Catch A Wave - Texas GulfLink, Bluewater Texas Hoping to Catch Next Wave of U.S. Crude Exports

A handful of U.S. midstreamers are striving to build an offshore export buoy in the Gulf of Mexico that would be able to fully load a Very Large Crude Carrier (VLCC). If successful, they could facilitate a new wave of crude oil export flows and dynamics. With domestic production back to record highs and global supply and demand dynamics in a constant state of flux, the market developments along the Gulf Coast are something the oil industry is eying intently. In today’s RBN blog, we look at the latest on two export projects — Phillips 66 and Trafigura's Bluewater Texas Terminal and Sentinel Midstream’s Texas GulfLink.

This is the second of a two-part series on the four major crude oil export terminals being developed in the Gulf of Mexico. In Part 1 of this series, we gave updates on two projects — Energy Transfer’s Blue Marlin Offshore Port (BMOP) and Enterprise Products Partners’ joint venture Sea Port Oil Terminal (SPOT). The outcome of the competition among these four contenders will have a major impact on the companies involved and the future of U.S. crude oil exports.

The reason it’s such a big deal is that each of the planned terminals would be able to fully load VLCCs — which are the most economical and efficient way to export large volumes of crude oil from  the Gulf Coast. VLCCs are some of the largest ships serving the oil industry, each able to carry roughly 2 MMbbl, offering tremendous cost-efficiencies on a per-barrel basis. Right now, only one domestic facility can fully load these giant ships, and that’s the Louisiana Offshore Oil Port (LOOP). Most charterers, as we have blogged before (see Working on a Dream), need to bear the extra cost of reverse lightering from smaller ships (up to four) to fill up these mammoth vessels. Even with that, on a per-barrel basis, transport costs are cheaper for VLCCs given how much they can carry — often referred to as economies of scale. Currently, many VLCCs take partial cargo loads (ranging from 1.25 MMbbl-1.6 MMbbl) at the Enbridge Ingleside Energy Center (EIEC) and South Texas Gateway (STG) terminals in Ingleside, TX. Located just across the bay from Corpus Christi, these are the only two U.S. facilities, besides LOOP, that can receive a VLCC. Once partially filled, these supertankers are then topped up to the brim in the deep waters of the Gulf using reverse lightering. The rest of the VLCCs coming to the Gulf load up exclusively from reverse lightering.  Because of the cost savings, VLCCs have become a major feature of the U.S. crude export market. Just last year, the industry booked some 424 of them for their voyages abroad — that’s more than double than before the pandemic — according to RBN’s weekly Crude Voyager.