Saving All My Crude For You – Commercial Crude Oil Cavern Storage in Houston?

Changes, expansions and reversals of the existing logistics system that supplies crude to 2.5 MMb/d plus of refining capacity in Houston have allowed refiners to expand output and process more crude than ever before. But there is still another 1.5 MMb/d of pipeline capacity coming into Houston by the end of 2015 and the decline in waterborne imports has reduced system flexibility. One company’s plans to build out over 17 MMBbl of crude storage in salt dome caverns south of Houston could alleviate some of the storage capacity challenges. Today we discuss the proposal.

In Part 1 of this series covering the changing crude storage situation at the Gulf Coast – home to 50 % of US refining capacity - we discussed how storage provides a buffer or slack in the distribution chain from wellhead to refinery. In Part 2 we showed that the typical imported waterborne barrel delivered to Houston refineries spent 17-20 days in floating storage. In Part 3 we calculated Houston area refinery storage days at 21-23 days depending on refinery throughput versus a Gulf Coast average of 32 days. In Part 4 we reviewed new crude pipeline flows into the Houston area. Current pipeline capacity is about 1.4 MMb/d with another 1.5 MMb/d expected online by the end of 2015. In Part 5 we looked at the challenges refiners could run into unless more storage flexibility is added to the system than current plans allow. In this episode we look at a potential storage project that would add over 17 MMb/d to Houston area capacity.

Fairway Energy Partners (FEP) has been working since 2011 to develop an underground storage cavern project at the Pierce Junction salt dome site just outside the beltway (I610) south of downtown Houston. All the existing commercial storage in the Houston area is above ground tank storage – those high-sided round tanks you see surrounding any refinery (see Table #2 in Part 3). Salt dome cavern storage is different because it is deep underground and offers the lowest cost, most environmentally secure way to store crude oil for long periods of time. We have posted a few blogs previously on cavern storage technology that is used in the oil, natural gas and natural gas liquids (NGLs) industries. We discussed the first use of salt caverns for NGL storage (see Smoky and the Salt Caverns) back in 2012. For more information about how they operate see a Department of Transportation fact sheet here. We have posted a couple of blogs on the Louisiana Offshore Oil Port – LOOP that boasts 58 MMBbl of salt cavern storage capacity at Clovelly, LA (see Thrown for a LOOP). The largest underground crude cavern storage facility in the US by far is the 691 MMBbl Strategic Petroleum Reserve (SPR) – a series of 4 sites along the Gulf Coast set up in 1975 to stockpile crude against the threat of a supply disruption.