It Won't Be Like This For Long - Will New Crude Export Terminals Spur Another Permian Pipeline?

For a few years now, crude oil shippers out of the Permian have enjoyed a surplus in pipeline takeaway capacity thanks to a slew of new pipes that came online just as COVID crushed demand, prices and production. But Permian production has recovered, and the takeaway situation is changing for some routes. For example, the pipelines from West Texas to Corpus Christi are running close to full, and if a new offshore export terminal gets built, Permian-to-Gulf-Coast takeaway dynamics would get far more complicated — and fast. In today’s RBN blog, we discuss highlights from our new Drill Down Report, which examines Permian crude flows to existing export terminals and the potential impacts of a new deepwater facility. 

As we discussed recently in Never Been Any Reason, U.S. crude oil production growth has largely steered pipeline development. Initially, new takeaway capacity out of the Permian — the nation’s leading crude oil play — targeted Gulf Coast refinery demand, but once that demand got saturated, attention turned to exports. Since the crude export ban to countries other than Canada was lifted in December 2015, shipments from Texas and Louisiana terminals have soared, averaging just under 4 MMb/d in the first half of this year. That boom was made possible by the massive (not to mention expensive) infrastructure buildout from the Permian and across the Gulf Coast — pipelines, storage and export facilities — and some upgrades to existing assets too.

With business, cost efficiency is king, and the winners (so far) in crude exports have been facilities like the Enbridge Ingleside Energy Center (EIEC) and Gibson Energy’s South Texas Gateway (STG; also in Ingleside, TX) that can dock and partially load 2-MMbbl Very Large Crude Carriers (VLCCs), which enable huge quantities of crude to be shipped over long distances at the lowest cost per barrel. The two-thirds-full VLCCs out of EIEC and STG are then topped off with only a single round of reverse lightering in the Gulf of Mexico (GOM).

To draw incremental export barrels — and get a leg up on EIEC and STG — some of the biggest names in the oil industry have been working to advance their proposals for deepwater export terminals off the Texas coast that could fully load VLCCs at their facilities. That means no reverse lightering. Currently, only one facility — the Louisiana Offshore Oil Port (LOOP), an oil import terminal revamped a few years ago to handle crude exports as well — can fully load a VLCC, but its access to the light-sweet Permian barrels that drive the export market is limited (see Keep On Loving You, for more on LOOP).