How Much More Can She Stand, Part 3 - Crude Export Terminals Weather Stormy Times

U.S. crude oil production is off its historic highs, the rig count is in free-fall, and crude inventories are rising fast, with the Cushing-to-Magellan East Houston price differential drawing oil away from the Gulf Coast and to the Oklahoma storage hub. Oh, and global demand for crude is off by more than 20%. None of this bodes well for U.S. crude exports, which have been at or near record levels the past few months. What seems to be shaping up is a fierce competition among the owners of existing export terminals to offer the most efficient, lowest-cost access to the water. Today, we continue our series with a look at Enterprise Products Partners’ Houston-area crude oil storage, pipelines and docks.

When we decided a couple of months ago to take a fresh look at crude export terminals along the Gulf Coast, the market’s concern was that additional loading and dock capacity would be needed soon to keep pace with what had been soaring export volumes. In the first two months of 2020, crude exports from Texas and Louisiana marine terminals averaged 3.2 MMb/d, or nearly 1 MMb/d more than in January/February last year. The expectation was that U.S. crude export volumes would continue rising, probably to at least 5 MMb/d in 2022 and maybe 6 MMb/d in 2024; in response, a number of midstream companies were scrambling to advance offshore facilities capable of fully loading Very Large Crude Carriers (VLCCs). But that was before COVID-19 became a pandemic, and before the OPEC+ alliance collapsed and West Texas Intermediate (WTI) prices fell below $25/bbl. In this new, scarier environment — even with a new agreement by the Saudis, the Russians and others to reduce crude production — the outlook for crude exports is far less clear; in fact, existing marine terminals along the Gulf Coast may well be battling for barrels.

In Part 1 of this series, we began our review with a look at the Seaway Freeport and Seaway Texas City terminals, both of which are part of Enterprise and Enbridge’s broader Seaway Crude Pipeline (SCP) system. Seaway is a ~500-mile, 950-Mb/d pipeline system that runs from Cushing to SCP’s Jones Creek terminal, which has 2.8 MMbbl of storage capacity and pipe connections to SCP’s Freeport and Texas City facilities. We estimate Seaway Freeport’s export capacity at 200 Mb/d and Seaway Texas City’s at 300 Mb/d. (An aside: Enterprise said in a regulatory filing on Monday that it planned to offer temporary northbound service on a pipeline from Katy, TX, to Cushing to help address demand by shippers to move crude to the Oklahoma hub. Enterprise didn’t name the pipe, but we think it’s one of the two pipes that make up the Seaway system.)

In Part 2, we discussed the Houston Fuel Oil Terminal (HFOT), which is now owned by Energy Transfer, and the Seabrook Logistics Marine Terminal, which is jointly owned by Magellan Midstream Partners and LBT Tank Terminals. HFOT has 7 MMbbl of crude storage capacity and 11 MMbbl of storage for residual fuel oil, as well as five ship docks and plans for a sixth. We estimate the terminal’s export capacity at 480 Mb/d. Seabrook Logistics, in turn, has 3.2 MMbbl of crude storage and one dock, with plans to add another 750 MMbbl of storage and a second dock. We estimate Seabrook Logistics’ current export capacity at 300 Mb/d.

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