American Oil and Gas Reporter - June 2014 - 133

customer demand increases, we will build
a rail loop to make unit train service available. At that point, we will be able to accommodate more than 1 million tons of
frac sand a year and more than 100,000
barrels of crude oil a day. We believe production activity in this area demands that
level of service."
The terminal is expected to begin operation in October.
Pipeline Project
The rail terminal, however, is only one
part of the RIO System. Keene says
Rangeland also is pursuing its RIO Pipeline
project, which will connect the Loving hub
to the market center at Midland. He says
the first 30-mile leg of the RIO Pipeline
will connect the RIO Hub to the RIO State
Line Terminal, a gathering hub near the
Texas-New Mexico border in Reeves
County, Tx.
Keene says the State Line Terminal will
provide tankage and truck unloading facilities, and will have the ability to send crude
to the RIO Hub in Loving or on the
pipeline to Midland. The final 104 miles
of pipeline will connect the RIO State Line
Terminal to the RIO Midland Terminal,
which provides connections to various terminals and interstate pipelines to both
Cushing and Gulf Coast markets. The RIO
Pipeline will have a capacity of 85,000
bbl/d.
Giving its customers a variety of options will help narrow the gap between the
Delaware Basin and West Texas Intermediate crude prices, which is something
Keene says he saw when Rangeland developed the similar COLT System in the
Bakken Shale.
"As the Midland Basin and the Eagle
Ford develop, as well as the Bakken and
other areas, the Delaware Basin will be
fighting to find a market," he reasons.
"When we put in our system in the Bakken,
approximately 5 percent of Bakken production was being shipped by rail. Now it is
in the 70-75 percent range. When that happened, the basin differential narrowed."
Keene says recent differentials between Delaware Basin crude and WTI have
been greater than the Bakken/WTI differential. One reason for that has been
pipeline constraints.
"When new pipes come on line, the differential likely will narrow," he maintains.
"However, the crude still has to get to Midland (by pipeline) to get out. For crude that
can't get out by pipeline, we provide our

customers the option to ship by rail to other high-value markets such as California
or the Pacific Northwest."
Another factor affecting the Delaware
Basin price, according to Keene, is that the
United States is awash with light, sweet
crude (or condensate) from shale plays. He
says refineries were configured several
years ago to handle heavier crude, and "the
pipes get saturated with light, sweet
crude." He says the RIO Hub will allow
light, sweet crude in the Delaware Basin
to be piped to Gulf Coast petrochemical
plants or shipped by rail to refineries that

want it.
"There is the larger issue of what to do
with all the light crude/condensate being
produced," he continues. "You can't sell
it abroad because the United States doesn't allow crude oil exports. But I have talked
with people who are thinking about putting
in splitters and breaking it into components
because we can export refined products."
Keene says Rangeland has been working with customers to secure volume
commitments on the pipeline to Midland
and hopes the RIO Pipeline will be operational by the end of 2015.
❒

JUNE 2014 133

American Oil and Gas Reporter - June 2014

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2014