(Updates with detail on Mexican crudes, adds desire to add crude by rail in Ohio)
* Growing domestic crude glut on Gulf Coast pushing Mexican grades to East Coast market
* Company interested in adding crude by rail at Ohio refinery
By Kristen Hays
HOUSTON, April 30 Independent refinery PBF Energy expects its U.S. East Coast refineries to process more Mexican crude grades as a growing glut of inland U.S. crude on the Gulf Coast pushes shipments of Mexican output further north, Chairman Tom O'Malley told analysts on Wednesday.
He said Gulf Coast refineries can back out imports as more domestic crude flows to the region from inland shale plays, such as the Eagle Ford shale and Permian Basin in Texas. That will increasingly push Mexican barrels to the East Coast market.
"I think you should look at Mexican grades becoming a regular part of our diets," O'Malley said during the company's first-quarter earnings call.
As domestic crudes increasingly make their way to the Gulf market, "Gulf Coast refiners are pushing out barrels they have traditionally handled," O'Malley said, making more medium-grade crudes available to the East Coast market.
He said the shift gives PBF more flexibility in choosing the best-priced crudes day to day, and the company also has seen other South American crudes coming to the market that PBF has never run.
PBF receives North Dakota Bakken and Canadian heavy crudes via rail in place of more expensive imports, but as discounts of those crudes to other global crudes fluctuate, the company can run imports if they are more economical, he said.
During the third quarter last year PBF took imports over Bakken when its the discount of U.S. crudes shrank to nothing. The company later ramped up crude shipments by rail when that discount widened again.
PBF doesn't receive similarly cheaper Texas crudes via barge or tanker because of restrictions in shipping oil between U.S. ports, O'Malley said. Tankers carrying Mexican crudes don't have those restrictions.
"I think we've so far in the first quarter frankly seen only a minimal impact of this. We're going to see more of this in the future," O'Malley said.
O'Malley also said PBF is interested in adding rail offloading capability at its 160,000 barrels-per-day (bpd) refinery in Toledo, Ohio, to further that flexibility to choose crudes to process.
The company is expanding its rail offloading capacity for both Bakken and Canadian crude at its 182,200 bpd plant in Delaware City, Delaware, to 210,000 bpd from 145,000 bpd by year-end.
As of April 1, PBF began taking shipments only in tank railcars that meet the latest safety standards adopted by the industry in 2011 in light of recent fiery crude train crashes, Chief Executive Tom Nimbley said.
Just on Thursday a CSX Corp train carrying crude derailed in Virginia and caught fire, according to Lynchburg city officials. (Reporting By Kristen Hays; Editing by Chizu Nomiyama)