Refinery Storage

U.S. crude exports continue to takeoff — increasing during the week ended September 29, to a new record just under 2 MMb/d, according to the Energy Information Administration (EIA), with 1.3 MMb/d in the first week of October followed by 1.8 MMb/d in EIA’s Wednesday report. The crude exodus is primarily occurring from port terminals along the Gulf Coast and is expected to continue as expanding Permian basin shale production is shipped directly to marine docks by pipeline. Recent and planned expansions to crude storage are largely linked to demand for new capacity at marine docks staging cargoes for export. In today’s blog, Morningstar’s Sandy Fielden details the rapid growth of commercial crude storage capacity at Gulf Coast terminals since 2011.

Even as Houston area crude oil storage – at refineries and commercial terminals – remains just half utilized according to data from Genscape, midstream operators are busy building more tanks. About 7 MMBbl of storage is under construction now and plans have been announced this year to build another 11 MMBbl. Today we detail plans to expand crude storage in the Houston area.

Close analysis of Houston area crude storage indicates it is only 52% utilized today even as regional crude inventories have reached record levels. Meeting refinery operational needs appears to be the main use of area storage – rather than speculative gains from buying today’s cheap oil to store and sell later. Today we continue our analysis of Houston area refinery infrastructure.

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.