Throughout the middle and latter parts of the 2010s, crude oil production growth in major U.S. basins and in Western Canada — not to mention the end to the ban on most U.S. crude exports in December 2015 — has caused noteworthy shifts in crude flow patterns, stressed existing pipeline infrastructure, and highlighted the importance of crude storage and distribution hubs. A common theme through all this has been that more and more crude needs to find its way to the Gulf Coast, with its bounty of refineries and export docks. To that end, lately, there’s been a slew of new pipeline and export-terminal projects announced that are tied to the St. James crude trading hub, which is located in Louisiana, about 60 miles up the Mississippi River from New Orleans. Today, we begin a series on St. James and why it’s becoming an even bigger player in crude markets.
All but the youngest of our blog readers can recall a time — the Pre-Shale Era — when U.S. crude oil production was on a decades-long decline, increasing volumes of foreign oil were being imported to fill the supply gap, and the general direction of flows on U.S. crude pipelines were northbound from the Gulf Coast to inland refineries. In the past 10 years or so, these trends and flows have flipped: U.S. (and Western Canadian) production is up, up, up; crude imports to the U.S. are down (but leveling out); and — as we said in our intro — crude is being pulled toward the Gulf Coast, not away from it.
In a series of blogs last summer and fall, we discussed how these and other changes have been affecting the crude oil hub in Cushing, OK — the self-proclaimed “Pipeline Crossroads of the World.” We’ve also reviewed plans by a number of midstream companies and others to develop new crude export terminals along the Gulf Coast, from Brownsville, TX, to near the mouth of the Mississippi, that together would add tens of millions of barrels of new crude storage capacity and be capable of fully loading Very Large Crude Carriers (VLCCs). Today, we turn our attention to another hub with a renewed purpose in the Shale Era: St. James, LA (purple hexagon in Figure 1 map and inset), which has long been the trading hub for regionally produced crudes [i.e., Light Louisiana Sweet (LLS), Heavy Louisiana Sweet (HLS) and the offshore-produced medium sour crude Mars], but is now increasingly a destination for Gulf-bound crude from other producing regions.