Deep Water, Part 6 - New Entrants in the Race to Build Offshore Crude Export Terminals

The competition to develop the one or possibly two new offshore crude oil export terminals that the U.S. will likely need by the mid-2020s has been under way for more than a year now, and the field of contestants continues to expand. Within the past few weeks, both Phillips 66 and Sentinel Midstream filed applications with the U.S. Maritime Administration (MARAD) — Phillips 66’s project would be located off the coast of Corpus Christi and Sentinel’s in the waters off Freeport. And who knows, maybe another deepwater project or two capable of fully loading Very Large Crude Carriers (VLCCs) might still be in the offing. Today, we update our series on prospective offshore crude export terminals with a look at the P66 and Sentinel project details revealed by their applications to MARAD.

One of the more interesting questions in the U.S. energy business today is which of the seven individual companies and joint ventures planning to build new deepwater terminals for exporting crude off the Texas and Louisiana coasts will be the first to reach a final investment decision (FID) on their project. The query regarding who crosses the FID line first is particularly important because, as we said a couple of weeks ago in Where the Boat Leaves From, the Gulf Coast — with an estimated 5.1 MMb/d of crude export capacity in place — will likely need at least another 1 MMb/d of capacity by 2024 or so as production keeps rising in the Permian and other major shale plays. While still more export capacity may be required in the mid-2020, the palpable fear of a capacity overbuild suggests that only a few of the proposed offshore terminals (and onshore-terminal expansion projects) will be able to secure the necessary throughput commitments to advance their plans to construction.

While expansion projects at onshore terminals allow their developers to build off of existing infrastructure, what they cannot do — at least so far — is enable their docks to fully load deep-draft, 2-MMbbl VLCCs, which (as we said in Working on a Dream) are the most cost-efficient waterborne means for transporting crude long distances (like from the Gulf Coast to Asia). To fill a VLCC to the gills, you need more than 72 feet of draft, and to get that along most of the Texas and Louisiana coast, you typically have to go out at least several miles. Hence, the growing importance of deepwater offshore terminals like the Louisiana Offshore Oil Port (LOOP; green triangle in Figure 1), which since the early 1980s has been receiving VLCCs fully laden with foreign crude — and since early 2018 has been sending out a small but growing number of VLCCs filled to the brim with U.S.-sourced oil. LOOP is still the only Gulf Coast facility capable of fully loading VLCCs. Otherwise, VLCCs exporting crude are generally reverse lightered in specified deepwater lightering areas in the Gulf — a couple of onshore terminals (Moda Midstream’s Ingleside facility near Corpus Christi, and Seaway’s Texas City terminal) can load VLCCs about halfway at their docks, then top them off via reverse lightering.

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