October 27, 2011 / 6:26 PM / 9 years ago

UPDATE 1-Eagle Ford shale oil pushing crude barge demand-Kirby

* Kirby barge demand strong as shale oil output grows

* Barge rates increasing

By Janet McGurty

NEW YORK, Oct 27 (Reuters) - Kirby Corp , the largest U.S. inland barge operator, said on Thursday it continues to see strong demand for inland barges carrying crude oil to refineries, as production from the Eagle Ford shale formation and other regions continues to grow.

Between 140 and 150 barges industrywide are currently carrying crude oil, more than 10 times the number in operation ten years ago, Joe Pyne, Kirby’s chairman and chief executive officer told analysts during the company’s third-quarter conference call on Thursday.

“We used to be able to count on less than two hands the number of crude barges,” said Joe Pyne, head of Kirby.

“The movement is mostly downriver movement of Canadian crude oil through Baton Rouge refineries.

Exxon Mobil Corp. operates a large, 503,000 barrel per day refinery in Baton Rouge, Louisiana. It is located north of several large Louisiana refineries including those owned by ConocoPhillips and Marathon oil.

Canada sent 2.2 million bpd of crude south in July, making it the largest exporter of oil to the United States. Once the crude gets to the St. Louis area it is barged down the Missouri River and onto the Gulf Coast.

Pyne said that Eagle Ford crude is also moving by barge to the ports of Houston and Port Arthur and into New Orleans markets, where a good chunk of U.S. Gulf refining capacity is sited.

Exxon Mobil also has the Baytown refinery in the Texas — the largest in the country at 562,500 bpd — as well as the 348,500 bpd plant in Beaumont.

Port Arthur is home to three refineries including Valero Energy Corp’s 325,000 bpd plant. Motiva — a joint venture between Royal Dutch Shell and Saudi Aramco operate a 325,000 bpd plant in the process of being expanded to 600,000 bpd with an estimated startup date of early 2012.

French major oil company Total P.A. also runs a 174,000 bpd refinery in Port Arthur.

Kirby operates 827 inland tank barges with the capacity to carry 16.3 million barrels of liquids. About 25 percent of the barges operate on a spot basis with the remainder under contract, with those under negotiation being inked at higher price.

Pyne said the contract pricing was approaching peak levels and that Kirby thinks that the rates are going to trend up.

“Some of the Eagle Ford movements will be ultimately be kind of medium term” said Pyne, adding that pipelines under construction will eventually replace some of the barges as a means to carry crude from the Eagle Ford.

“But I do think that the the volume coming out of the Eagle Ford and Canadian crude that is being exported to Baton Rouge is sustainable.”

Shale oil from the Eagle Ford deposit in southeast Texas has come on strong this year, rising to 272,000 barrels per day (bpd) in June from 70,000 bpd in April, according to energy consultancy Bentek. Some experts say it could top 400,000 bpd by 2013.

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