April 25, 2024 [Oilprice]- Slowing U.S. crude oil production growth and changed global oil flows have stalled projects by pipeline giants and oil majors to have deepwater ports built off the Texas coast to handle the loading of supertankers.
Four projects were planned offshore Texas before multiple crises hit the industry in the 2020s and changed trade oil flows. But only one of these projects has received a license from the U.S. Administration—and it’s not certain it would soon have long-term customer commitments or partners to underpin a final investment decision.
Texas Offshore Port for Supertankers
The first approval of a Texas deepwater port came earlier this month when the United States Maritime Administration (MARAD) issued the deepwater port license for the Sea Port Oil Terminal (SPOT) to Enterprise Products Partners. The SPOT offshore platform is planned to be located approximately 30 nautical miles off Brazoria County, Texas, in 115 feet of water, and is designed to load very large crude carriers (VLCCs) and other crude oil tankers up to a rate of 85,000 barrels per hour.
With a direct connection to Enterprise’s Houston ECHO terminal, as well as the company’s extensive integrated midstream network, SPOT would offer access to more than 40 distinct grades of crude oil, including Midland WTI, Enterprise Products Partners says.
The U.S. currently has only one operational offshore export port capable of handling VLCCs, or supertankers, which have the capacity to load and ship 2 million barrels of crude oil. This is the Louisiana Offshore Oil Port (LOOP), which handles mostly crude produced in the Gulf of Mexico.
The Texas offshore ports for supertankers are planned to be able to export crude from the top oil-producing basin in the United States, the Permian.
Stalled Development
However, slowing growth in U.S. crude oil production in recent months and a shift of the record U.S. crude exports to Europe after the Russian invasion of Ukraine have weakened the case for Texas offshore ports for supertankers, as evidenced by the recent struggles of Enterprise’s SPOT project to take off.
The plans were submitted in 2019—when U.S. crude oil production was soaring by more than 1 million barrels per day (bpd) per year – and had the backing of supermajor Chevron, which said at the time that “The SPOT facility provides opportunity to significantly expand our export capacity and access multiple market centers as we increase our crude oil produced out of the Permian.”
But Chevron has backed out of the project due to the delays in license approvals, which only came earlier this month, while Enbridge, Canada’s pipeline giant, has dropped an option to buy a stake in SPOT, Enterprise told Reuters.
The project is also struggling to secure long-term customers or partners that would allow Enterprise to make a final investment decision, industry executives, sources, and analysts have told Reuters.
Moreover, oil producers and traders are unwilling to pay higher loading fees, as the SPOT project reportedly would offer, even if they are able to load supertankers close to the Texas coast, energy industry executives told Reuters.
Last but not least, the top destination of U.S. oil exports is now Europe, where smaller tankers are better suited to ship the crude from America.
U.S. Exports to Europe Surge
As U.S. crude oil production defied forecasts of a significant slowdown in growth last year and hit new highs, again, exports from America increased—to a record-high level since the U.S. ban on most crude oil exports was lifted in 2015.
U.S. crude oil exports averaged an all-time high of 4.1 million barrels per day (bpd) last year, having jumped by 13%, or by 482,000 bpd, from the previous record set a year earlier, in 2022, data from the U.S. Energy Information Administration (EIA) showed last month. Except for 2021, U.S. crude oil exports have increased every year since the ban on most exports was lifted in 2015.
Last year, Europe became the largest buyer of U.S. crude oil, following the Western sanctions on OPEC+ producer Russia over its invasion of Ukraine. The inclusion of West Texas Intermediate (WTI) crude oil in Dated Brent pricing also spurred buying of the U.S. crude variety in Europe.
The WTI crude oil included in determining the Dated Brent price is delivered into Rotterdam, a large crude oil storage and trading hub in the Netherlands. As a result, the Netherlands received more U.S. crude oil exports than any other country in 2023, averaging 652,000 bpd, per EIA estimates.
In total, U.S. crude oil exports to Europe averaged 1.8 million bpd last year, slightly more than the combined U.S. crude exports to Asia and Oceania of 1.7 million bpd. American crude has replaced a large portion of Russian crude, which Europe imported before 2023.
At the same time, the EIA – which is typically very conservative in its output estimates – expects U.S. crude oil production growth to slow to just around 300,000 bpd this year compared to 2023.
“The short-term dynamic is less need for big ship capacity, which actually fits the current U.S. export capacity a lot better,” Colin Parfitt, vice president of Midstream for Chevron, told Reuters in an interview last month.
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