Oh-Ho-Ho its Magic – Will Gulf Coast Crude Flow Smoothly?

The Ho-Ho reversal project coming online in early 2013 provides an important link between the Texas and Louisiana Gulf Coast markets. Ho-Ho should help to distribute 3 MMb/d of crude supplies arriving over the next two years in the Houston area to refineries throughout the region. All this new pipeline capacity is designed to end the Midwest supply glut. Today we discover how the new supply capacity could initially cause more problems than it solves.

In Part 1 we detailed Shell’s planned early 2013 completion of the eastbound Houston, TX to Houma, LA (Ho-Ho) pipeline reversal. The Ho-Ho reversal will provide a link for new flows of crude arriving at the Texas Gulf Coast via pipeline projects due in service during 2013 and 2014 to flow to the Louisiana Gulf Coast. Bakken and Canadian Crude via Cushing, Eagle Ford crude from South Texas and Permian Basin crude from West Texas will be able to reach the entire 7 MMb/d Gulf Coast refining complex (see the map below or download a PDF of it from the link at the end of the blog – let us know at info@rbnenergy.com if you have trouble). Shell is also planning to replace the reversed westbound Ho-Ho link with a new Westward Ho pipeline from St James LA back to Houston in 2015.

Source: Shell Open Season and RBN Energy

The Ho-Ho reversal completes a new crude logistics paradigm in the US.  Under the old paradigm the needs of Gulf Coast refineries that exceeded local onshore and offshore Gulf of Mexico production were met by imported foreign crude. A portion of that imported crude also flowed from the Gulf Coast to the Midwest when refinery capacity in that region exceeded domestic and Canadian supplies. In the new paradigm, from early 2013 incremental crude supplies to feed Gulf Coast refineries will come from domestic production and Canadian imports rather than from foreign imports into the Gulf Coast. The pipeline projects to facilitate this new paradigm are already well underway but will really kick into gear over the next two years. The table below shows the projects together with their capacities and expected online service dates.