Deep Water - A New Drill Down Report on Proposed Crude Export Terminals

Just as midstream companies are in a fierce competition to build new crude oil pipelines from the Permian to the Gulf Coast, there’s a race on to develop what would be the first Gulf Coast terminal in a generation capable of handling fully laden Very Large Crude Carriers. There’s a lot at stake. Currently, 2-MMbbl VLCCs can be filled to the brim without reverse lightering only at the Louisiana Offshore Oil Port (LOOP), and even if U.S. crude production continues to rise at a fast clip, it’s unlikely that more than another one or two high-capacity, VLCC-ready terminals would be needed over the next five years. And, assuming there’s not an overbuild situation, the project or projects that ultimately advance would be expected to be in-demand and highly utilized — VLCCs are the preferred mode of transporting crude to Asia and other far-away markets, and being able to fully load VLCCs saves the considerable cost and time associated with reverse lightering these supertankers in deep water. Today, we conclude our series on the fast-paced efforts to develop export terminals in waters deep enough to float VLCCs chock-full of oil.

There are common drivers behind the handful of offshore crude oil terminals now under development along the Gulf Coast, chief among them the well-founded belief that shippers would prefer putting crude on Very Large Crude Carriers (VLCCs), which can only be fully loaded in deep water. But each of these projects also has unique nuances — its own specific rationale and characteristics. Tallgrass Energy’s plan is a case in point in that it involves a new pipeline from the crude hub in Cushing, OK, to the refinery center in St. James, LA, and to a new onshore crude storage and loading terminal a few miles down the Mississippi River, to be followed by a VLCC-ready offshore terminal capable of both exporting and importing crude. Today, we continue our review of made-for-VLCCs offshore terminals with a look at Tallgrass’s effort to deliver neat, unblended barrels directly from multiple inland plays to deep water — “shale-to-ship,” in other words.

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.