interesting market proposal by Alex Pey;   Senior Advisor at Aurecon

Diesel fuel, which is one of the most critical elements to most mines, is a major cost component of any bulk mining activity. Access to a reliable and economical supply can have a significant impact on the cost competitiveness of the mine. Logistics interruptions to supply can prove fatal.

But there is an opportunity to provide a market service to mines by utilizing empty backhaul rail wagons to create incremental revenues on otherwise returning empty unit trains of coal and ore.

Bladders were effectively used by the military in Operation Desert Storm.

Empty Backhaul – The Opportunity

A typical coal mine, producing say three million tonnes of coal each year, consumes approximately 10 million litres of diesel fuel each year, depending on the mining methods employed and the type of mine. The transport of this fuel is typically by tanker trucks. With an average of 25,000 litres per truck, this constitutes around 400 return trips per year. Larger, B-double trucks, able to transport twice this amount per trip, would still result in 200 return trips per year.

Just two 30,000 litre fuel bladders in one empty wagon on each empty train arriving at the mine would be sufficient to deliver all the required fuel to the mine.

The Fuel Bladder

Current manufacture of portable collapsible fuel tanks, commonly referred to as fuel bladders, is mainly for US military use. Made from heavy duty reinforced fabric, it is possible to roll the bladders into compact, transportable units. This is the technology proposed for rail.     Read more

Prospering in oil’s tough times. A lesson even for rail managers

A Bloomberg special report on superior executives — Jun 10, 2015

Apache Corp. CEO John Christmann took charge of one of the world’s biggest shale producers in the dark days of the oil market crash in January.  He signed on to execute to a corporate makeover.

RESULTS:

He slashed cash costs — making the company much healthier during a period of over supply. There is a lesson for rail managers in this business story.

To read the entire article, go to http://bloom.bg/1FJLIpC

His leadership turned the company into a “ruthlessly efficient oil production machine”.

With the changes, Apachie’s competitive business can now thrive with $50-a-barrel oil prices. The company is now making more cash from operations than it is spending. That compares to the 2 years preceding the 2014 oil market crash were cash outlay significantly exceeded cash income. That was a poor strategic plan as global oil dropped from the $100+ a barrel range.

Apache reduced its operating drilling rigs initially by 70%

Apache’s service costs dropped 40%. Their competition had a goal of just 25%

Reduced breakeven price — with a 10% profit — to about $42 a barrel.

LESSONS for OTHER INDUSTRIES like railroads

Others like big rail companies need to execute similar changes in tough times. Like Stan Crane did as CEO & Chairman of Consolidated a Rail back in 1981. Mr Crane declined further government subsidies back then and he and his management team slashed their cost of doing business. Conrail thrived. From a million a day in losses, it turned around to earning $500 million in operating income on only half of the former projected business traffic.

CHALLENGE

Are rail companies like Vale rail, UBTZ, Transnet Rail, China Rail up to the challenge as rail mangers in tough times?

New mobile application for First Responders to crude oil trains accident could be INFO breakthrough

Under development since last fall, the AskRail mobile phone application gives local responders essential train commodity hazardous information even without train on board train information available from the train crew or if it is difficult to reach local BNSF train offices or train dispatchers.

Demo given by the BNSF railroad in Chicago.

A French language version to be released soon for Canada.

Other rail carriers can also use the software application developed in part with RailLinc technical assistance.

Software use will now become part of hazmat training provided by the rail companies.

Other carriers besides BNSF can choose to use the application.

http://www.rtands.com/index.php/safety-training/mobile-app-that-gives-first-responders-real-time-dangerous-goods-info-continues-role-out.html?channel=

Fire fighters tell their side of resulting fire from oil train accidents

Cude Oil train in Interstate median in front of cntral Albany capital area Crude Oil Train passing adjacent capital area of Albany NY

From a TV report on 06/08/2015 6:59 PM by WNYT.com ALBANY NEW YORK
By: Samantha DiMascio

(DISCLOSURE: My Uncle Jim was a career fireman in Milwaukee)


Firefighters confronted by catastrophic oil train derailments shared their stories with people in Albany today. It was part of a summit put on by the Albany County Executive, and Sheriff at the College of St. Rose.

Over the last five years, the amount of crude oil traveling through Albany has tripled

One listener said that what we learned today is that you cannot fight the fire, you have to run away from the fire and let it burn out.  That is the same message I received when at a seminar in April in Easton PA.  Mostly we evacuate and let it burn out said the fire marshal in Easton.

A local Albany sheriff said warned that on a bigger scale “we didn’t think about the oil going into the sewer systems, taking out water systems, taking out infrastructure”.  Those are worst case scenarios that we might not be able to handle.

A Battalion Chief from Lynchburg, VA had an oil train derail in his city. He stressed to the audience in Albany the need for depth in the emergency response system. “You’ve got to have people in place to backfill positions, you have to have those command functions filled and people able to come in place of someone else’s absence. Because you cannot just ignore other possible fires and incidents happening in your town while you fight the train fire for multiple days.

To put manpower and equipment resources in perspective, Lac Megantic depleted resources from 85 different fire departments over the course of their three week disaster response. “That would wipe out all of Albany County’s 48 departments and put a sizeable dent in surrounding county services” said one Albany firefighter.  Imagine what that might do in an even larger urban area with more population both residential and working day time employees to possibly evacuate.

Who has calculated that catastrophic risk scenario and how recovery and claims would be paid?

For more go to: http://wnyt.com/article/stories/s3820216.shtml