Where the Boat Leaves From, Part 2 - The Challenging Economics for Crude Export Terminals

Crude oil exports out of the U.S. are the topic du jour these days. At the heart of the discussion are the who, what, where and when of how the export capacity will be developed. Who is going to build the next crude oil export terminal, what type will it be (offshore or onshore), where are they going to put it (Corpus, Houston, Louisiana ­­— the list goes on), and when will that new capacity be available? Everyone seems to have a different answer, and for good reason. Crude oil export terminals aren’t easy to develop, any way you look at them. Today, we examine the financial and logistical hurdles that export terminals must clear in order to reach a final investment decision, and what those obstacles mean for what kind of terminal gets built, where it gets built, who builds it and how soon.

In Part 1 of our series, we briefly highlighted the history of U.S. crude oil exports. Since Congress lifted the ban on most oil exports in December 2015, U.S. export volumes have quickly increased from an average of 600 Mb/d in 2016 to an average of just over 2.7 MMb/d so far in 2019. We’ve seen seven weeks in which exports have topped 3 MMb/d so far in 2019, according to Energy Information Administration (EIA) data, and the four-week average for crude oil exports is currently at an all-time high (3.290 MMb/d). Based on RBN’s assessment of available capacity, which we also covered in Part 1, we believe there is currently more room for exports to grow. Our analysis suggests there is now around 5.1 MMb/d of actual, actionable export capacity that could move volumes onto the water and out to international markets. Our breakout of that capacity is shown in Figure 1, with the pink areas of the pie charts representing available capacity at each port.

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