Texas port at centre of U.S. oil exports

Late last month, an oil tanker that measures three football fields long and six storeys high moved slowly through the port of Corpus Christi, Texas, to test the waters of America’s booming crude-export industry.

After navigating the Aransas pass around 7 a.m. on May 26, the vessel, Euronav NV’s Anne, didn’t pick up any oil. But its arrival in the humid air of south Texas marked the first time ever a tanker of that size had called on a U.S. terminal in the Gulf of Mexico.

The Anne docked at Occidental Petroleum Corp.’s terminal to determine if some of the world’s biggest carriers could start ferrying oil from Texas to foreign buyers. The shipping upgrade is necessary after a surge in production from U.S. shale fields like the Permian Basin led to more oil than Gulf Coast refiners could handle. And Corpus Christi is vying to become America’s main export hub.

“Corpus Christi was the No. 1 port for U.S. crude exports last year, and this trend is continuing,” said John LaRue, the port’s executive director.

Shipping oil overseas is something new in the U.S., a country that spent most of the past century refining almost every drop of domestic output. For decades, tankers laden with crude from around the world arrived at Gulf Coast refineries to be made into fuel for American cars and trucks. Dependence on imports grew as domestic output fell.

But in recent years, lowcost drilling methods unlocked vast deposits in places like West Texas. U.S. production has almost doubled and may reach 10 million barrels a day next year for the first time since 1970, government data show.

While the U.S. still consumes more than it produces, supplies from the new Permian and Eagle Ford fields are primarily light, low-sulphur oil. Many of need to remain a cheaper alternative to supplies from traditional producers in the North Sea, West Africa and elsewhere. West Texas Intermediate, the U.S. benchmark pumped from the Permian Basin, has dropped 20 per cent this year, trading at less than US$43 a barrel.

Corpus Christi is betting the boom will last. The port, where three major pipelines unload crude shipped from southern Texas and from fields hundreds of miles away in the far western reaches of the state, has received preliminary approval from Congress for a US$350 million dredging project that almost 30 per cent of the country’s total exports.

Daily export capacity could grow to 2.8 million barrels from 960,000 now, according to port officials. Houston, the second-biggest crude exporting hub, can ship 1.7 million barrels a day.

Right now, most of the ships handling crude in the port are Aframax carriers that hold about 600,000 barrels of crude. Once the dredging project is complete, Corpus Christi would be able to handle Suezmax tankers that load about 1 million barrels. The VLCCs like Anne hold as much as 2 million barrels, so they remain too big for the channel.

But producers are looking toward a day when the port can handle those big tankers, too.

“The Permian Basin is the largest basin producing crude in the United States,” Cynthia Walker, Occidental’s senior vice-president of marketing and midstream operations, said last month. “It’s the fastest growing in the world.”

The Anne alone could hold 11 days of the company’s daily production in the Permian, which was 185,000 barrels of oil a day at the end of 2016, she said.

Two more pipelines, the EPIC and South Texas Gateway, are slated to open in 2019, bringing more oil to the coast.

Several companies have expressed interest in adding storage capacity at the port, LaRue said.