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Texas size expansion for Gulf of Mexico oil hub

Texas size expansion for Gulf of Mexico oil hub
Capacity for oil movements around the US Gulf has been expanding dramatically, according to recent reports. Most notably, the Houston/Corpus Christi area has benefited as they have become hubs for “tight oil” produced from the Eagle Ford and Permian basins.

If the conference circuit is any indication, Corpus Christi is now on the map, having hosted its “Eagle Ford Shale” convention, one of many similarly titled events, last week. The conference, ostensibly about sensible planning for the future, was a great opportunity to wave the Texas flag, with one port official reported by a local media outlet as saying: “…state of Texas is going to surpass some OPEC countries in production." By some accounts, that has already happened.

One of the best “boots on the ground” (and underground, or in the waters) is Houston based consultants RBN Energy, who track local production, refining, and the associated transportation impacts. According to their latest news briefing: “Since the start of 2012 just under 2m barrels per day (bpd) of transport capacity has been added to bring crude into the Texas Gulf Coast refining region. In the next two years (2014 and 2015) we expect another 2.1m bpd of crude pipeline and rail transport capacity to be added.”

Pipeline and rail modes have played an important role in bringing crude oil to the waterfront, but RBN also points to an important role for barging- with an estimate of 245,000 bpd of crude coming into the region on barges.

A big beneficiary, not surprisingly, is Kirby Corporation, where chairman Joe Pyne told investors: “Our inland and coastal tank barge fleets continue to remain high equipment utilization levels and favorable pricing trends during the quarter…” on its recent call.

Equipment utilisation was revealed to be above 90%, versus 75%- 80% only a year earlier. Another sign of strength- rates for spot barging moves were pegged at 5% – 8% above term (contract) pricing. Of course, the bigger vessels, ATBs and 50,000 dwt Jones Act tankers, are also feeling the love from Eagle Ford.

Outbound from Corpus, RBN estimated that as much as 387,000 bpd of crude in waterborne moves to refineries elsewhere around the US Gulf. Activity is also up out of the Bakken, North Dakota, as well, with rail shipments, mainly to the east, but also to western destinations, are back to record levels.

The spread between Brent Oil and West Texas Intermediate (WTI), which had narrowed during Q3, has now widened again, its was recently at $12/barrel, making imports of foreign oil, notably from West Africa, but also farther afield, less desirable.

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