The Atlanta Journal-Constitution
Oil exports, illegal for years, now fuel a Texas port boom
U.S. ships 1.3 million barrels a day to foreign countries.
CORPUS CHRISTI, TEXAS — In a twist that would have been unthinkable only two years ago, the oil tanker that arrives in China today may be carrying crude that left the South Texas port of Corpus Christi instead of Saudi Arabia.
Chinese drivers most certainly don’t care where their fuel comes from, but the export of American crude oil to dozens of countries over the last year is the latest chapter in a remarkable turnaround for the U.S. oil and gas industry, about the only good news in three years of plummeting commodity prices, bankruptcies and layoffs.
For 40 years it was virtually impossible to sell American oil to any country except Canada because of an export ban that was a bedrock of U.S. energy policy. The Obama administration slowly loosened the ban and Congress finally ended it in late 2015 in a compromise that also extended tax credits for renewable energy.
Oil exports grew slowly through most of 2016, but this year there has been a surge reaching 1.3 million barrels a day — roughly 15 percent of domestic production — which even at today’s depressed prices is worth more than $1.5 billion a month.
That may be only the beginning. In a test a few weeks ago, the Frenchflagged supertanker Anne, empty but capable of holding more than 2 million barrels of oil, docked safely at Occidental Petroleum’s yearold export terminal here. The docking of the 1,093foot vessel, larger than any tanker to come into port previously in the Gulf of Mexico, is seen as the herald of an export boom, lifting the spirits of U.S. oil executives despondent over the crumbling price of crude and sending ripples across global energy markets.
“This is our chance, this is our turn to prosper,” said Khalid A. Muslih, executive vice president of Buckeye Partners, a pipeline and terminal operator in the midst of a major export expansion. “We’re working our way toward energy independence. We’re grabbing market share, and we’re doing our part to rectify our imbalance of trade.”
Suddenly buyers from all over the world are purchasing the new U.S. supplies, from South Korea to India — even oil-rich Venezuela, which uses the light sweet crude that comes out of American shale to blend with its gooey heavy crude. The light crude is highly prized even while global oil markets are saturated. Canadian oil sands, which also tend to be heavy, are being increasingly produced and need to be mixed with lighter crudes.
European countries are looking to U.S. exports to reduce their dependence on oil from Russia and African countries that produce light crudes, particularly Libya and Nigeria, which are politically unstable and unreliable suppliers. And China, with slumping oil production and rising demand, wants a more reliable source than the Persian Gulf, on which it now depends.
As the Organization of the Petroleum Exporting Countries cuts production to prop up oil prices, U.S. exports are beginning to elbow out Saudi crude in some markets, a development that would have been inconceivable four decades ago when OPEC oil embargoes threatened to cripple the U.S. economy.
And the world’s energy leaders are noticing.
“U.S. oil exports are a game changer and are going to be a larger and larger changer in the markets,” said René Ortiz, a former Ecuadorean energy minister and former OPEC secretary-general.
The United States still imports far more oil than it exports, and probably will continue to do so for many years. But since many U.S. refineries were designed for heavy crudes from Mexico, Venezuela and Canada, the light shale oil from Texas is an awkward mismatch. Meanwhile, that oil is coming out of the fields in a record gush, and despite persistently low oil prices, the Energy Department projects that domestic production next year will top 10 million barrels a day, an all-time high. That output, an increase of half a million barrels a day from current production levels, will need to find a market somewhere. With domestic demand flattening because of increased fuel efficiency in cars, oil executives say that somewhere is likely to be overseas.
The expansion of energy exports fits neatly with President Donald Trump’s promise to usher in an age of “American energy dominance.” But oil executives say the driving force for future production and exports will be the economics of global supply and demand, rather than Washington policy.
Even with prices lagging, lower oil field costs and new technologies have enabled producers in the dominant Permian Basin shale fields of West Texas and New Mexico to deploy 250 rigs over the last year or so, which has led to the hiring or retention of as many as 25,000 workers, according to Scott Sheffield, executive chairman of the Pioneer Natural Resources, a leading Texas producer.
And here in Corpus Christi, a hub of refineries and pipelines between some of the country’s richest oil fields and the Gulf of Mexico, the port is just beginning a $1 billion capital investment program that includes deepening and widening the shipping channel for bigger tankers to dock and load. Some of the program is dependent on final approval of funding from Congress.
Occidental, NuStar and other companies have made major investments in additional dock and tankage facilities and are planning additional ones, while several pipelines between the Permian Basin and the port are in the planning stage.
Crude exports from Corpus Christi have already increased to 384,000 barrels a day this April from an average of 68,000 barrels a day during the first half of 2016, according to a recent report by RBN Energy, an analysis firm.
Buckeye Partners alone has invested $1.2 billion since 2015 in docks and other export facilities here, putting to work 1,500 construction workers and 130 fulltime employees. It has plans to put more than $1 billion into additional investments, including a pipeline system called South Texas Gateway that would connect West Texas with Corpus Christi and global markets. The system is expected to be finished in 2019, with the potential to move 400,000 barrels a day. Meanwhile, it plans to add a sixth and seventh deepwater dock in the port capable of loading big tankers for export.
The expansion has been nothing but good news for Rudy Dominguez, a pipeline technician who was laid off in early 2016 after working for the same pipeline company for 26 years. With two children to support, he was out of work for 15 months and living off his severance pay, savings and odd jobs. Friends brought him fish from boating trips to put on the table, and he learned more hamburger recipes than he cares to remember. Learning of Buckeye’s expansion, he applied for several jobs and was finally hired a few weeks ago. “God closes doors and then opens them right up,” Dominguez said. “I just hope oil, gas, energy exports go on forever.”