Oiltanking

The build-out of Houston-area crude oil storage and marine terminal capacity continues, and as it does, ship congestion in the Houston Ship Channel worsens. Which raises the question, why not develop more crude storage and marine docks outside the Ship Channel that still offers strong pipeline connectivity to crude production areas, the Cushing hub and Houston-area refineries—plus easier access to the open waters of the Gulf of Mexico? That’s a key premise behind Oiltanking’s first major Gulf Coast expansion since the February 2015 sale of most of Oiltanking’s assets in the region to Enterprise Products Partners. Today we discuss Oiltanking’s plan to add crude storage and a marine terminal in Texas City, TX.

The major re-plumbing of the U.S. crude pipeline distribution network to get 4 MMb/d of new domestic production as well as incremental Canadian barrels delivered to refineries is getting close to completion. The price crash and an expected slow down in production will almost certainly slow the pace of infrastructure development. The result is likely to be intensified competition between rival midstream companies and industry consolidation. Today we look at the larger implications of a small pipeline project in Houston.

The current capacity of incoming crude pipelines into the Houston refining region is about 1.4 MMb/d. By the end of 2015 that will have more than doubled to 2.9 MMb/d. Add to these flows crude railed into new and developing unloading terminals as well as barges of Eagle Ford crude from Corpus Christi in south Texas and the prospects for congestion build up. Foreign waterborne imports into Houston are falling as pipelines supply more refineries but in the process a lot of floating storage flexibility is being lost. Today we describe the Houston crude distribution system that could be overwhelmed by the new flows.

Houston area refineries are the first to experience the full impact of the flood of domestic and Canadian production headed to the Gulf Coast in 2013 and 2014. These refineries have traditionally relied on floating storage in the form of import cargoes in transit to buffer them against supply shocks. Now the region is adapting to new crude supplies mostly delivered by pipeline. As imports decline, the floating storage option disappears, leaving the potential for congestion caused by inadequate onshore working storage. Today we calculate the storage impact of these changes.

As we move toward the end of 2013, all eyes in the crude market will focus on the Texas Gulf Coast as a flood of over 1 MMBbl of new crude supplies arrives via pipeline. In anticipation of that bonanza, Oil Tanking Partners (OTP) are in the process of adding 7 MMBbl of crude storage capacity at their Houston Ship Channel terminal and looking to expand their Beaumont capacity. OTP is also benefiting by leasing dock space for propane exports. Today we look at OTP’s ongoing preparations for the flood.

Rapid change in the Gulf Coast crude supply picture is encouraging new infrastructure investment by crude and feedstock terminal companies anxious to capitalize from increased throughput volumes. A 3 MMb/d influx of new crude from pipelines in Texas and the Midwest over the next two years could easily end up causing indigestion at Houston refineries and that means opportunity for storage and blending operators. Today we continue our survey of Gulf Coast crude terminals by looking at Oiltanking Houston.

Recap

In Part 1 of the series (see Echo and the Blending Men) we looked at the new 6 MMBbl Enterprise ECHO crude terminal being touted as a delivery point if the NYMEX list a Houston crude futures contract. In Part 2 (see Nederland Crude Wonderland) we looked at the Energy Transfer Partners/Sunoco Logistics Nederland Terminal at Port Neches on the Texas/Louisiana border between Beaumont and Port Arthur 100 miles East of Houston. That terminal has been in place since the beginning of the twentieth century and now has 22 MMBbl of storage capacity.

Oiltanking Houston

This time we turn our attention to the Oiltanking Houston (OTH) Terminal on the Houston Ship Channel east of downtown Houston. The Ship Channel is the conduit for ocean going vessels between the Port of Houston, Galveston Bay and the Gulf of Mexico. One of the largest refinery and petrochemical complexes in the world runs along the Ship Channel. Don’t book a vacation there. We found a satellite map of the Ship Channel that includes the names of many of the plant facilities and terminals and we have attached a copy of it at the end of the blog (scroll down to the bottom of the page – if the download doesn’t work for you, let us know at [email protected] and we will email a copy). We reproduce a smaller version of the map below with the OTH terminal marked with a black arrow. You can see that Oiltanking are right in the thick of the action.