Every Little Thing - Pipeline Projects, Refinery Closures Alter Flows to Crude Export Venues

It’s possible for a single new infrastructure project to be a game-changer — the Transcontinental Railroad comes to mind, and so do the New York City subway system and the Hoover Dam. In the energy industry’s midstream sector, things work a little differently. There, projects are incremental. They’re privately, rather than publicly backed and so they must be commercially justified, which means they need to serve a specific purpose. That’s not to say they can’t shift the landscape of the areas they serve. For example, when the Shale Revolution transformed and disrupted U.S. hydrocarbon markets, supply and demand dynamics were turned on their head and waves of projects had to be built to handle surging production in suddenly supercharged shale plays like the Bakken, Appalachia, and Permian and to serve new markets, most notably exports. Sometimes, it’s a more complicated combination of projects and events that, as a group, cause not-so-subtle shifts in how things are done. Lately, handfuls of pipeline projects and refinery closures — plus increasing regional crude oil production in both the U.S. and Canada — have spurred changes in traditional pipeline-flow patterns and may breathe new life into oil-export activity at the Louisiana Offshore Oil Port and the Beaumont-Nederland area in Texas. In today’s RBN blog, we discuss these changes and their effects.

For some time, crude oil export terminals in Louisiana (including LOOP) and what folks in the southeastern corner of Texas call “the Golden Triangle” (the Beaumont-Nederland-Port Arthur area) have been overshadowed by their competitors in Corpus Christi and Houston. More recently, however, exports out of LOOP and terminals in Beaumont and Nederland have been on the rise and, as we see it, their prospects for further gains are good — largely because of a series of seemingly random infrastructure changes and events we hinted at in the introduction to today’s blog. Individually, each midstream decision serves a specific purpose; whether it’s to overcome a capacity constraint, allow supplies to reach market more efficiently, repurpose an underutilized asset, or shut down infrastructure that’s no longer justified. These may be separate but, taken as a whole, when you step back, you can see their combined effect.

The Figure 1 map below highlights the infrastructure projects and refinery closures that, in combination, are enabling more crude oil from Western Canada, the Bakken, and the offshore Gulf of Mexico (among other places) to flow to LOOP and the three export terminals in Beaumont and Nederland, which are owned by Energy Transfer, Phillips 66, and Enterprise. Before we get to the net impacts of these projects and events, here are several projects and events we see combining to significantly change crude oil flows and boost the prospects for crude exports out of Louisiana and Texas’s Golden Triangle:

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