Enterprise plans to develop an offshore crude oil export terminal off the Texas Gulf Coast, which will be capable of fully loading supertankers, or Very Large Crude Carriers (VLCC), signaling the next phase in the U.S. journey to becoming a major energy exporter.
Enterprise has started front-end engineering and design (FEED) and is preparing the application for permit approval, the company said in a slide presentation at Barclays CEO Energy-Power Conference in New York on September 5.
Enterprise expects to receive permit approval for the proposed oil export terminal within the next 24 months.
The offshore terminal is underwritten by long-term contracts and is capable of loading at about 85,000 barrels/hour or one VLCC/day, Enterprise said.
Enterprise’s crude exports totaled about 645,000 barrels/day in July, according to the presentation.
Export Growth
U.S. oil exports have been growing since the U.S. Government reversed a 40-year-old law prohibiting most crude exports at the end of 2015. As oil prices improved, U.S. oil production has also boomed.
U.S. crude oil exports averaged 1.1 million barrels/day in 2017, an increase of 527,000 barrels/day from 2016, according to the U.S. Energy Information Administration (EIA).
Oil exports from the Texas Gulf Coast eclipsed imports for the first time in 2018.
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.
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.
Port limitations
This acceleration in export growth happened even though most U.S. Gulf Coast ports cannot fully load VLCCs.
Instead, export growth was achieved by using the smaller and less cost-effective ships.
The Louisiana Offshore Oil Port (LOOP) is the only deep-water port in the U.S. at this time that can handle the super tankers.
The first U.S. oil supertanker ‘Shaden,’ was loaded in Louisiana in February 2018. The ship was chartered by Shell Oil and flagged for Saudi Arabia, according to S&P Global Platts.
U.S. ports in the Gulf Coast that actively trade petroleum are in inland harbors and connected to the open ocean via shipping channels or navigable rivers.
Although these channels and rivers are regularly dredged to maintain depth and safe navigation, they are not deep enough for the safe navigation of deep draft vessels, such as fully loaded VLCCs.
To circumvent depth restrictions, VLCCs transporting crude oil to or from the U.S. Gulf Coast have typically used partial loadings and ship-to-ship transfers.
The ship-to-ship transfer process known as lightering occurs when a larger vessel partially unloads onto a smaller vessel, while reverse lightering occurs when smaller vessels load onto a larger vessel.
These transfers take place in designated lightering zones and points that exist outside many of the largest U.S. petroleum ports.
Smaller Vessels
However, most U.S. Gulf Coast petroleum ports can accept vessels with capacities of approximately 500,000 barrels of crude oil (AFRAMAX), while the number of ports that can accept vessels with capacities of approximately 900,000–1 million barrels (SUEZMAX) are limited.
Therefore, four AFRAMAX sized vessels or two SUEZMAX vessels are required to carry the same amount of crude oil as a single VLCC.
The inability to fully load larger and more cost-effective vessels at U.S Gulf ports has pricing implications for U.S. crude oil exports, the EIA said.
Costs with smaller ships
Using several smaller ships requires a wider price spread between U.S. crude oil and international crude oil prices to compensate for the lower economies of scale and costs associated with reverse lightering and partial loadings, according to the EIA.
The costs associated with using a smaller vessel are less of a factor for exports over shorter distances such as within the Atlantic basin than exports over longer distances such as to Asia.
As exports to Asia are a growing share of total U.S. crude oil exports, these costs will grow in importance.
By comparison, other nations that export large volumes of crude oil generally have deeper and wider navigable waterways that are not located in inland/onshore harbors.
For example, in Yanbu, Saudi Arabia, located along the Red Sea, the crude oil export facility uses a jetty trestle that extends out to berths in water deep enough to fully load VLCCs.
In addition, the largest crude oil export facility in Saudi Arabia, located at Ras Tanura, uses a combination of jetty trestles, single point mooring facilities, and other facilities to load multiple sizes of vessels.
More Terminal Projects
Just six miles offshore from Brownsville, Texas, privately-held midstream company Jupiter MLP has commenced the engineering, permitting and design of the Jupiter Offshore Loading Terminal (JOLT), a VLCC loading facility.
“The plan is to have JOLT connected to 10 million barrels of onshore storage through two 24-inch diameter pipelines, capable of loading 1 million barrels/day (one VLCC every 48 hours),” according to the Poten & Partners report.
Oil trader Trafigura submitted plans to building an offshore crude oil terminal 15 miles outside of Corpus Christi, with a potential capacity of 400,000 barrels/day, enabling them to load one VLCC every five days using a single-point mooring buoy system.
In Louisiana there are two projects (one old, one new) that have growing crude oil export potential.
The old one is The Louisiana Offshore Oil Port (LOOP), the only current VLCC capable terminal. Originally built as an import terminal, it has also started to export limited quantities of crude oil, but LOOP has the potential to do significantly more.
The other project is still in the planning stage. Midstream company Tallgrass Energy is proposing to build “Seahorse”, a new 700-mile, 800,000 barrel/day pipeline from Cushing, Oklahoma to St. James, Louisiana. It is also planning a new terminal on the Louisiana Gulf Coast called Plaquemines Liquids Terminal (PLT).
“Even if not all these offshore terminals are built, VLCC export capacity from the U.S. Gulf will likely grow dramatically in the next 3-4 years, coinciding with and facilitating a rapid expansion of U.S. production,” the Poten & Partners report stated.
Enterprise expects U.S oil and condensate production to reach 12 million barrels/day in 2020 and the nation’s crude exports to climb above 4 million barrels/day in 2021.
“There is a risk that the new export capacity will outpace production growth, but, given their pipeline connections and superior economics, it is likely that these new offshore terminals will be fully utilized,” according to Poten & Partners.
By Heather Doyle