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Shares of Bakken oil producers plunge after US warning

NEW YORK Jan 2 (Reuters) – Shares of Whiting Petroleum Corp , Continental Resources Inc and other top crude oil producers in the Bakken shale formation plunged on Thursday after the U.S. government said oil produced there may be extra flammable.

The warning came three days after a BNSF train carrying crude oil collided in eastern North Dakota with another train carrying grain. The resulting explosion led to the temporary evacuation of a nearby town and added to the growing concern about the safety of oil-by-rail shipments.

Last July a runaway oil train, which originated in North Dakota, derailed and exploded in a small Quebec town, killing 47 people.

Oil extracted from the Bakken, a vast rock formation underneath North Dakota and Montana, “may be more flammable than traditional heavy crude oil,” the Pipeline and Hazardous Materials Safety Administration, part of the U.S. Department of Transportation, said on Thursday.

Whiting & Continental, the largest Bakken producers, saw their shares fall more than 3.5 percent after the announcement. Shares of Oasis Petroleum Inc, Kodiak Oil & Gas Corp and Northern Oil & Gas Inc saw similar drops.

Crude oil prices also fell, contributing to the decline.

The U.S. government’s warning should come as no surprise considering refineries and other oil buyers value the high energy content of Bakken crude oil, said Ron Ness, the head of the North Dakota Petroleum Council, a trade group for oil producers.

“I don’t think there’s any surprise that Bakken crude oil is the highest quality crude oil available and it has more of those high-end components that you’re looking for in a top-shelf crude oil,” Ness said.

Ness said Whiting and other producers he represents follow current federal standards for oil-by-rail shipment. He said the U.S. government should consider updating transportation regulations that currently put crude oil in the same category as ammonia and other chemicals for safety standards.

Oil producers are not responsible for their product once it is loaded onto railcars, a process that typically comes as sale of the oil is finalized. Logistics companies often buy oil from producers and arrange to have it shipped via rail or other means, before selling it to the end user.

The oil involved in the Monday crash was loaded onto the train in Fryburg, North Dakota, and was headed nearly 1,300 miles (2,092 km) to Hayti, Missouri.

Sources familiar with the loading operations told Reuters on Tuesday that Houston-based logistics company Great Northern Midstream loaded the crude at Fryburg, and it was to be unloaded at Marquis Energy’s storage terminal and barge loading facility at Hayti, along the Mississippi River.

“When the train leaves the station, (the oil) is in someone else’s hands,” Ness said.

The American Association of Railroads (AAR), an industry trade group for BNSF and others, said it has worked with federal regulators to try and increase railcar design standards and other regulations. Railways do not inspect material they ship, and simply transport it from one location to another.

A member of the National Transportation Safety Board said on Tuesday that railcars involved in the crash were all older types that do not meet the latest industry safety standards.

One comment

  1. Flammability test (flash point) needed to determine exact temperature of volatile oil from Bakken crude

    I am surprised and actually shocked to learn these physical tests have never been performed on the crude oil from the Bakken formation. This defies logic to ship a hazardous material way across the country to a refinery without actually knowing the physical and chemical properties of the mixture. It sounds to me like ND is actually shipping crude oil mixed with natural gas, which as everyone should be aware usually contains about 70-75 percent methane,the remainder being ethane, propane, butane, and pentane hydrocarbons. There is also usually nitrogen,carbon dioxide and hydrogen sulfide present. I understand the Bakken is sweet crude.

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