Twice the crude exports by ’20
Studies see new markets for shale oil, Texas coast handling the boom
U.S. crude oil exports are expected to more than double by 2020, and unlike the pipeline constraints hampering the booming Permian Basin oil field, the Texas Gulf Coast will be ready to ship the larger volumes to the world, according to two studies released this week.
Crude exports from the United States are expected to climb to 4 million barrels a day, reshaping energy markets as the nation expands its share of the global oil sales. Much of the exports will flow from Texas shale fields, providing new markets for the Permian’s record output and helping drive the growth of the Texas economy. Exports bring new money into a local economy — money that can create wealth, fuel new investments and generate jobs.
“Exports mean that you can keep increasing production — that means you can keep selling barrels, that means you can keep investing, so you have jobs, economic growth and government revenue,” said Christopher Guith, senior vice president at the U.S. Chamber of Commerce’s Global Energy Institute, a policy development and education group.
Reports released by the financial services firm Raymond James, and the research and data company S&P Global Platts each predicted that U.S. crude exports would double from roughly 2 million barrels a day
in June and July, according to government figures. June exports set a record of 2.2 million barrels a day.
Shale oil fields such as the Permian Basin in West Texas, Eagle Ford Shale in South Texas and Bakken Shale in North Dakota will drive the export growth, the reports said. U.S. refiners don’t have the capacity to process much more U.S. crude oil, in large part because most are configured to process heavier crudes from the Middle East, Canada and Latin America. That means excess production will go to foreign markets, said Danny Oliver, senior vice president at the San Antonio pipeline company NuStar Energy.
“For the most part,” Oliver said, “the new production that’s coming out of these fields will have to find a home, and that’s what’s driving the export story.”
Companies such as NuStar, Buckeye Partners of Houston and until recently Occidental Petroleum, also of Houston, are building pipelines, storage and export terminals at Gulf Coast ports to capitalize on the flood of oil coming from the Permian and other shale plays. Occidental, also known as Oxy, said it was selling its expanding Ingleside crude oil storage and export terminal near Corpus Christi to Moda Midstream, a Houston pipeline and storage company.
Oliver said NuStar — which partnered with Houston producer ConocoPhillips to ship the first crude oil after the crude export ban was lifted in December 2015 — is building another 1 million barrels of storage capacity at the Port of Corpus Christi. The storage facility will hook into one of three pipelines that will carry oil from the Permian. Those pipelines, still under construction, will have a combined capacity of about 2 million barrels a day.
So far, however, the lack of pipelines to move oil from West Texas to the Gulf Coast has slowed the growth of crude exports, said Ed Hirs, an energy economist at the University of Houston. But, Hirs added, “We have all the (export) terminals and capacity we need.”
The United States has exported refined products such as gasoline and diesel for years, and some of the pipelines, storage and terminals can be repurposed for crude exports, Hirs said. The Louisiana Offshore Oil Port, or LOOP, system, for example, was developed to import crude oil, but has reversed the direction of pipelines and recently loaded at least two tankers for export.
LOOP is the only Gulf Coast port that can handle fully laden very large crude carriers or VLCC, which can hold up to 2 million barrels of oil. Because the water depths in U.S. ports are too shallow, VLCCs can only partially load there. They then must cruise offshore to finish loading crude from smaller tankers in a practice called reverse lightering.
At least three proposals to build or expand Gulf Coast port facilities to handle VLCCs are under consideration. In July, the Houston energy company Enterprise Products Partners said it would build an offshore crude oil terminal capable of fully loading VLCCs. The Swiss company Trafigura filed a permit application that same month to develop a similar offshore loading terminal near Corpus Christi.
The Port of Corpus Christi, meanwhile, is eyeing a piece of property it owns on Harbor Island, about 2 miles inland from the Gulf of Mexico, for an inland VLCC loading and export terminal. The port is opposing Trafigura’s planned offshore facility, which would be a competitor.