December 13, 2021 [SPGlobal] – Enterprise Products Partners hopes to receive regulatory approval in the spring for its deepwater crude export terminal offshore of the Houston area, a project that would eventually allow for the seamless loading of VLCCs from Texas for the first time, said Enterprise co-CEO Jim Teague in an interview.

The race to build crude export hubs offshore of Texas was swiftly halted by the pandemic last year, but Enterprise is now hoping to become the first mover and, if all goes as planned, build the Sea Port Oil Terminal project, called SPOT, without any other Texas competition.

“I’m hoping we get that permit on the port in the second quarter,” Teague said, referencing the necessary approvals from the US Maritime Administration and the Coast Guard. “We started seeing things moving again, and it’s moving.”

Enterprise, which has partnered with Enbridge on the project and counts Chevron as the anchor customer, had previously hoped for full approval by the end of this year. But Enterprise has not included SPOT on its capital expenditure budget for 2022, demonstrating the uncertain nature of the regulatory process. However, Teague said construction could still begin later next year if all goes as planned. The construction process is expected to take two to three years.

Teague acknowledged the process has been “kinda political,” but he referenced an unnamed “champion” in Congress who has helped keep things from stalling indefinitely.

The public comment period ended Dec. 6 and the final environmental impact statement is expected next, he said, although he did not give any indication when that might come.

SPOT is proposed to be built about 30 miles offshore of Freeport, which is due south of Houston. The deeper water depths offshore are needed for VLCCs to load up to capacity. SPOT could be able to load 2 million b/d, handling two VLCCs simultaneously.

Currently, crude exports from the Houston Ship Channel and the Port of Corpus Christi must utilize more costly and time-consuming reverse lightering to load VLCCs because of the shallower water depths. Only one Gulf of Mexico port, the Louisiana Offshore Oil Port, called LOOP, can fully load VLCCs currently without reverse lightering from smaller vessels.

“I’m cautiously optimistic,” Teague said. “I hope it’s the only one that gets built.”

Still, Teague bemoaned the dialogue out of Washington with some Democratic senators currently pushing for crude-export bans. Even if it is just talk and not action, it can still hamper investments in the industry and for projects, he said.

“The tone coming out of Washington on hydrocarbons needs to change,” he said.

Enterprise is stationed in the Houston area and has seen the majority of US crude exports shift to Corpus Christi as it has been built out. Teague sees the momentum moving back to Houston once SPOT comes online. It will be the more affordable and faster option for loading crude barrels, he said.

“It’s cheaper to load one VLCC than four lightering ships, and it’s a lot cleaner environmentally,” Teague said.

Also, SPOT would free up Houston Ship Channel capacity for Enterprise to export more LPG from terminals currently dedicated to crude oil, he said.

Other competing projects include Energy Transfer’s Blue Marlin facility offshore the Texas-Louisiana border, Phillips 66’s Bluewater project offshore of Corpus, and Sentinel Midstream’s Texas GulfLink also offshore of Houston. However, all of those projects are behind SPOT’s timeline, and may never come to fruition.

Permian reliance

The effort to build deepwater ports was fueled by the shale boom and the emergence of the Permian Basin as arguably the world’s top crude basin.

US crude exports were expected to keep surging before the pandemic took over, subsequently placing the urgency to build the offshore exporting terminals on hold.

Crude exports fell from a monthly all-time high of 3.54 million b/d in February 2020 down to 2.67 million b/d as of September 2021, US Energy Information Administration data shows. For the four weeks ending Dec. 3 exports averaged 2.8 million b/d, according to the EIA.

Pre-pandemic, US crude exports were projected to rise to at least 4.5 million b/d by the end of 2021. However, crude exports could begin slowly rising next year as Permian volumes continue to steadily rise.

Permian Basin crude production is expected to rise to a new high of nearly 5 million b/d in December after initially taking a big hit during the pandemic. At the same time, Permian crude pipeline capacity is already at more than 6 million b/d after rapid growth in recent years and could exceed 7.5 million b/d next year as the ExxonMobil-led Wink-to-Webster pipeline system to Houston ramps up beginning in January, according to S&P Global Platts Analytics.

Enterprise’s 450,000 b/d Midland-to-ECHO 3 pipeline project came last year, but it is part of the Wink-to-Webster network and will not ramp up more until next year when more minimum-volume commitments kick in.

“SPOT will help pull more crude through our pipelines,” Teague said, and long-term contracts will keep the pipeline profits healthier until then.

In the meantime, Enterprise continues to examine repurposing some crude pipeline, including potentially switching the Seminole Pipeline from crude to NGL service at some point in 2022, Teague said.

“We’re in pretty good shape,” Teague smiled, highlighting Enterprise’s profit-making even during the worst of the pandemic.

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