All I Need to Get By?, Part 2 - A Flood of SPR Releases May Test U.S. Crude Export Capacity

Brace yourself for it. Over the next few weeks, there’s a good chance that a tsunami of crude oil will be released from the U.S. Strategic Petroleum Reserve (SPR), and it’s likely that much (if not most) of that oil will be piped to Gulf Coast export docks and loaded onto supertankers. If that happens, the export capacity of crude-handling terminals from Corpus Christi to coastal Louisiana will be stress-tested on their ability to send out much larger volumes than they’re used to dealing with. And that’s only the beginning. Over the next year or two, while U.S. E&Ps ratchet up production in response to higher prices as Europeans and others scramble to replace Russian crude oil, Gulf Coast export terminals may well be called upon to load and ship out even more oil (in addition to refined products) on a regular basis. In today’s RBN blog, we discuss the impending SPR releases and the ability of Gulf Coast ports and individual terminals to handle increasing volumes.

For a while now, we’ve been thinking that a confluence of factors — efforts by European and other refineries to slash their use of Russian crude oil, massive releases of crude from the SPR, rising U.S. oil production, and declining domestic refining capacity, among others — may result in a rapid increase in crude exports from Gulf Coast marine terminals. And the latest weekly data from the Energy Information Administration (EIA) indicates that the surge has begun: an average of 3.85 MMb/d was exported during the last three weeks of April, in contrast to earlier this year (the six weeks prior to the mid-February invasion of Ukraine), when exports averaged just 2.5 MMb/d. We’ve also been wondering if the existing oil-related infrastructure along the coast would be capable of handling a real flood of crude.

In Part 1 of this series on U.S. crude oil export capacity, we took a 30,000-foot view of the situation and determined that the 16 largest oil-handling terminals along the Gulf have a combined maximum capacity of well over 6 MMb/d, or about twice the 3 MMb/d-plus volumes these same facilities have been routinely sending out the past couple of months. That’s the good news. The not-so-good news is this: (1) there are questions about how sustainable the maximum export capacity will be over time, and (2) there is a reasonable possibility that U.S. export terminals are about to be inundated with previously unheard-of volumes of oil — in other words, their hypothetical export capacity may be tested in a very real way.

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