As U.S. crude production ramps back up and larger volumes flow to the Gulf Coast, competition is building among midstream companies for control over the final miles from pipeline to refinery or marine dock. Nowhere is this more evident than the Houston area, where more than a dozen pipelines can deliver as much as 4 million barrels/day to the region’s 10 refineries as well as to export docks. Owners of the long-distance incoming pipelines—seeking to secure terminal, storage and dock fees—are making significant midstream investment in Houston, but smaller players are also developing assets. Today we begin a two-part series describing the build-out and how competitive the market has become.
The RBN blogosphere has covered the build-out of Houston’s crude oil infrastructure extensively over the past three years, including two deep-dive Drill Down reports starting with Houston We Have A Problem and followed up with Stairway to Houston. There also have been a couple of blog series—see Saving All My Crude For You and The Future of Houston Area Crude Infrastructure. But while the Houston area already offers an amazing array of oil pipeline, storage and dock assets, the continuing evolution of the market results in ongoing efforts by midstream companies to tweak and add to the region’s infrastructure.
Existing incoming crude pipelines into Houston from the Permian Basin in West Texas, the Eagle Ford in South Texas, offshore Gulf of Mexico and the legacy South Texas region can carry as much as 1.85 MMb/d of domestic crude. The two Enterprise Products Partners/Enbridge Seaway pipelines (one of which was damaged by a third-party contractor on January 27, and shut for repairs that should finish up this week) and TransCanada’s Marketlink from Cushing, OK can between them ship an additional 1.55 MMb/d of domestic and Canadian crude into Houston. Another 0.5 MMb/d of pipeline capacity from the Permian to Houston will be added in the coming year or so via the expansion of the Magellan Midstream/Plains All American BridgeTex Pipeline by 100 Mb/d in the second quarter of 2017 and in mid-2018 with the planned addition of Enterprise’s 450 Mb/d Midland-to-Sealy, TX pipeline. That’s a grand total of 3.4 MMb/d of crude pipeline capacity now, rising to near 4 MMb/d less than a year-and-a-half from now (see complete listing in Figure 1). In addition to incoming pipelines, waterborne crude imports (all grades) to Houston area refineries averaged 950 Mb/d between January and November 2016, according to the Energy Information Administration (EIA).