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U.S. oil export boom sparks race to build Texas ports

Peter Stewart, PortandTerminal.com, January 10, 2019

Corpus Christi, Texas (09/01/19) – The United States has been the world’s top oil buyer for decades. Understandably then, America’s port infrastructure was built to import rather than export oil.

That’s now changing. Booming U.S. oil exports have set off a race to build Gulf Coast ports to handle more than 3 million barrels per day.

What changed?

Rising demand for new ports follows a 2015 decision by the U.S. Congress to lift a 40-year ban on crude exports.

The crude oil export ban had prohibited most crude oil exports from the United States to other countries. It was implemented in 1975 and lifted in December 2015.

At the end of 2015, the US congress fully liberalized exports of all grades of US crude oil, removing obstacles to market based flows and pricing.
The decision was made after advances in drilling techniques sparked a rapid rise in domestic shale production – especially in Texas.

Oil shales are sedimentary rocks that contain kerogen, an oil-like substance. The U.S. Energy Information Administration (EIA) estimates that in 2017, about 4.67 million barrels per day of crude oil were produced directly from shale oil resources in the United States. This was equal to about 50% of total U.S. crude oil production in 2017.

Suddenly the US had a lot more oil that needed to be exported.

How much oil is America able to export?

U.S. oil production is booming at record levels (see graph below), and U.S. oil exports have also reached new highs — 3 million barrels a day, according to government data.

In December 2018 it was announced that first time on record the United States had exported more crude oil and fuel than it imported for the first time on record.

Those exports are more than most OPEC countries can produce each day and only lag two OPEC countries, Saudi Arabia and Iraq, in terms of exports.

New Infrastructure

The U.S. Gulf Coast has been racing to build infrastructure, including wider shipping channels and revamped terminals, to handle foreign demand for America’s oil.

Existing ports along the Gulf Coast were not built to accommodate the super tankers–Very Large Crude Carriers (VLCC) – which can carry around 2 million barrels of crude. Only one U.S. facility, the Louisiana Offshore Oil Port, can fully load supertankers capable of carrying 2 million barrels.

Plans are underway to build as many as five new offshore terminals capable of directly loading VLCC tankers for export from U.S. territorial waters in the Gulf of Mexico, according to the research arm of international brokerage Poten & Partners.

Very large oil tanker at sea
VLCC (Very Large Crude Carrier) vessels have a size ranging between 180,000 to 320,000 DWT. But the standard dimensions of these ships range between 300 to 330 meters in length, 58 meters breath and 31 meters in depth.

Plans at Corpus Christi

The Corpus Christi port – the closest to the most productive shale fields in Texas – exports less than 1 million bpd, and its harbor is too shallow to fully load supertankers.

Major Asian buyers are looking to load as much oil on to one vessel in order to maximize the economics of their US purchases so they prefer to use the VLCC vessels to make their pick-ups. Corpus Christi has a depth of about 14 meters (35 feet). VLCC vessels need a depth of 23 meters (75 feet) once fully laden. That’s a problem that Corpus Christi needs to fix.

Three firms are vying to open the first deepwater port in Texas that could handle the VLCC vessels. Reports say that the commodities trading firm Trafigura has taken an early lead with a planned offshore facility that has an easier path to regulatory approval and faces fewer objections from environmentalists.

What to expect next

Expect to see a battle over who will actually build the Corpus Christi port. While the Trafigura project may be the favourite for now there are others in the running. Its chief competitor – a partnership of investor Carlyle Group and the Port of Corpus Christi to build an onshore port – has responded by petitioning regulators to kill Trafigura’s project.

Read more

The VLCC Race: US midstream companies plan to export more oil faster https://blogs.platts.com/2018/07/23/vlcc-midstream-us-crude-oil-export/

US Gulf oil terminal projects signal major export growth http://analysis.petchem-update.com/supply-chain-logistics/us-gulf-oil-terminal-projects-signal-major-export-growth

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