Ex-rivals team up in race for oil terminal
Enterprise, Enbridge are among firms seeking export site
An eight-way race to build new offshore crude oil export terminals in the Gulf of Mexico is heating up, with two former competitors agreeing to work together on a project just south of Houston.
Houston pipeline operator Enterprise Products Partners and Canadian pipeline operator Enbridge announced on Monday an agreement to jointly develop Enterprise's proposed Sea Port Oil Terminal, or SPOT.
Located in 115-foot deep water about 30 miles off the coast of Brazoria County, the proposed export terminal will be able to accommodate supertankers known as Very Large Crude Carriers, or VLCCs. The vessels, capable of hauling 2 million barrels of crude oil in a single shipment, require at least 75 feet of water and are therefore too large to be fully loaded in almost all U.S. ports, whose depth vary between 40 to 50 feet.
If the proposed project is approved by federal regulators, Enbridge will be able to buy a stake in SPOT, which is roughly 50 miles away from a similar offshore project the Canadian pipeline operator is seeking to develop in a separate deal with German terminal operator Oiltanking.
The United States is currently exporting nearly 3.1 million barrels of crude oil per day. But with six more offshore terminals able to support up to two VLCC tankers a day proposed, the market can only support one or two of the eight projects, said Pearce Hammond, research director for the Houston investment bank Simmons Energy.
“They’re clearly not all going to get built,” Hammond said. “This is where you are starting to see the winnowing down of projects. Combining makes a lot of sense. You lower risks and increase the chance of success.”
Enterprise and Enbridge filed competing permit applications with the U.S. Department of Transportation’s Maritime Administration, or MARAD, in January and February. The review process is expected to be completed in the first half of 2020 and construction of the underwater pipelines and offshore platforms are expected to take another two years.
A vertically integrated company with pipelines, processing plants and marine terminals, Enterprise already has a head start in the exports game. The Houston pipeline operator handles nearly one third of all U.S. crude oil exports, more than 80 percent of U.S. ethane exports and about 40 percent of propane and butane exports.
“We are very pleased to work with Enbridge to jointly develop a deepwater port in the Gulf of Mexico to support growing exports of U.S. crude oil,” Enterprise CEO Jim Teague said in a statement. “We value Enbridge’s expertise and resources as we focus our collective commercial development efforts on making the SPOT project a reality.”
The announcement of the joint venture with Enterprise comes as
Enbridge is expanding its Seaway Pipeline, which moves crude oil from storage terminals in Cushing, Okla., to Brazoria County. Enbridge also announced that it is moving forward with plans to develop its proposed Jones Creek Crude Oil Storage Terminal. Located off State Highway 36 near the Village of Jones Creek, the terminal will be able to hold 15 million barrels of crude oil destined for export.
In a statement, Enbridge reported that the company still plans to develop a separate deepwater port known as Texas COLT (for Crude Offshore Loading Terminal) roughly 50 miles west of Enterprise's SPOT export terminal. That terminal project began as a partnership with Oiltanking and Houston pipeline operator Kinder Morgan, which dropped out of the project in March.
"We are pleased to be teaming up with Enterprise to bring large scale, integrated export solutions to the market," Enbridge CEO Al Monaco said in a statement. "This collaboration leverages our jointly owned and highly competitive Seaway system and capitalizes on each of our capabilities to drive out highly capital efficient export infrastructure for our customers. For Enbridge, it's also a key part of our priority to provide our North American light and heavy crude customers with highly efficient access to the Houston-area refining markets and growing global demand."
The other proposed projects are terminals from Swiss trading firm Trafigura and Houston oil major Phillips 66, which are seeking to build offshore crude oil export terminals near Corpus Christi, and Dallas-based pipeline operators Sentinel Midstream and Energy Transfer, which are trying build two others near Houston.
In addition to getting a permit from MARAD, the projects must also secure contracts and funding.
And while these proposed projects remain under review, a joint venture between Ohio-based Marathon Petroleum, San Antonio-based Valero and the Dutch oil major Royal Dutch Shell known as the Louisiana Offshore Oil Port, or LOOP, has been receiving VLCC tankers since February 2018.