Newsletter: Crude-by-rail terminals update: the surplus grows

In our May 2014 report on the burgeoning crude-by-rail trade, we tracked, among other things, the capacity of loading and unloading terminals in the U.S. and Canada. These terminals are also mapped on our crude-by-rail map.

We noted in the report that there was a large surplus in the capacity to load and unload crude oil from trains (Figure 1).

Ten months later it seems that while traffic has grown modestly, companies have continued to add new capacity, leading to an even greater surplus (Figure 2).

The capacity surplus reflects a number of features of the crude-by-rail trade:

The relatively low capital requirements for building terminals: a typical 150,000 bpd unit train terminal in North Dakota can be built for as little as $125 million.
The speed with which terminals can be built: around 12-18 months for a large unit train terminal as described above.
The fragile economics of crude-by-rail: while terminals are cheap, the costs for shippers are relatively high compared to pipelines.  There has not been a rush to fill crude-by-rail capacity and shipping levels fluctuate with oil price differentials, which need to be wide to support crude-by-rail growth. When differentials are narrow, shippers move their crude to existing pipeline capacity to save money.
There are other constraints in the system beyond terminal capacity. Track congestion and weather have limited traffic in recent months, particularly to the East Coast.  It is far from clear that the system could cope with a substantially higher utilization level of existing loading and unloading capacity.