It’s ready, set, go on crude exports
Permian shale production drives terminal construction to move millions of barrels
Ramped-up Permian pipeline production has companies racing to build Gulf Coast terminals.
The race to export U.S. shale oil overseas is about to get fierce, with at least nine proposed terminals angling for a piece of a very limited pie.
Within 18 months, new pipelines opening in the nation’s most prolific shale basin promise to carry an added 2 million barrels of oil a day to the Gulf Coast. But the extra crude will arrive at a time when existing terminals in the Corpus Christi area can offer only about 300,000 barrels a day of unused capacity.
Meanwhile, some of the terminals proposed are being designed to load a supertanker every other day, each capable of carrying 2 million barrels. The result: It’s likely only one or two new terminals are needed, with the edge going to companies such as Enbridge Inc., whose Freeport effort could be fed by two pipelines it already owns interests in.
“Anyone can build a terminal,” said Chief Executive Officer James Teague of Enterprise Products Partners LP, one of the first companies to export oil from the U.S., in a conference call last month. “But it’s what’s behind that terminal that determines its success.”
Soaring exports
Or in other words, success in the terminal business is as much about securing the barrels as it is about shipping them out.
U.S. oil exports have soared to nearly 2 million barrels a day since a near four-decade moratorium was lifted in late 2015. Trafigura Group and other trading houses have jumped at the opportunity to send those supplies to Europe and Asia.
Industry analysts have predicted that exports will double by 2020 given increased export capacity and growing shale production.
Enbridge hasn’t released many details on its proposal for Freeport, which is about 175 miles northeast of Corpus Christi.
But it would likely be fed by the company’s Seaway pipeline system, which runs south from the U.S. storage hub in Cushing, Okla. as well as the Gray Oak pipeline in which it owns a stake. Once completed, that pipe will run southeast from Midland, in the heart of the Permian, into Freeport and Corpus Christi.
To date, Trafigura is the only known company that’s submitted a formal permit application to build a deepwater terminal in the Corpus Christi area. The company would move crude to a single-point mooring system a few miles offshore, where it would plan to load a supertanker every other day.
Houston’s position
The lion’s share of crude exports leave from around Houston, given the expansive network of inbound pipelines, storage tanks and dock space in the Houston Ship Channel. But that activity can also prohibit new growth, some say, with concerns about congestion limits.
That makes Corpus Christi an attractive option. Many Permian pipelines slated to come online are ending up there. That builds a strong case for new terminals to be constructed.
Trafigura’s proposal is one of five for the Corpus Christi area that would rely on the three new pipelines coming online in 2019. They comprise the Plains AllAmerican Pipeline LP’s Cactus II conduit, with a capacity of 585,000 barrels a day; Epic Midstream LLC’s EPIC line, with 600,000 barrels a day; and the Grey Oak line, owned jointly by Enbridge, Andeavor and Phillips 66, with about 900,000 barrels.
Beyond Trafigura, the other companies proposing terminals for the area include Magellan Midstream Partners LP, Carlyle Group LP, Buckeye Partners LP and Flint Hills Resources LLC.
Closely-held JupiterMLP, meanwhile, is proposing a terminal miles away from the Corpus Christi mashup. Its effort in Brownsville, about 163 miles south of Corpus Christi, has no domestic pipeline connections. Instead, the company aims to build its own pipeline to the Permian Basin.
“The more congested it gets, the longer it takes,” said CEO Tom Ramsey of JupiterMLP. On the question of how many will succeed, he said "The number may be two or three, but you’re going to need more than one."
“It’s what’s behind that terminal that determines its success.” Enterprise Products Partners LP CEO James Teague