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Kansas City Southern expects growth in crude-by-rail to Texas
Kansas City Southern expects its movement of crude by rail to Texas to grow, and remains committed to building a new crude terminal in Port Arthur once permits are approved, executives told analysts.
The railroad now moves up to two trains of crude per week to southeast Texas, and that will increase as a separate new oil terminal at the Port of Beaumont adds storage tanks to complement rail unloading facilities there.
The executives said the railroad’s loop track to those facilities connecting to its main line was finished earlier this week, and will be able to handle a 120-car crude train per day once the additional storage capacity is built.
That is in addition to Kansas City Southern’s plan to start its own crude terminal operation in Port Arthur, Chief Executive David Starling told the analysts, during the company’s second-quarter earnings conference call.
Kansas City Southern originally planned the facility in Port Arthur - home to three major refineries, including Motiva Enterprises’ 600,000 barrels-per-day (bpd) plant, the largest in the United States - with Savage Companies, a privately held logistics and supply chain firm.
That plan fell through, but the railroad is in talks with an undisclosed “potential partner” to build a crude terminal that could take trains moving crude from Canada as well as North Dakota’s Bakken shale oil play, Starling said.
“KCS is no less committed to the Port Arthur crude terminal than we’ve been discussing for the last year,” Starling said.
Executives have said that the project could take two years to build once permitted, with startup in late 2015. In the interim, the Beaumont facilities, about 10 miles from Kansas City Southern’s 500-acre site in Port Arthur, could let the company’s crude-by-rail business grow.
The railroad doesn’t load crude shipments directly from producers. But it can take shipments of Canadian heavy crude from Canadian railroads at points where those railroads stop in the United States.
Starling acknowledged that his company would compete for such shipments with BNSF Railway Co, owned by Warren Buffett’s Berkshire Hathaway, and Union Pacific Corp, the largest U.S. railroad. BNSF dominates Bakken shipments, and Union Pacific’s crude shipments are growing.
“We’re going to have to compete for it, but we don’t have a problem with that,” Starling said. (Reuters)
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