Carlyle Firm To Seek Fast-Track Approval Of Texas Oil Export Terminal

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Carlyle in talks with pipeline firms to sell 25% stake in U.S. oil export project: source

Carlyle Group LP is in discussions with three companies that operate pipelines and terminals to sell a 25% stake in its Corpus Christi, Texas, crude oil export terminal for $625 million, according to a source familiar with the matter.

Carlyle is also in talks with the three companies to jointly operate a crude oil pipeline from Houston to Corpus Christi, the source said. The identities of the companies could not be immediately learned.

Carlyle and other companies are working to open at least eight facilities to export U.S. crude oil to global markets from the U.S. Gulf Coast. The United States is now producing more than 12 million barrels per day (bpd), more than Saudi Arabia and Russia. Last week, U.S. crude exports were near a new record at nearly 3.4 million bpd.

A deal with one of the three companies, which operate facilities in Houston, could happen as early as Friday, according to the source.

 

The joint-venture pipeline would carry crude from Houston to Corpus Christi with an estimated capacity of between 700,000 to 1.2 million barrels per day (bpd), the source said.

 

It would provide alternate access to U.S. oil producers. Carlyle’s facility has existing connections to producers in the Eagle Ford and the Permian Basin, two of the largest U.S. oil fields.

Carlyle-backed Lone Star Ports LLC is proposing a 1.4 million bpd export facility on a harbor island near Corpus Christi. It has said it expects to begin operations at the facility in October 2020.

Lone Star Ports and its partner, the Port of Corpus Christi, have filed for permits to build a deepwater port that could handle tankers carrying up to 2 million barrels of oil.

 

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Carlyle Firm To Seek Fast-Track Approval Of Texas Oil Export Terminal

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U.S. crude exports out of the Gulf Coast averaged more than 2.4 MMb/d in the first four months of 2019 — using infrastructure that is increasingly constrained by a lack of deepwater ports. U.S. crude is reaching destinations worldwide, with large volumes traveling long distances to Asia on gargantuan 2-MMbbl vessels — Very Large Crude Carriers (VLCCs) — loaded offshore by ship-to-ship transfer. Shipments to Europe are primarily on smaller Suezmax and Aframax vessels. Overall, the increased marine activity is testing the limits of existing infrastructure. the past 16 months of crude export vessel movements and their impacts on Gulf Coast ports.

the development of U.S. crude exports since the ban on most overseas shipments was lifted in December 2015. Exports from the Gulf Coast are growing and expected to increase further as new pipelines from the Permian and Eagle Ford come online over the next two and a half. In the less than four years since wide-open exporting began, the rapidly developing export market has overcome a number of challenges, like poor price transparency and the lack of deepwater terminals to load exports Actual shipments still require considerable logistical juggling as crude is loaded from smaller tankers onto long-distance VLCCs for voyages to Asia. ports like the Houston Ship Channel are contending with increased congestion and the resulting difficulties in scheduling. Plans to expand the onshore ports — and build new deepwater terminals offshore — are in the works, but funding and executing on these projects is not easy and can take many years.

 

We reviewed every export shipment from Gulf Coast ports between January 1, 2018 and April 24, 2019, including the size of vessel, load terminal and ultimate destination as well as ship-to-ship transfers onto larger tankers. We’ll begin our discussion of what we learned with a closer look at port activity, then break down the characteristics of crude ship movements affecting marine traffic in the Gulf.

 

 

 

Size Matters

 

With the exception of the Louisiana Offshore Oil Port (LOOP) terminal 20 miles off the Louisiana coast in the Gulf of Mexico, the Gulf Coast is not blessed with deepwater ports that can accommodate massive VLCCs. These supertankers and a handful of their giant brethren — the 3-MMbbl Ultra Large Crude Carriers (ULCCs) — require at least a 75-feet of draft to load fully and are the workhorses of long-distance oil transport between continents. Most Gulf Coast terminals are restricted to a 45-foot draft that only allows them to fully load Aframax tankers holding 500-650 MBbl of crude or to partially load Suezmax tankers that hold up to 1.3 MMbbl. Analysis of the  data shows that during the 16-month period from January 2018 to April 2019, 548 different vessels made a total of 1,402 crude export shipments from Gulf Coast terminals. Of these shipments, 69% involved Aframax tankers, 21% Suezmax, and 6% smaller Panamax (less than 500 Mbbl); 3% were loaded directly onto VLCCs. (As we’ll get to in a bit, many of the smaller tanker loadings were for ship-to-ship transfers to VLCCs.)

 

Load Terminals

 

Figure 1 lists the top 15 export terminals by throughput volume over the analysis period. Enterprise Products Partners’ Enterprise Hydrocarbons Terminal (EHT) in the Houston Ship Channel (HSC) is the Gulf Coast’s busiest crude export terminal, followed by Energy Transfer’s Nederland terminal in Port Arthur, TX, and Moda Midstream’s Ingleside Corpus Christi terminal in third place.

 

 

EHT has over 22 MMbbl of crude storage and seven tanker berths with a 45-foot draft capable of partially loading Suezmax and fully loading Aframax vessels. Enterprise loaded 172 Aframax and 79 Suezmax vessels for crude export from the terminal between January 1, 2018 and April 24, 2019, amounting to an average 355 Mb/d. Enterprise can deliver crude to EHT by pipeline from the Permian and Eagle Ford basins in addition to moving domestic and Canadian supplies from Cushing via the Seaway pipeline.

 

In addition to its terminal on the HSC, Enterprise also operates the fifth and sixth busiest Houston-area terminals: Seaway Texas City and Seaway Freeport. Other top 15 terminals in the Houston region include SemGroup’s Houston Fuel Oil Terminal and the Magellan/LBC Seabrook terminal.

The second busiest crude oil export terminal on the Gulf Coast is Energy Transfer’s Nederland facility, which has 27 MMbbl of storage capacity and pipeline connections from Cushing (TC Energy’s Cushing Marketlink), the Permian (Energy Transfer’s Permian Express and West Texas Gulf pipelines), Houston (Shell Midstream’s Zydeco pipeline) and North Dakota (the Dakota Access Pipeline and the Energy Transfer Crude Oil Pipeline, better known as ETCOP). Nederland has five tanker berths that can fully load Aframax vessels with a 40-foot draft and partially load a Suezmax. Energy Transfer Nederland loaded 146 Aframax and 62 Suezmax tankers between January 1, 2018 and April 24, 2019.

 

Third place among Gulf Coast crude export terminals belongs to the Moda Ingleside Energy Center located in the outer harbor of Corpus Christi. Moda purchased the terminal from Occidental in August 2018, and Oxy remains its principal customer. The purpose-built crude export terminal can partially load VLCCs and Suezmax tankers at three deepwater berths. Export capacity is currently being expanded from 300 Mb/d to 750 Mb/d and the channel draft is being deepened to 54 feet to accommodate fully laden Suezmax tankers. Moda Ingleside receives crude from the Permian and South Texas Eagle Ford basins. The terminal loaded 83 Aframax, 33 Suezmax and 22 partially loaded VLCC tankers between January 1, 2018 and April 24, 2019.

 

During the 16-month period of our analysis, 38% of export shipments were from the Houston region — encompassing the HSC, Texas City, Freeport and Seabrook terminals. The Beaumont/Port Arthur region was second busiest, with 26% of export volumes leaving three facilities: Energy Transfer’s Nederland terminal (mentioned above) and Phillips 66 and Enterprise terminals in Beaumont. Shipments out of Beaumont/Port Arthur just beat volumes leaving the Corpus Christi area (25% of the total), which includes the Buckeye, NuStar and Valero terminals in the Corpus Christi Ship Channel, as well as the Flint Hills Resources (a.k.a. Koch Industries) and Moda terminals at Ingleside. Louisiana accounted for the smallest share of crude export volume leaving the Gulf Coast; the state accounted for 12% of the total. These shipments were made from LOOP in the Gulf of Mexico , the NuStar and Plains terminals in St. James, LA, as well as a few refinery terminals along the Mississippi.

Ship-To-Ship Transfers

 

Despite the preponderance of exports loading onto Aframax tankers, most long-distance crude shipments from the Gulf Coast to buyers in Asia are made on VLCCs, because these supertankers boast the most competitive freight rates (see Rock The Boat). Since the direct loading of VLCCs can only happen at deepwater ports like LOOP, it’s common practice to use Aframax and Suezmax tankers to make ship-to-ship transfers (STSs) onto VLCC tankers located in offshore Gulf of Mexico loading zones. These STSs, also known as reverse lightering, allow shippers to load a full VLCC cargo for onward shipment from the Gulf. Our data shows that just under half (or 46%) of the crude export vessels loaded at Gulf Coast ports were for ship-to-ship transfers, with crude loaded onto the smaller tankers at port subsequently loaded onto VLCCs. The data further shows that 85% of Aframax and 76% of Suezmax STS transfers were made onto VLCCs destined for Asia (bottom chart in Figure 2). While VLCCs are popular for the longer-haul Asia runs, smaller Aframax and Suezmax vessels are most popular for shipments to Europe (top chart in Figure 2). During the 16-month analysis period, a total of 306 Aframax and 85 Suezmax tankers were loaded directly (without transfers) for voyages to Europe.

The detailed logistics involved in getting U.S. crude out of Gulf Coast terminals and on their way to export markets underlines the ingenuity of shippers that have built export volumes from next to nothing to more than 2.4 MMb/d in just four years. The upcoming tsunami of crude from new pipelines out of the Permian and Eagle Ford over the next two years will surely test the export infrastructure. That’s the reason behind a slew of new project proposals to build deepwater Gulf of Mexico terminals off the coast of Freeport (TX), Texas City (TX), Corpus Christi, Brownsville (TX) and Louisiana, as well as plans to expand part of the Corpus Christi harbor channel to accommodate fully loaded. If one or more of the new deepwater terminals are built, they would reduce the number of ship-to-ship transfers needed to load export cargoes. Then, in theory at least, pipelines could seamlessly feed deepwater terminals and load VLCC tankers directly and efficiently. If for any reason those deeper terminals don’t get built, expect to see increased congestion as existing Gulf Coast docks struggle to handle ever-larger crude export volumes.