St. James

Sunday, 05/19/2019

This blog is based on research from Morningstar Commodities. A copy of the original report is available here.

U.S. crude exports out of the Gulf Coast averaged more than 2.4 MMb/d in the first four months of 2019 — using infrastructure that is increasingly constrained by a lack of deepwater ports. U.S. crude is reaching destinations worldwide, with large volumes traveling long distances to Asia on gargantuan 2-MMbbl vessels — Very Large Crude Carriers (VLCCs) — loaded offshore by ship-to-ship transfer. Shipments to Europe are primarily on smaller Suezmax and Aframax vessels. Overall, the increased marine activity is testing the limits of existing infrastructure. Today, we analyze the past 16 months of crude export vessel movements and their impacts on Gulf Coast ports. (We’ll also be discussing this and other critical trends related to U.S. export markets live and in person tomorrow at xPortcon in Houston.)

Sunday, 03/03/2019

Increasing U.S. shale oil production has benefitted many U.S. refineries, but along the Gulf Coast, the primary beneficiaries have been in Texas. As production increased in the Permian and Eagle Ford plays, new pipelines were built to supply refinery centers in Corpus Christi, Houston, and Beaumont/Port Arthur. In contrast, the availability of shale crude by pipeline to refineries in Southeast Louisiana has lagged. However, new pipeline capacity to the crude hub in St. James, LA, is about to change the dynamic in a major way. Today, we continue our series on St. James by discussing the Bayou State’s refinery infrastructure and how new pipelines could impact refinery crude slates.

Thursday, 01/31/2019

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.

Thursday, 01/17/2019

Throughout the middle and latter parts of the 2010s, crude oil production growth in major U.S. basins and in Western Canada — not to mention the end to the ban on most U.S. crude exports in December 2015 — has caused noteworthy shifts in crude flow patterns, stressed existing pipeline infrastructure, and highlighted the importance of crude storage and distribution hubs. A common theme through all this has been that more and more crude needs to find its way to the Gulf Coast, with its bounty of refineries and export docks. To that end, lately, there’s been a slew of new pipeline and export-terminal projects announced that are tied to the St. James crude trading hub, which is located in Louisiana, about 60 miles up the Mississippi River from New Orleans. Today, we begin a series on St. James and why it’s becoming an even bigger player in crude markets.

Thursday, 01/10/2019

The possibility of reversing the flow on Capline — the U.S.’s largest northbound crude oil pipeline — has been discussed for a number of years now. Finally, it may be on the horizon. The three owners of Louisiana-to-Illinois pipeline announced last week that this month they plan to initiate a binding open season for a reversed Capline system that would enable southbound flows starting in the third quarter of 2020 — only a year and a half from now. And, as we discuss in today’s blog, reversing Capline’s direction could open up new crude-slate possibilities for Louisiana refineries and boost crude exports out of the Bayou State.

Sunday, 10/21/2018

Time and again, the repurposing of existing assets like pipelines and marine terminals to meet changing market needs has proven to be a winning approach. After all, if a lot of what you need is “already there” — as we said in today’s song title — why build something entirely new? That use-what-you’ve-got tack is a key driver behind MPLX and Crimson Midstream’s recently unveiled Swordfish Pipeline project, which by early 2020 would enable large volumes of crude oil to flow south from the St. James, LA, market hub to the Clovelly storage hub — a key crude distributor to area refineries and the jumping-off point for crude exports on fully loaded Very Large Crude Carriers (VLCCs) via the Louisiana Offshore Oil Port (LOOP). The companies also envision using other existing pipelines — including a possibly reversed Capline — as well as the soon-to-be-finished Bayou Bridge Pipeline to feed crude into Swordfish. Today, we review the MPLX/Crimson plan and assess how it might boost the export cred of LOOP, which is currently the only Gulf Coast port that can fill a 2-MMbbl VLCC to the brim without reverse lightering.

Monday, 08/20/2018

There are common drivers behind the handful of offshore crude oil terminals now under development along the Gulf Coast, chief among them the well-founded belief that shippers would prefer putting crude on Very Large Crude Carriers (VLCCs), which can only be fully loaded in deep water. But each of these projects also has unique nuances — its own specific rationale and characteristics. Tallgrass Energy’s plan is a case in point in that it involves a new pipeline from the crude hub in Cushing, OK, to the refinery center in St. James, LA, and to a new onshore crude storage and loading terminal a few miles down the Mississippi River, to be followed by a VLCC-ready offshore terminal capable of both exporting and importing crude. Today, we continue our review of made-for-VLCCs offshore terminals with a look at Tallgrass’s effort to deliver neat, unblended barrels directly from multiple inland plays to deep water — “shale-to-ship,” in other words.

Monday, 05/21/2018

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.

Tuesday, 05/15/2018

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.

Wednesday, 11/01/2017

The three co-owners of the 1.2-MMb/d Capline Pipeline from St. James, LA, to Patoka, IL, have begun assessing whether there is sufficient shipper interest in reversing the flow of one of the U.S.’s largest crude oil pipelines in the early 2020s. There are good reasons both for ending Capline’s long run as a northbound-flowing pipe and for repurposing the pipeline to help transport heavy western Canadian oil and other crudes south to refineries in eastern Louisiana and Mississippi and to export markets. But there also are logical questions to ask, such as why Capline’s owners envision sending only 300 Mb/d south on the pipe, and why they don’t see the reversal occurring for five years. Today, we examine the forces behind Capline’s possible reversal and the benefits that flipping the pipe’s direction might provide.

Wednesday, 08/16/2017

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.

Sunday, 04/24/2016

The story of crude-by-rail (CBR) in North America is that of a victory of good old U.S. ingenuity over the lack of pipeline capacity that stranded booming shale oil production in 2012. The lower cost to market of “on-ramp” rail terminals allowed surging crude production a route to (mainly) coastal refineries - igniting a building boom over 4 short years that has left 82 load terminals and 44 destination terminals operating today  - many of them now underutilized. Along the way monthly lease rates for rail tank cars that reached $2,750/month at the height of the boom are down to $325/month after the bust – with many lease holders paying daily rent to park their empty cars. Today we conclude our series reviewing the state of CBR today.

Sunday, 04/17/2016

Our analysis shows that about 1.7 MMb/d of crude-by-rail (CBR) unload capacity has been built out and is operating in the Gulf Coast region today. According to Energy Information Administration (EIA) data for January 2016 an average of only 142 Mb/d was shipped into the region by rail in January 2016 down from a peak of just under 450 Mb/d in 2013 and an average of 235 Mb/d in 2015. In other words, the current unload capacity represents a whopping 12 times January 2016 shipments – a massive overbuild that is continuing today as new terminals are still planned. Today we look at the fate of Gulf Coast CBR terminal unload capacity.

Wednesday, 04/06/2016

According to our friends at Genscape at the end of March (week ending April 1, 2016) Bakken shippers could sell their crude at the railhead in North Dakota for $32.05/Bbl. Prices for Light Louisiana Sweet (LLS) crude at the Gulf Coast were about $5.40/Bbl higher than at the railhead but the rail freight to the Gulf was a few cents less than $12/Bbl. That means a Bakken producer would lose nearly $6.50/Bbl by shipping crude by rail to St. James, LA versus selling in North Dakota. Yet despite Crude-by-Rail (CBR) economics being so underwater - the volumes delivered to two St. James terminals averaged 66 Mb/d in 2016 through March.  Today we continue our series on the fate of CBR with a look at inbound Gulf Coast CBR shipments.

Sunday, 04/03/2016

The St. James, LA crude trading hub provides feedstock to 2.6 MMb/d of regional refining capacity as well as refineries in the Midwest. St. James is also an important distribution hub for crude from North Dakota, South Texas, the Gulf of Mexico and onshore Louisiana as well as imports arriving at the Louisiana Offshore Oil Port (LOOP). Crude storage and midstream infrastructure at St. James has been expanding in recent years as the trading hub handles larger volumes of domestic production. Today we begin a new series looking at infrastructure and crude pricing at St. James.