Warren Buffett’s Berkshire Hathaway Subsidiary Boosts US Shale Revolution

From Offshore Technology International

By Roberta Murray

Warren Buffett’s investment in BNSF Railway Company, a subsidiary of Berkshire Hathaway Inc. (NYSE:BRK.A), has given a massive boost to the US shale oil industry. Oil production in North Dakota, the region at the epicentre of the shale revolution, has risen this year to a record high of 700,000 barrels a day from 90,000 b/d in 2005 as drillers tap the prolific Bakken formation. The surge has overwhelmed local pipelines.

The lack of off-take capacity to transport the jump in production forced regional oil prices to fall sharply lower earlier this year. In February, the cost of oil from the Bakken at the pricing hub of Clearbrook, Minnesota, fell to a record discount of $27.5 a barrel under the West Texas Intermediate, the main US benchmark.

The discount was the price needed to incentivise producers and trading houses to hire expensive trucks to haul the crude to refining centres elsewhere. But since then, BNSF and other railway companies have announced massive increases in rail capacity to ship crude oil from the region to Canada, several refineries in the US east coast, and the key refining corridor along the coast of the US Gulf of Mexico, the Financial Times says.

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