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.

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.

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.

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.

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.

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.

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.