But PBF Energy (NYSE: PBF) has options to lower its feedstock costs in coming years, primarily through infrastructure projects designed to deliver heavily discounted crude oil from North Dakota’s Bakken Shale.
Check out this map of regional price differentials and oil transportation costs.
With crude oil produced in this prolific shale play trading at a significant discount to Brent, shipping these supplies via rail to the East Coast at a cost of $14.00 to $16.00 per barrel still lowers PBF Energy’s feedstock costs.
Despite the high cost of rail transportation to the East Coast, refineries in the region still enjoy a major cost advantage over competitors in Europe.
Even better, Jones Act-compliant tankers can transport crude oil from the Gulf Coast to the Northeast at a cost of about $5.00 per barrel, giving PBF Energy an opportunity to take advantage of the developing glut of crude oil in markets Houston and other markets.
PBF Energy has already made some moves to diversify its crude-oil supply and lower its input costs; the firm will expand the capacity of its rail unloading facilities in Delaware City to about 210,000 barrels per day, including up to 80,000 barrels per day of heavy crude oil from Canada.
With limited cross-border pipeline capacity and rising competition from surging US production of light-sweet crude oil, Western Canada Select has traded at a significant discount to other heavy crude oils.
PBF Logistics LP (NYSE: PBFX) is a key piece of its parent’s effort to boost the profitability of its refineries by diversifying its slate of crude oils.
The MLP already owns a light-oil rail terminal that serves PBF Energy’s Delaware City and Paulsboro refineries. This facility, which can unload two unit trains of about 100 railcars simultaneously, primarily receives crude oil from the Bakken Shale and Western Canada.
In addition, PBF Logistics owns a truck terminal at its sponsor’s Toledo refinery that can unload about 15,000 barrels of oil per day.
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Elliott and Roger on Mar. 30, 2017
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