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Deep Water, Part 3 - Trafigura's Plan for a Crude Oil Export Terminal Off the Coast of Corpus Christi

Since mid-July — only a few weeks ago — four proposals have been unveiled to build offshore crude export terminals along the Gulf Coast that would be capable of fully loading Very Large Crude Carriers. That’s an extraordinary burst of interest in new infrastructure development, and a signal that (1) more export growth is on the horizon and (2) VLCCs will play a much bigger role in transporting that crude. A leading contender in the race to construct new offshore terminals is Trafigura, the Swiss-based logistics and physical-trading giant, which in recent years has become a major player in U.S. energy markets. Today, we continue our review of made-for-VLCCs offshore terminals with a look at Trafi’s plan.

Every year, when Nobel Prizes are awarded for physics, chemistry, economics and other arts and sciences, it’s become relatively common for each prize to be shared by two or three very smart people who on their own — and almost at the same time — came up with the very same idea. This phenomena, known as either “multiple discovery” or “simultaneous invention” — appears to have a corollary in the more mundane world of crude oil exports. As we said in our intro, in the space of only three weeks, four companies (Enterprise Products Partners, Oiltanking, Tallgrass Energy and Trafigura) announced specific (or at least relatively specific) plans to develop offshore crude oil export terminals. At least two others (MPLX and Magellan) noted during their second-quarter earnings calls in this same period that they were interested in crude-export opportunities that (we surmise) could involve offshore terminals, and a Texas-based start-up (JupiterMLP) announced in May (2018) that it had begun engineering for a planned VLCC-loading terminal off the coast of Brownsville.

We discussed Oiltanking’s plan (in partnership with Enbridge and Kinder Morgan) for a deepwater terminal 30-miles off the coast of Freeport, TX (yellow diamond in Figure 1) in Part 1 of this blog series and Jupiter’s planned terminal (light blue diamond) in Part 2. In both blogs, we noted that U.S. crude oil exports have been rising steadily since the 40-year ban on most exports was lifted in December 2015, averaging 590 Mb/d in 2016, 1.1 MMb/d in 2017, and more than 1.8 MMb/d so far in 2018. While the 2-MMbbl VLCCs are by far the most cost-efficient way to haul crude to Asia, their gargantuan physical dimensions restrict the number of land-based terminals they can use. And even those that can accommodate VLCCs can only load these supertankers part-way — “reverse lightering” out in deeper, open waters is required to fill the supertanker to the brim. As we said in Rock the Boat, there’s still only one terminal on the Gulf Coast that can fully load a VLCC: the Louisiana Offshore Oil Port (LOOP; green diamond), which is located in 110-foot-deep waters 18 miles off Port Fourchon, LA. And while LOOP benefits from the 72-MMbbl crude storage, blending and distribution hub in nearby Clovelly, LA (red dot), pipeline connections to Clovelly from key Texas and Oklahoma plays to LOOP are limited (see Part 1 and Clovelly Calling? for more on that).

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