Texas-based pipeline operator Energy Transfer is in talks to build an offshore crude oil export facility capable of handling VLCCs connected to its Nederland export terminal near Houston, Texas, in the US Gulf of Mexico
In its Q2 earnings call, Energy Transfer chief financial officer Thomas Long said the company was ‘advancing discussions’ on the project, but that a final investment decision has not been made.
Mr Long revealed the discussions around a potential VLCC terminal as he discussed Energy Transfer’s expansion to add a fourth pipeline from its joint-venture with ExxonMobil to export shale oil from the Permian Basin in the US southwest.
On its own, the P4 pipeline will carry 120,000 barrels per day of crude oil from Colorado City, Texas, to the Nederland terminal on the Gulf coast. Mr Long said his company expects the project to be in service and at full capacity on all four pipelines by the end of Q3 2019.
“We are almost complete with an expansion of our Permian Express system... We are also advancing discussions on a VLCC project that would be connected to our Nederland terminal. As this project gets closer to FID, we will provide you with more specifics,” he said.
Regarding the project’s timings and a potential start date for construction on the offshore terminal, Energy Transfer president Marshall (Mackie) McCrea said the proposed project was halfway through a process that can take up to three years.
“We are extremely optimistic that our VLCC project will go [ahead],” he said. “We are in the middle of that. To put a time frame on it, you are probably saying… two and a half, probably best case, [or] three years, so we can make [a] filing soon.”
The company’s next step would likely be to file for a permit with the US Maritime Administration.
As exports from the US have surged as the US lifted a 40-year ban on crude oil exports, midstream companies have been jockeying for position in the race to secure permits and build VLCC loading terminals.
In late July, Enterprise Products Partners signed a deal with Chevron and later announced a final investment decision to advance its proposed offshore terminal off the coast of Brazoria County, Texas, also near Houston. The Enterprise Sea Port Oil Terminal is one of many terminal projects under development in the US Gulf, as a 2018 Poten Partners report documented.
Nine kilometres offshore from Brownsville, Texas, privately-held midstream company Jupiter MLP is working on permitting, designing and engineering for its VLCC loading facility Jupiter Offshore Loading Terminal.
Some 193 km north of Brownsville, with direct pipeline connections to the Eagle Ford and Permian Basin shale formations, Corpus Christi has developed into one of the most active gateways for crude oil exports in the US Gulf.
Louisiana waters are the site of two additional terminal projects with growing crude oil export potential. Originally built as an import terminal, Louisiana Offshore Oil Platform (LOOP) is the only current terminal capable of loading VLCCs in both directions. LOOP began to export limited quantities of crude oil in early 2018.
VLCCs loading directly is likely to take business away from smaller tanker vessels, as the Poten report pointed out.
“Even if not all these offshore terminals are built,” Poten’s report said, “VLCC export capacity from the US Gulf will likely grow dramatically in the next 3-4 years, coinciding with and facilitating a rapid expansion of US production.
“This will further increase the use of VLCCs in US exports, but may come at the expense of Suezmaxes and in particular Aframaxes, as it will reduce the demand for reverse lightering.”