Clovelly

As four proposed crude export terminals off the coast of Texas navigate the long and winding regulatory path toward potential construction, the Louisiana Offshore Oil Port (LOOP) already does what they want to do. It’s the sole Gulf Coast terminal that can fully load Very Large Crude Carriers (VLCCs) bound for global markets. LOOP started as an import-only facility, but later flexed to bring oil in and move it out as the energy landscape changed. It’s easy to wonder whether a new offshore crude export facility might be redundant –— why build another one if LOOP could just export more? Turns out it’s not that simple. LOOP is different — in its construction, its connectivity, its role in balancing imports and exports and especially the types of crude it handles. In today’s RBN blog, we’ll examine LOOP’s niche in U.S. crude exports and the role it continues to play. 

The Raceland crude oil hub is far from Louisiana’s largest but might be positioned to earn a little more of the spotlight after Sentinel Midstream and ExxonMobil Pipeline formed a joint venture in December to enhance business for a few crude oil pipelines connecting Louisiana hubs, including Raceland. In today’s RBN blog, we examine the infrastructure and connectivity that makes up the Raceland hub southwest of New Orleans, see how it stacks up against some of its larger cousins in the state — namely, Clovelly and St. James — and discuss why activity at the hub could be poised to pick up steam. 

Very Large Crude Carriers offer economies of scale and are the oil transporters of choice for shippers moving massive volumes of crude from the U.S. Gulf Coast to distant customers in Europe and Asia. VLCCs also can serve as cost-effective floating storage — in the current contango market, a growing number of these 2-MMbbl behemoths are being used to stockpile crude until its value increases in the coming months. VLCCs can be loaded to the gills through reverse lightering at a number of deepwater points off the coast of Texas, but only one facility, the Louisiana Offshore Oil Port, can fill the supertankers to the brim at the port itself. LOOP also can receive fully loaded VLCCs, of course, and another ace up its sleeve is its 72 MMbbl of cavern and tank storage a few miles inland at Clovelly, LA. Today, we continue our series on Gulf Coast export facilities with a look at LOOP.

Imagine a crude oil hub with all this: a central location near the Gulf Coast; pipeline, waterborne and rail access to a wide range of imported and domestic crude; tens of millions of barrels of storage capacity; direct connections by pipe to nearly a dozen major refineries; and the ability to load “neat” or blended barrels of oil onto Aframax-class vessels for export. You’ve conjured up the hub in Louisiana’s St. James Parish, which is fast-becoming an even more significant market player, with even broader access to U.S. and Canadian crude supplies and, very likely, direct outbound links to one or more export terminals capable of fully loading VLCCs. Today, we continue our series on St. James with a look at its storage assets and at the pipes that flow into and out of the hub.

The sharp increase in U.S. crude oil exports over the past couple of years is tied primarily to Texas ports — mostly Corpus Christi and the Houston Ship Channel. Louisiana, a distant second in the crude-exports race, has a long list of positive attributes, including the Louisiana Offshore Oil Port (LOOP) — the only U.S. port currently capable of fully loading the Very Large Crude Carriers that many international shippers favor. It also has mammoth crude storage, blending and distribution hubs at Clovelly (near the coast, connected to LOOP) and St. James (up the Mississippi). In addition, St. James is the trading center for benchmark Light Louisiana Sweet, a desirable blend for refiners. The catch is that almost all of the existing pipelines at Clovelly flow inland — away from LOOP — many of them north to St. James. That means infrastructure development is needed to reverse these flows southbound from St. James before LOOP can really take off as an export center. Today, we continue a blog series on Louisiana's changing focus toward the crude export market and the future of regional benchmark LLS.

U.S. crude oil exports have averaged a staggering 1.6 MMb/d so far in 2018, up from 1.1 MMb/d in 2017, and the vast majority of these export volumes — 85% in 2017 — have been shipped out of Texas ports, with Louisiana a distant runner-up. The Pelican State has a number of positive attributes for crude exporting, though, including the Louisiana Offshore Oil Port (LOOP), the only port in the Lower 48 that can fully load the 2-MMbbl Very Large Crude Carriers (VLCCs) that many international shippers favor. It also has mammoth crude storage, blending and distribution hubs at Clovelly (near the coast and connected to LOOP) and St. James (up the Mississippi). In addition, St. James is the trading center for benchmark Light Louisiana Sweet (LLS), a desirable blend for refiners. The catch is that almost all of the existing pipelines at Clovelly flow inland — away from LOOP — many of them north to St. James. That means infrastructure development is needed to reverse these flows southbound from St. James before LOOP can really take off as an export center. Today, we consider Louisiana's changing focus toward the crude export market and the future of regional benchmark LLS.

The stars may finally be aligning for two related crude oil infrastructure projects that, if undertaken, would provide an important new pathway to overseas markets for Bakken, western Canadian and other North American crude. The first would involve reversing the Capline Pipeline, which was built to transport crude north from the U.S. Gulf Coast to Midwest refiners; the second would make modest physical changes to the Louisiana Offshore Oil Port — better known as LOOP — to allow the crude import facility off the Bayou State coast to load crude onto ships, including Very Large Crude Carriers (VLCCs). Today we look at the new infrastructure and market forces that may finally spur Capline’s reversal and lead imports-focused LOOP to enable exports.

The reversal of Shell’s Zydeco Pipeline (formerly Ho-Ho) in 2013 was a big deal. It enabled eastbound flows of a wide range of crude streams from the Houston area to the storage and distribution hub at St. James, LA and from there to a dozen nearby refineries. Soon, though, Zydeco (named for the region’s Creole music) was running full and shippers were competing for space, spurring midstream companies to consider further enhancements. New pipeline capacity being developed is planned to come online later this year and in 2017, but—with ever-changing market dynamics—will it all be necessary? In today’s blog, “Take the Long Way Home—Easing Crude Pipeline Constraints to St. James,” Housley Carr begins a series on new pipeline capacity to St. James, and whether it will meet (or exceed) market needs.

The proposed 400 Mb/d Shell Pipeline Company Westward Ho pipeline from St. James, LA to Nederland, TX was first touted in 2011 and initially expected to be in service by Q3 2015 but is now delayed at least until the end of 2017. The project is designed to replace the Shell Ho-Ho pipeline that used to ship crude from Louisiana to refineries on the Texas Gulf Coast until it was reversed in 2013. Westward Ho has struggled to attract shipper commitments to bring additional crude into the saturated Texas Gulf Coast market. Today we review the project’s rationale.