20 - Crude By Rail Or By Pipeline?

Crude oil is the most traded commodity in the world. Everyday, billions of barrels of crude oil are transported via a complex transportation network designed to ensure timely, economical, and safe delivery to market (midstream Oil & Gas). While pipelines are the most popular means of transportation, some argue that it is unsafe, and advocate using alternative methods such as railway. This article lists the different means of transportation, and discusses the pros and cons of pipelines.

Transportation of hydrocarbons from producing fields to refineries is called Oil & Gas Midstream sector

What Are The Available Means Of Crude Oil Transportation?

For crude oil to reach market, it is transported via one or a combination of the following means:

• Pipelines

• Railway

• Ships

• Trucks

How To Choose A Mean Of Transportation?

We established a subjective ranking across 6 different criteria. This ranking aims to help better understand the mechanism for selecting a mean of transportation and doesn't objectively promote one method over the other.

Cost

While pipelines require significant capital expenditure compared to other means of transportation, their running cost remains the least expensive and is goes downward as pipelines are building scale.

• Pipeline : $3-$5/bbl

• Ships : $5-$6 / bbl

• Railway : $10-$15 / bbl

• Trucks : $20 / bbl

Cost is indicative and represent a rough industry average

Location

While pipelines, ships, and railway offer a point-to-point transportation, trucks are the most flexible means as they allow direct transportation from source to destination (within a reasonable range and a specific geographic area).

On the other hand, railway is considered the least convenient since crude oil requires additional handling and processing at the railway station, and usually requires changing several routes before reaching destination.

• Truck (most flexible)

• Pipeline

• Ships

• Railway (least flexible)

Capacity

Carrying capacity is crucial to determine the best mean of transportation. Pipelines usually offer the largest carrying capacity since they are designed around oilfield and installed after a detailed field development plan. Also, ships are gaining scale as they are crucial for transporting oil across continents.

• Pipeline (large capacity)

• Ship

• Railway

• Truck (small capacity)

TI Oceania is the largest oil tanker in service with a carrying capacity of above 3 million barrels

A limitation of pipelines is that their capacity can't be adjusted without a significant pipeline work, while railway capacity is modular and can easily be adjusted by:

• modifying train frequency

• adding / removing rail cars

CO2 emissions

Since pipelines are fixed structures, energy is mostly consumed in pumping oil through the pipeline. This makes pipelines significantly lower in carbon footprint compared to the other means of transportation.

• Pipeline (least pollutant)

• Ship

• Railway

• Truck (most pollutant)

Spill Rate

Spill rate is calculated on the basis of the volume spilled to the total volume transported. According to some studies, pipelines are less likely to spill than railway.

• Trucks (less likely to spill)

• Ship

• Pipeline

• Railway (most likely to spill)

However; spill severity is another measure that needs to be factored in by considering the:

• absolute volume spilled, and

• environmental impact.

When putting these two factors into the spill equation, pipelines and ships demonstrate a higher risk. Also, the spill containment and site restoration costs are elevated for pipelines and ships especially in marine environment.

IoT investment to reach 800 Billion Dollars in the next decade to improve pipeline monitoring

Operating Environment

Geographic, meteorology, or geopolitics could promote the use of a transportation mean over another. A great example is the Deep-Water and Ultra-Deep-Water environment, While FPSOs emerged as an economical solution for producing from distant oilfields, shuttle tankers emerged as the primary mean of transportation from the FPSOs to shore.

Final Words

Pipelines remain the most popular mean for transporting crude oil from source to market. However, a comprehensive risk assessment and a detailed feasibility study should be conducted prior determining which transportation method to promote.

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