We estimate that over 4 MMb/d of new crude transportation capacity will have opened up to the Texas Gulf Coast by the end of 2015 – to a region with just under 3.7 MMb/d of nameplate refining capacity. With crude exports restricted by Federal law, some of that crude is going to need to find a home – most likely at Eastern Gulf refineries in Louisiana and Mississippi. Today we look at how some of the incoming flood of crude could be redistributed across the Gulf Coast region.
In the first episode in this series we described the current and planned expansions to crude transportation capacity into the Texas Gulf Coast region (see Handling The Texas Gulf Coast Crude Flood). When and if all this (4.1 MMb/d) of capacity is taken up, the volumes will exceed refining capacity in the Texas Gulf region of 3.7 MMb/d. And we cannot assume that the local refineries will actually consume 3.7 MMb/d of incoming crude. Our previous analysis shows that Texas Gulf Coast refineries currently consume nearly 2 MMb/d of heavy crude (see Rock the Basin) and only new pipeline supplies from Cushing (on Keystone XL – 830 Mb/d capacity and Seaway – 850 Mb/d capacity – total 1.68 MMb/d) will help meet that demand. So there is likely to be a shortfall of heavy crude in the new supply streams based on how much Keystone and Seaway crude is heavy. The net result is that the new incoming light crude capacity will exceed Texas Gulf Coast demand by somewhere north of 0.5 MMb/d by the end of 2015.
In this episode we look at transport routes to move this excess supply of crude out from Texas to refineries on the Louisiana and Mississippi Gulf Coast to the East.
A lot of hopes for crude transportation flexibility across the Gulf Coast region rest on the Shell Houston to Houma (known as Ho-Ho) pipeline reversal. That project has been underway for over a year now and is expected to be completed in December of this year. We covered the Ho-Ho reversal project plan at the end of 2012 in our Oh-Ho-Ho it’s Magic blog series (see Part 1, Part 2, Part 3 and After The Flood). The Ho-Ho reversal - in theory at least - provides a gateway for the new Texas Gulf Coast bound supplies to reach an additional 3.2 MMb/d of refining capacity on the Louisiana and Mississippi Gulf Coast.
The Ho-Ho project reverses the flow of the Shell pipeline that previously ran from Houma, LA to Houston – feeding crude supplies from offshore Gulf of Mexico (GOM) production and very large crude carrier (VLCC) vessels discharging imports at the Louisiana Offshore Oil Port (LOOP) across the Gulf to Texas refineries. Given all the new crude coming from domestic production into the Texas Gulf Coast region, a reversed Ho-Ho now makes more sense. Although there is still significant offshore GOM production (see Bridge Over Troubled Water) the quantity of crude imports at LOOP is declining as domestic supplies take their place (see Thrown for a LOOP Part 1 and Part 2).
The map below is the Shell Pipeline Company representation of the Ho-Ho reversal from the Open Season documentation. The reversed pipeline from East Houston to Nederland (Port Arthur Refineries) is already up and running with 175 Mb/d capacity. The second phase of the project (to be completed in the next few weeks (the end of 2013) is underway to reverse the flow from Nederland to Houma that will initially offer 375 Mb/d capacity. Phase 3 of the project will expand the Houston to Port Arthur capacity from 175 Mb/d to 250 Mb/d early in 2014. Phase 4 (currently in Open Season) would expand the Port Arthur to Houma section of the pipeline by a further 75 Mb/d for a total on that section of 375 Mb/d. The existing Houma to St. James, LA leg will stay unchanged with capacity of 300 Mb/d. The Houma to Clovelly leg has already been reversed to run southbound with 500 Mb/d capacity.
Source: Shell Pipeline Company and RBN Energy (Click to Enlarge)
The Ho-Ho reversal is significant because it runs West to East across the Gulf Coast region, linking together several of the key incoming pipeline projects recently completed or under development to carry crude supplies from new US and Canadian production across the Houston and Port Arthur region and to provide a route for oil from these pipelines to reach Louisiana refineries in and around the St James and Mississippi river basin region. The map below is a representation of how the Ho-Ho reversal will link together incoming pipelines across the region.