Deep Water, Part 5 - More Plans for Offshore Crude Oil Export Terminals Along The Gulf Coast

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.

This is the fifth episode in our series. In Part 1, we discussed the ongoing boom in U.S. crude oil exports, which have been rising steadily since the 40-year ban on most exports was lifted in December 2015. Crude exports averaged 590 Mb/d in 2016, 1.1 MMb/d in 2017, and more than 1.8 MMb/d so far in 2018. While 2-MMbbl VLCCs are by far the most cost-efficient way to haul crude to Asia, their very large physical dimensions restrict the number of land-based terminals they can use. A typical VLCC is about 1,100 feet long, with a beam (or width) of nearly 200 feet and a fully loaded draft of 72 feet. And even those land-based terminals that can accommodate VLCCs can only load these supertankers part-way — “reverse lightering” out in deeper, open waters is required to fill a VLCC to the brim. (LOOP — green diamond in Figure 1 — is the only facility along the Gulf Coast that can fully load a VLCC today.) We also reviewed the joint plan by Oiltanking, Enbridge and Kinder Morgan to develop a crude export terminal 30 miles off the coast of Freeport, TX (yellow diamond). In Part 2, we considered JupiterMLP’s proposal for an offshore export terminal only six miles off Brownsville (aqua diamond) — and a new long-haul pipeline from the Permian to that South Texas city. Next, in Part 3, we looked at the plan by Trafigura, the international logistics and trading company, to build a deepwater export terminal 15 miles off Corpus Christi (lavender diamond). Each of these projects also calls for the development of several million barrels of onshore storage capacity to support the regular loading of VLCCs. Tallgrass Energy’s plan to build a combination export and import terminal 1.5 miles off the coast of Venice, LA (near the mouth of the Mississippi River) was the subject of Part 4, which also discussed the company’s related plan to build new pipelines (Seahorse and Pelican) to connect the crude oil hub in Cushing (OK) to the hub in St. James (LA), a planned new terminal on the Mississippi in Plaquemines Parish (LA) and the proposed offshore terminal near Venice (orange diamond).

Today, we consider two other plans to develop new Gulf Coast terminals capable of handling fully loaded VLCCs — one of which may actually involve land-based docks. We begin with Enterprise Products Partners’ plan — first unveiled in July (2018) — to build an offshore terminal about 80 miles off the Texas coast, presumably connected to Enterprise’s extensive crude storage and pipeline infrastructure in the Houston/Texas City area. The offshore terminal (pink diamond indicates the general area) would be connected via a 42-inch-diameter pipeline, and would be capable of loading crude at a rate of 85 Mb/hour — fast enough to fill a 2-MMbbl VLCC in 24 hours. Front-end engineering and design (FEED) work and permitting on the project is already under way, and the company has indicated it expects to have permits and other approvals for the facility in hand as soon as early 2020.

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