U.S. oil export race accelerates as Enterprise makes leap ahead

By Sheela Tobben on 8/19/2019

NEW YORK (Bloomberg) - The race to develop oil terminals that can fully load supertankers on the U.S. Gulf Coast remains congested, even as one of North America’s largest pipeline operators decided to push its project ahead.

Over a year, more than 10 projects have been proposed for terminals that, combined, will be able to load 8 MMbpd onto very large crude carriers, or VLCCs. While they all may not be needed, the companies planning the facilities continue to move forward.

Enterprise Products Partners LP was first to announce a final investment decision on its Sea Port Oil Terminal late last month, and last week the company said it expects to receive regulatory approval in the first half of 2020, followed by two years of construction. In the meantime, Energy Transfer LP said last week it was advancing talks on its terminal and Tallgrass Energy LP is holding discussions on its project.

“I’d say the race is still on,” said Kurt Barrow, vice president of oil markets, midstream and downstream energy at IHS Markit. “Just because one company pulls ahead earlier in the race, doesn’t mean that they will be the first one over the finish line.”

The new terminals should help propel U.S. crude exports to fresh records as oil continues to flow from American shale patches. Domestic output is forecast to average 13.3 MMbpd next year, according to the U.S. government, about a million barrels higher than this year’s estimated average.

The ports, combined with new pipeline systems, will also help ease bottlenecks that have caused Permian Basin crude to pile up with very few outlets.

WTI at Midland, Texas, rose $0.05 to $0.55/bbl above WTI at Cushing, Oklahoma, Friday, the highest since February, according to data compiled by Bloomberg.

“Of the 10 or so projects that have been announced, not all would be completed, simply because they aren’t needed,” said Sandy Fielden, director of research for Morningstar Inc.

Some, though, will be needed as the Louisiana Offshore Oil Port, or LOOP, is currently the only export facility in the U.S. that can completely fill up these mega-tankers, to ship barrels around the world. LOOP may not play an important role in U.S. crude exports in the long-term, especially if facilities are built in Texas where production zones lie, said John Coleman, an analyst at consultancy Wood Mackenzie.

It’s not so easy to complete projects. Several have already faced regulatory hurdles this year. The U.S. Coast Guard and Maritime Administration suspended the review process for both Enbridge Inc.’s and Enterprise’s port applications. Officials also delayed the review process for Trafigura Group Ltd.’s Texas Gulf Terminals.

Jupiter Energy Group pushed the startup of its terminal, which is backed by private equity firm Apollo Global Management, by a year because it hasn’t secured base shippers or approvals from the Port of Brownsville, according to Jupiter Energy Group CEO Tom Ramsey.

Only five projects are in the permitting process -- those planned by Enterprise, Enbridge/Oiltanking, Trafigura, Phillips 66 and Sentinel Energy Services Inc., according to the Maritime Administration.

Sufficient export infrastructure must be built along the Texas Gulf Coast, said a Texas Gulf Terminals representative.

A Phillips 66 spokesman said the company’s plans have not changed, a Flint Hills Resources LLC spokesman said it continues to advance its project and Port of Corpus Christi officials were not immediately available for comment.

“In our view, there is not going to be one winner in this race. There is room in this market to support two to three total VLCC terminals and that won’t include LOOP,” said Coleman.

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