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By Kristen Hays HOUSTON, Jan 3 (Reuters) - Shipments of petroleum on U.S.railroads rose more than 46 percent in 2012 as shale oilproducers put record amounts of crude on trains to overcomepipeline capacity constraints. Petroleum products were the fastest growing cargo categoryfor major U.S. railroads last year and analysts expect oilproducers to further expand their use of trains in 2013 aspipeline constraints are far from overcome. Aided by hydraulic fracturing techniques U.S. oil producershave unlocked huge volumes of crude from shale formations buthave struggled to get the oil to market due to limitedinfrastructure. U.S. crude output jumped nearly 1 million barrels per daylast year to a near 20-year high, but much of the new productioncomes from places like North Dakota where there is littlepipeline capacity. Although rail shipments are very costly, the infrastructureto load crude oil onto trains can be built quickly and cheaply,unlike pipelines which can take years to develop. Total petroleum shipments exceeded 540,000 carloads in 2012,up from 370,000 carloads in 2011, according to the Associationof American Railroads. Another report released by the AAR last month forecastcrude-by-rail shipments for 2012 would come in at more thanthree times the number of carloads moved in 2011. Major U.S. freight railroads carried 66,000 carloads ofcrude in 2011, up from only 11,000 carloads in 2009. By thethird quarter of last year, daily shipments of crude oil wereexceeding 500,000 barrels per day, roughly equivalent to theoutput of OPEC's smallest member, Ecuador. If growth patterns hold, crude by rail could "easily" blowpast 600,000 barrels per day by early 2013, AAR said. Dismissed by some observers as a transient phenomenon whenrail movements of crude oil first emerged as a significantdevelopment in North American oil markets a few years ago,recent market activity suggests big players are betting thephenomenon will continue. Oil marketer and shipper Plains All-American Pipeline LP paid $500 million last month to buy four operating railterminals for crude oil shipment. COAL STING Growing rail shipments of oil have also eased some of thepain for railroads from rising U.S. natural gas output, anotherfacet of the shale revolution, which is cutting into electricutilities' demand for coal. Coal shipments on major U.S. railroads fell nearly 11percent in 2012 to 6.03 million carloads. Hydraulic fracturing techniques also require large amountsof sand and other material that is being moved by trains, whichfurther offsets some of the losses in the coal cater gory. BNSF Railway, owned by Warren Buffett's Berkshire Hathaway , is the biggest mover of crude by rail,largely thanks to its foothold in the Bakken shale oil play inNorth Dakota and Montana. John Miller, BNSF's vice president of sales for industrialproducts, told Reuters in an interview that the company has gonefrom moving about 5 percent of Bakken output two years ago tonearly half today. "It's been incredible growth, and that's spurredstrengthening of the infrastructure we have," Miller said. By the end of the third quarter last year, about 430,000barrels per day of crude moved out of North Dakota's Bakkenshale play by rail, up from nearly nothing in mid-2010,according to the North Dakota Pipeline Authority. Miller said BNSF touches all the shale plays across thewestern United States, but rail in the Bakken play is muchfurther along than others in development rail efficiencies. "You'll see development in the other shales as well, butthey don't seem to have the speed or the depth that the Bakkendoes - at least not yet," he said. COASTAL SHIFT Rail shipments to the Gulf Coast may shrink once pipelinesmove more crude into the region from the glutted U.S. crudefutures hub in Cushing, Oklahoma, or the booming Eagle Fordshale and Permian Basin in Texas. Enterprise Products partners LP and Enbridge Inc's jointly owned Seaway pipeline is slated to start moving400,000 bpd of crude from Cushing to the U.S. Gulf Coast nextweek, unveiling the first of two expansions on the line that wasreversed last year. The second expansion involves building a new parallelpipeline that will up shipments to 850,000 bpd by early 2014. However, these developments are unlikely to spell the end ofrail movements. "A pipe goes from A to B. Rail is more flexible. If pricesare higher somewhere else, send the train there," said RustyBraziel, president of consultancy RBN Energy LLC in Houston. Refiners on the East and West coasts increasingly aretapping rail because inland crude's discount to other globalcrudes makes crude-by-rail profitable despite transportationcosts that can reach the mid-teens. Last September Tesoro Corp began moving up to 40,000bpd to a new offloading facility at its 120,000 bpd refinery inAnacortes, Washington. Tesoro is also processing up to 5,000 bpd of Bakken crude atits 166,000 bpd refinery in Martinez, California. Rival Phillips 66 is buying 2,000 railcars, withdeliveries starting early this year, to increase shipments toits coastal refineries in New Jersey and Washington. BP Plc is also seeking permits to build an offloadingfacility by spring of 2014 to bring up to 60,000 bpd of oil toits 225,000 bpd Cherry Point refinery in Blaine, Washington. And PBF Energy aims to lease thousands of railcarsto move cheaper inland U.S. and Canadian crude to its Delawareand New Jersey refineries.