Crude by Rail - United States-Mexico Chamber of...

©2014 Kansas City Southern

Crude by Rail Jose G. Zozaya

President of KCSM

May 2015


Founded in 1887, KCS is 126 years

old

More than 6,100 miles of track

US -Mexico cross border railroad

Serves 12 Ports in the Gulf and

one in the Pacific

Serves more than 140 transload

terminals and 11 intermodal ramps

181 interchange points with all

Class I railroads in the US and

Mexico

Founded in 1887, KCS is 126 years

old

More than 6,100 miles of track

US -Mexico cross border railroad

Serves 12 Ports in the Gulf and

one in the Pacific

Serves more than 140 transload

terminals and 11 intermodal ramps

181 interchange points with all

Class I railroads in the US and

Mexico

Kansas City Southern Railway

©2014 Kansas City Southern 3

Shale Plays, Refineries, and Pipeline Infrastructure

Noticeable gaps in the pipeline network. Some with significant hurdles.


Moving Crude Oil by Rail


Crude Oil Carloads on US Class I


Crude Oil Basins & Connecting Partners

Canadian Heavy Oil:

CPRS – Kansas City

CN – Jackson

CN – Cockrell, IL

Bakken Region:

BNSF – Kansas City

CPRS – Kansas City

Niobrara Region:

UP – Kansas City

BNSF – Kansas City

Cushing Barrels:

SKOL – Pittsburg, KS

Permian Basin:

UP – Dallas

TXPF/FWWR – Dallas

Eagle Ford Shale:

KCS Direct


Canada Production – Oil Sands

Current Pipeline Capacity


Crude by Rail Advantage

Access to areas without existing or easily

accessible transportation infrastructure

Faster deployment

Flexibility to deliver to different end markets

Comprehensive solution for refiners

Faster delivery to demand markets

Reduced shipper commitments


Benefits of Crude by Rail

Time to Market Optionality Lower Capital

Requirements Crude Quality

Management

Fast delivery time

per train

Fast

construction –

rails in place

Lower permitting

hurdles

Increased market

coverage

Flexibility to deliver

to key markets,

direct to refinery, or

to move where the

production occurs

Bi-directional

movement

Shorter investment

horizon

“Neat” Barrel

Quality In

=

Quality Out

Heavy barrel

“Pure bit”


42%

48%

6% 4%

Maintenance Growth / Locomotives

Regulatory IT / Other

10

KCS Investing for Growth, Asset Utilization,

Safety, and Service

2015 Capital Expenditures Investing in Growth - Equipment

• All 85 locomotives ordered in 2014 have been delivered.

• 50 additional locomotives ordered for 2015 with the first

deliveries scheduled for February.

• Secured options for 2016 and 2017 locomotive orders.

• Expansion of grain and automotive fleets.

Investing in Growth - Capacity

• Crude oil network mainline and capacity improvements.

• Kansas City IFG Terminal expansion to facilitate interchange.

• Jackson, Mississippi in year two of a three year expansion

project to nearly double capacity.

• Wylie, Texas intermodal facility to open mid-year.

• Sanchez Yard three year, $60M+ expansion project.

• Seven new or expanded sidings to improve line of road fluidity.

Investing in Maintenance – Velocity Benefits

• Track programs between Shreveport and Baton Rouge to

provide increased speeds from (40 to 49MPH), benefitting

crude shipments.

• CTC implementation on the Laredo subdivision and in Mexico

to improve fluidity and increase maximum allowable speed.

• Continued mainline improvements between Monterrey and

Nuevo Laredo, MX, allowing for speed increase to 68MPH.


Kansas City

East St. Louis

Springfield

Wylie

San Luis Potosi

Monterrey

Lazaro

Cardenas

Houston

Ft. Worth Shreveport

Mexico City

Meridian

Laredo

Saltillo

New Orleans

Gulfport

Port Arthur

Veracruz

Tampico

Counce

Artesia

Vandervoort Siding Extension

IFG Double Main Extension

New Siding at Trenton, LA

New R&D Track in Laredo Yard

Santa Maria Siding Extension

Comonfort Siding Extension CTC Install Surrounding Escobedo

Ojo Seco and Salvatierra Siding Ext.

2015 Capacity Related

Capital Projects

*Please note that this project list

may change at any time.

Jackson Yard Expansion

Artesia Yard R&D Tracks

New Wylie Intermodal Terminal

CTC Install KCS Laredo Sub

New R&D Track in Knoche Yard

Double Track Sanchez to Nuevo Laredo

Sanchez Yard Build Out Continuation

Escobedo Yard R&D Track Build

Jacuaro and La Goleta Siding Ext.

Singer Siding Extension


Mexico Energy Reform is a Reality

12

Reform could drive an increase

in rail shipments in the following

ways:

Increased LPG and refined products

could be the first growth market

Movement of steel tubing for new

pipelines

Importation of frac sand from the

United States

Crude by rail from new producing

regions to refineries

Increased intra-Mexico moves of

diesel, LPG, gasoline and fuel oil

Reform could reduce power generation cost, further

improving Mexican competitiveness and strengthen near

shoring thesis


Altamira contract area production potential

13


Production Constraints & Logistical Challenges

14

• Crude oil delivered to Pemex with 10% water content (Field condition)

• Limited gas availability in the field for heating purposes

• 12,000 Bbls per day transported through Cacalilao pipeline

• Cacalilao Pipeline is at capacity / 12,000 Bbls per day

• Dehydration Plant (CAB) at capacity is for 15,000 Bbls per day

• Currently 3000 Bbls per day moved by truck

• Tank located in Madero refinery is at capacity (200,000 Bbls) This tank blends

Ebano, Altamira, Panuco and Arenque streams (Blend known as Altamira Index is

Maya)

• Logistical constraints in all the supply chain impact production growth and

economics


Ebano Production Area Altamira Contract Area

Raya 5

Ébano 4

Escudo Nacional

Las Flores

E-112

E-114 Méndez 2

E-M

Chijolito Chijol-D17

Ébano 3

E-41

K Paciencia P

G-Méndez

Corc. 5 Águila

Corc. 2 Águila

1 Sábalo

6 Internacional

A-21 Oficinas Ébano

Proposed Stations

Actual pumping

G-Méndez

Gross: 6,500 bbls Water: 8-12% °API: 10-12

Pipeline

Railroad

Refinería Madero Crude analysis to be dehydrated


Thank You

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