Hondo Railway — Eagle Ford Shale News

The Live Oak Railroad will be breaking ground in November with plans to open in the first half of 2013. The new rail facility will include 28,000 ft of track located just south of Three Rivers. The facility has a great location almost halfway between San Antonio and Corpus Christi. If you have noticed, there has been a dramatic rise in rail traffic in South Texas related to the Eagle Ford boom.

Three other major railroad sites have grown significantly in recent times:

The Live Oak Railroad is being built by a partnership between Howard Energy Partners and local real estate developers. The primary purpose of the facility is to move liquid hydrocarbons - condensate, NGLs, and oil.

Why Move Oil by Rail?

It might surprise you that crude will move by rail. Approximately 1.8 million barrels per day of pipelines have been built or are under construction. That should be adequate capacity for quite some time, but that is only part of the story. WTI oil prices have been significantly discounted to Louisiana Light Sweet (LLS) in recent history (Read more at Eagle Ford Oil Prices Trade at a Premium to WTI).

There are several projects underway to move crude from WTI's trading point, Cushing, OK, to the Gulf Coast near Houston. Those projects will relieve congestion in Oklahoma, but will make supply more abundant in the Texas refinery complex.

All that to say, there is adequate pipeline capacity to get into the Gulf Coast Refinery Complex, BUT there is a lot of other oil on its way there too. If Eagle Ford operators can get their production across the state line into Louisiana, it might mean several more dollars per barrel. That's potentially millions of dollars of savings per day across the Eagle Ford. The Live Oak Railroad and others will be the primary trading points for oil if prices prove more lucrative in other areas of the country.

Eagle Ford railroad traffic is on the rise. Operators are moving crude past pipeline bottlenecks, and moving frack sand and other products in to continue development.

The Hondo Railway, 30 miles west of San Antonio, serviced about 1,500 railcars per year on 13,000 ft of track a few years ago. The Railway terminal now serves 15,000 railcars per year and has expanded to 80,000 ft of track.

This year, an estimated 15,000 railcars will move through Hondo Railway LLC's 175-acre property — many of them carrying fracking sand bound for drilling operations in the Eagle Ford Shale formation.

The Hondo Railway isn't alone either:

What started at 1,600 feet of track has grown to 130,000 feet of track. Gardendale Railroad moves a mix of oil field commodities.
“The root of everything is sand,” Cundiff said. “We hadn't had any activity there in 15 years. We've gone from that beginning to 25 miles (of track) in just under 24 months.”
And at Port San Antonio, the East Kelly Railport is adding 15,000 feet of track to the existing 20,000 feet of track.
Spokesman Paco Felici said the rail port went from moving 2,594 railcars in the 2010 fiscal year to 4,556 railcars in the 2011 fiscal year.

The Port of Corpus Christi's rail expansion shouldn't be forgotten either. The port is adding the capacity to handle 100,000 railcars per year.