by Pete Cook, President, Petroleum Connection
As reported in an earlier issue of the Frac Sand Weekly News Digest, on October 2, 2015, Rangeland Energy received a record-breaking frac sand unit train at the company’s RIO Hub located near Loving, New Mexico. The Frac Sand Weekly News Digest conducted a follow-up interview with Rangeland’s Executive Vice President and Chief Operating Officer Steve Broker to learn more about the shipment and the RIO Hub.
As previously reported, the record 150-car unit train originated in Ottawa, Illinois and transported 33 million pounds of frac sand to its final destination in New Mexico to supply an operator with a large quantity of sand for high-volume hydraulic fracture jobs in the Delaware Basin. The unit train’s total length was approximately 6,675 feet including the five diesel locomotives used to move the train, which was operated by BNSF and its short-line railway partner Southwestern Railway Inc. It took approximately 22 hours to unload the train.
“Upon the unit train’s arrival, we unloaded sand from 100 cars directly into our silos. We then moved the remaining 50 cars to our 300-car spot manifest yard to be stored and unloaded once silo inventory became available,” Broker explained. “Unload times depend on the available volume in our silos when a unit train arrives at the RIO Hub. Silo volume availability is directly proportional to the rate at which trucks take sand away from our facility and disperse it to the field; the more trucks that arrive to be loaded with sand, the faster our storage volumes become available and a unit train can be fully unloaded. This is a complicated inventory balancing exercise, which requires us to pay great attention to detail when scheduling the arrival of unit trains. We always attempt to sync a unit train’s arrival with the arrival and immediate load out of sand trucks so that we can operate at peak efficiency once a train has arrived. The average truck loading time at the RIO Hub is an impressive six to eight minutes including the printing of the Bill of Lading.”
The Rangeland Integrated Oil (RIO) System is a multi-part system designed to support the production of crude oil and condensate in the Delaware Basin. The RIO Hub is a 300-acre rail facility in the center of the basin’s drilling and production activity.
While the Hub is capable of receiving crude oil, Broker explained that the company has only handled inbound and outbound frac sand shipments. “Since fully commissioning service at the RIO Hub in July 2015, the terminal has only received frac sand shipments,” Broker clarified. “We have designed the facility for future loading/unloading infrastructure on site to handle large volumes of inbound or outbound crude oil. The hub’s concentric “teardrop” loop track design enables us to handle two unit trains simultaneously and the cargo of these trains could be frac sand or crude oil.”
Rangeland expects to begin handling crude oil and condensate shipments once market conditions better incentivize increased crude-by-rail activity.
The RIO Hub’s sand plant has a nominal capacity of 26,000 tons spread between six silos. While Rangeland has an impressive history of developing and operating midstream facilities, namely the COLT Hub in the Bakken, the RIO Hub is the company’s first frac sand storage and transloading facility.
Initial rail-to-truck transload service at the RIO Hub began in November 2014. As of October 7th, Rangeland has received 31 unit trains and additional manifest railcars at the Hub. Although it is difficult to know with any certainty the total sand market for the Delaware Basin, Rangeland estimates that the approximately 20% of the sand used in the Delaware Basin comes through the RIO Hub.
“Our customer sent a 150-car unit train because they needed extra sand on-hand to complete large hydraulic fracturing jobs throughout the Delaware Basin and they did not want to risk the shipping delays that commonly affect manifest rail service,” Broker explained. “Unit train service was the most reliable and efficient choice for our customer because the train could be shipped directly from origin to destination.”
Demand for frac sand continues to be strong in the Delaware Basin. Rangeland expects volumes to increase significantly in the months ahead and the company plans to expand the RIO Hub to accommodate more than 1 million tons of frac sand per year. This expansion potentially calls for the addition of a second sand silo storage facility on the Hub’s unit train loop.
“We are proud to have successfully handled this record-breaking unit train, but it is worth noting that our RIO Hub is capable of receiving unit trains even larger than the 150-car train that arrived on October 2,” Broker said.
The future remains bright for operations at the RIO Hub. The Delaware Basin still remains an economic play despite the current price environment. Producers in the region continue to require increasingly large volumes of frac sand to drill and complete wells. Additionally, Rangeland’s ability to accept large unit trains is attractive to customers because of the cost savings associated with unit train shipments. Shipping a larger unit train enables a customer to transport more frac sand on a more reliable delivery schedule than manifest service. Unit train service is also advantageous because the rail car utilization rate is far higher than manifest service. This means a customer can use a smaller rail car fleet to move the same volume of sand, which saves them money.
“Planning for the well completion process is a fluid and complicated task that requires our customers to attempt to sync their sand forecasts, usage rates and available inventory levels with existing rail schedules,” Broker said. “It is our goal to make this process easier and more cost-effective for our customers. Utilizing unit trains helps alleviate some of the complications associated with this entire process.”
And in the current price environment, it is all about reliability, efficiency and cost savings.