Ticket to Ride? Expanding Storage Supports Booming Exports

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.

We’ve covered growing terminal and storage capacity on the Gulf Coast extensively since the start of the shale boom. By 2014, pipelines were built out to reach the Gulf Coast from Cushing in the Midwest and the Eagle Ford and Permian basins in Texas, bringing significant new flows to the Houston region (see “Texas Bound and Flyin’”). All the new crude showing up in the Houston region needed new storage capacity to stage its redistribution to local refineries and plants further east in Louisiana. We detailed the growth of Houston storage in a 2015 blog series (see “Stairway to Houston”) and an accompanying Drill Down Report. More recently, we covered expanding storage capacity in Texas City (see “Easy Like Texas City”) and storage at the Louisiana Offshore Oil Port, as well as the potential for crude exports from that port (see “Livin’ on the Edge”).

Refinery Storage Capacity Static

Refineries need storage to buffer their feedstock input and refined product output in case of any interruptions in their supply and distribution chain. Unplanned outages are expensive, because — as we have seen in the weeks since Hurricane Harvey — refineries are complicated to restart. At the same time, refiners prefer to keep on-site inventory to the minimum required for blending and immediate supply. Data from the EIA shows that the volume of crude in Gulf Coast refinery storage tanks remained remarkably stable over the period from January 2011 to July 2017 (latest available data). Figure 1 below shows monthly refinery storage levels reported to EIA for the Gulf Coast region (shaded area) as well as total working refinery storage capacity (red line). Refiners only used 60% to 70% of their available storage capacity — even when crude throughput reached seasonal highs of 97% of operating capacity this year in July. Overall working storage capacity at Gulf Coast refineries increased by just 1.9 MMBbl to 74.4 MMBbl over the period.

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