Seaway

A crude oil leak last Tuesday at the Enterprise Crude Houston (ECHO) terminal disrupted regional flows and caused crude differentials to move higher over the course of the week. While the spill was swiftly addressed by terminal owner Enterprise Products Partners, it still affected inbound and outbound operations for a few days. In today’s RBN blog, we discuss the role of the ECHO terminal and show how even an isolated incident can quickly have an impact on the market. 

In small steps and giant leaps, Enbridge has been building out two “supersystems” for transporting crude oil to refineries and the company’s own export terminals along Texas’s Gulf Coast, one moving heavy crude all the way from Alberta’s oil sands to the Houston area and the other shuttling light oil from the Permian to Enbridge’s massive terminal in Ingleside on the north side of Corpus Christi Bay. There’s nothing quite like it — first, an unbroken series of pipelines from Western Canada to Enbridge’s tank farm in Cushing, OK, (via the Midwest) and from there to Freeport, TX, on the twin Seaway pipelines; and second, the Gray Oak and Cactus II pipes from West Texas to the U.S.’s #1 crude export terminal. And the midstream giant is far from done. New projects and expansions are in the works, as we discuss in today’s RBN blog.

In the three years since Moda Midstream acquired Occidental Petroleum’s marine terminal in Ingleside, TX, the company has developed millions of barrels of additional storage capacity, connected the facility to a slew of Permian-to-Corpus Christi pipelines, and increased the terminal’s ability to quickly and efficiently load crude onto the super-size Suezmaxes and VLCCs that many international shippers favor. Moda’s fast-paced efforts have paid off big-time, first by making its Ingleside facility by far the #1 exporter of U.S. crude oil and now with a $3 billion agreement to sell the terminal and related pipeline and storage assets to Enbridge. The transaction, which is scheduled to close by the end of this year, will make Enbridge — already the co-owner of the Seaway Freeport and Seaway Texas City terminals up the coast — the top dog in Gulf Coast crude exports. Today, we discuss the Moda agreement and how it advances Enbridge’s broader Gulf Coast export strategy.

With a number of U.S. producers slashing their drilling plans for 2020, crude oil production may flatten or even decline somewhat in the oil-focused basins over the next few months. Still, large volumes of crude — somewhere north or south of 3 MMb/d — will need to be exported from Gulf Coast docks for the foreseeable future to keep U.S. supply and demand in relative balance. That raises the questions of whether more export capacity will be needed, and if so, how much and when? The answers to these questions depend in large part on how much crude the existing marine facilities in Texas and Louisiana can actually handle. Today, we begin a series that details the region’s export-related infrastructure and examines its capacity to stage and load export cargoes this year and beyond.

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.

Last Wednesday (October 1, 2014) pipeline and NGL giant Enterprise Products Partners LP (Enterprise) announced step one of a two step multi-billion dollar deal to merge their assets with competing major liquids storage and terminal partnership Oiltanking Partners (Oiltanking). If the deal goes according to plan (timing to be determined) Enterprise will absorb all of Oiltanking. Both companies have significant midstream assets in the Houston and surrounding Gulf Coast region that is currently front row center of efforts to process and handle an incoming flood of new crude and natural gas liquids arriving from U.S. shale plays. Today we review the deal.

Throughout the three year-long disruption of the US crude oil distribution system caused by rising domestic and Canadian production trying to find a path through the Midwest, the Seaway pipeline reversal project has been a market bellwether of progress to unwind the congestion. In 2Q 2014 the final phase will come online - opening up an additional 450 Mb/d capacity between Cushing and Houston. As the Seaway project has been built out, the crude surplus in the Midwest appears to have moved to the Gulf Coast. Today we detail the impact of Seaway Phase 3 on Gulf Coast crude supplies.

We estimate that over 4 MMb/d of new crude transportation capacity will have opened up to the Texas Gulf Coast by the end of 2015 – to a region with just under 3.7 MMb/d of nameplate refining capacity. With crude exports restricted by Federal law, some of that crude is going to need to find a home – most likely at Eastern Gulf refineries in Louisiana and Mississippi. Today we look at how some of the incoming flood of crude could be redistributed across the Gulf Coast region.

The latest available Energy Information Administration (EIA) data for April 2013 indicates that imports into Houston and Port Arthur region refineries on the Texas Gulf Coast included 425 Mb/d of light and 425 Mb/d of medium quality crudes. Seventy three percent of the imports that month were heavy crude. Domestic and/or Canadian supplies fed only 43 percent of the region’s 3.18 MMb/d crude demand. That balance of refinery crude supplies will change significantly by 2014 as increased domestic production finds a path to the Houston and Port Arthur regions via new and expanded pipeline capacity. Today we extend our Permian series by digging into the import data and building a Houston/Port Arthur refinery supply demand balance.

The West Texas Intermediate (WTI) discount to Brent has narrowed 30 percent in 2013 to close at $13.95/Bbl on Friday March 22, 2013. At the same time Gulf Coast Light Louisiana Sweet (LLS) prices have moved unexpectedly to a $6.75/Bbl premium over Brent. Is the WTI discount to Brent finally unwinding? If so – then why are LLS prices trading above Brent? Today we update our analysis of the WTI/Brent spread.