Texas-based Vista Proppants and Logistics has struck a deal with logistics firm JupiterMLP to transload crude oil from truck to rail at Pecos, Texas, and ship crude on the Union Pacific Railroad through 2019 and potentially into 2020, to seize crude-by-rail opportunities for moving oil out of the Permian until pipeline capacity catches up with rising production.

The Permian production exceeding pipeline takeaway capacity has depressed the prices of Midland, Texas, crude compared to the price of the grade at Houston, and shippers and producers are looking for other ways of moving the oil to the market.

Currently Vista expects to ship around 400,000 barrels per month from Pecos to St James, Louisiana.

“The amount of crude shipped out of Pecos could be larger than Vista’s current estimate, which is dependent on the number of available train slots each month. Union Pacific has indicated they will continually evaluate their mainline capacity and provide additional service as it becomes available,” Vista said.

“The strategic location and capabilities of our Pecos facility make it a natural fit for crude-by-rail operations, and we look forward to assisting our customers with their transport needs as takeaway infrastructure for the Permian is further built out over the next couple of years,” Vista’s chief executive Gary Humphreys said.

“The crude-by-rail opportunity that their facility provides helps us to accelerate our strategy of moving significant volumes of Permian Basin crude oil to the Gulf Coast while we construct our Jupiter Pipeline and VLCC loading terminal in Brownsville, Texas,” said Juniper CEO Tom Ramsey. Related: Production Growth In The Permian To Hit New Record

Last month, Union Pacific’s Chief Marketing Officer Beth Whited said on an earnings webcast, as quoted by S&P Global Platts, “We have some capacity in our network and expect to see some results in the third and fourth quarter.”

Meanwhile, Plains All American is fast-tracking two pipeline projects in West Texas in a bid to alleviate a worsening pipeline capacity shortage. The current pipeline capacity in the Permian is 3.1 million bpd. Railway capacity, according to S&P Platts, is around 315,000 bpd, but railway is mostly used to supply frac sand.

By Tsvetana Paraskova for Oilprice.com

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