I'm Already There - Will the Swordfish Project Give LOOP a Leg Up in Crude Exports?

Time and again, the repurposing of existing assets like pipelines and marine terminals to meet changing market needs has proven to be a winning approach. After all, if a lot of what you need is “already there” — as we said in today’s song title — why build something entirely new? That use-what-you’ve-got tack is a key driver behind MPLX and Crimson Midstream’s recently unveiled Swordfish Pipeline project, which by early 2020 would enable large volumes of crude oil to flow south from the St. James, LA, market hub to the Clovelly storage hub — a key crude distributor to area refineries and the jumping-off point for crude exports on fully loaded Very Large Crude Carriers (VLCCs) via the Louisiana Offshore Oil Port (LOOP). The companies also envision using other existing pipelines — including a possibly reversed Capline — as well as the soon-to-be-finished Bayou Bridge Pipeline to feed crude into Swordfish. Today, we review the MPLX/Crimson plan and assess how it might boost the export cred of LOOP, which is currently the only Gulf Coast port that can fill a 2-MMbbl VLCC to the brim without reverse lightering.

It’s hard not to talk about U.S. crude oil exports these days. Spurred on by West Texas Intermediate (WTI) prices north of $70/bbl (and Brent prices about $10/bbl higher), U.S. producers continue to ramp up their output, some even in the face of regional takeaway constraints and wide price differentials. And, with U.S. refineries taking about as much domestically produced crude as they can handle, exporting is pretty much the only option for incremental barrels being produced in the Permian, Eagle Ford, SCOOP/STACK and other major U.S. plays. According to RBN’s Crude Voyager report, exports out of the Gulf Coast totaled about 21.2 MMbbl in the first 11 days of October — an average of more than 1.9 MMb/d, with about 670 Mb/d being sent out from the Houston area, 655 Mb/d from Corpus Christi, 390 Mb/d from Beaumont and 180 Mb/d from Louisiana. That 1.9 MMb/d is up from the January-through-September (2018) average of 1.6 MMb/d in 2017 and the 2016 average of only 590 Mb/d.

As we said in our five-part “Deep Water” blog series on the new offshore crude export terminals under development, the preferred (and most cost-effective) way to transport oil to faraway Asian markets is on VLCCs. But there is still only one terminal on the Gulf Coast that can fully load a VLCC without reverse lightering: the 37-year-old LOOP facility, which is located in 110-foot-deep waters 18 miles off Port Fourchon, LA, and was originally designed to import crude. Elsewhere along the coast, outgoing VLCCs need to be fully loaded or topped off in offshore deep water by reverse lightering — a slower and more costly loading process that typically involves shuttling crude out in AFRAmaxes or other smaller vessels to a VLCC in a trans-shipment area (TSA) and transferring the crude onto the larger ship. With U.S. crude export volumes now almost high enough to fill one 2-MMbbl VLCC a day, there’s a big push on to develop new offshore terminals capable of fully loading the supertankers off the coasts of Texas and Louisiana. We looked at Oiltanking, Enbridge and Kinder Morgan’s joint plan for such a terminal off the coast of Freeport, TX, in Deep Water, Part 1, and followed that up with blogs on JupiterMLP’s Brownsville project (Part 2), Trafigura’s Corpus Christi plan (Part 3), Tallgrass Energy’s project near the mouth of the Mississippi River (Part 4), and (in Part 5) a Houston-area plan by Enterprise Products Partners and an onshore, VLCC-ready terminal under development by the Port of Corpus Christi.

Today, we shift our attention to a newly announced plan by MPLX and Crimson Midstream to create new, southbound pipeline capacity from St. James hub to the Clovelly hub. As we said in I Got Storage (I Feel Good), St. James is located about 60 miles up the Mississippi River from New Orleans; it has 38 MMbbl of storage capacity and receives crude by pipeline (including the 1.7-MMb/d LOOP-to-Capline Pipeline — or LOCAP — from Clovelly [brown line in figure 1]), by barge and tanker, and by rail. The crudes flowing into St. James include the Gulf Coast benchmark Light Louisiana Sweet (LLS), Heavy Louisiana Sweet (HLS), medium sour crude Mars (produced offshore in the Gulf of Mexico, or GOM), and WTI. The hub sends crude out to area refineries with a combined capacity of more than 2.5 MMb/d. St. James also feeds the 1.2-MMb/d Capline pipeline (purple line in Figure 1), which transports oil more than 600 miles north to Patoka, IL, though Capline has been running at far less than full-capacity lately (more on Capline in a moment).