U.S. crude oil exports are projected to increase from 1.1 million barrels per day (mmbpd) to 4.8 mmbpd by 2022. Almost 75 percent of this increase will take place in the Permian and Eagle Ford Basins, which produce light, low sulfur crude oil. New investment is urgently needed to upgrade U.S. export infrastructure in order to accommodate this volume.
What they’re saying
Crude oil produced in the Permian Basin and Eagle Ford is projected to increase significantly, creating an incredible opportunity for U.S. crude oil exports.
S&P Global Platts: "Planned long-haul pipelines out of the Permian Basin will potentially bring an additional 1.9 million barrels per day of light, sweet crude and condensate to Corpus Christi by the end of 2019. That's on top of the about 2 million barrels per day of crude from the Permian Basin and Eagle Ford Shale play that reaches the port city currently."
International Energy Agency: Oil 2018: "Driven by light tight oil, by 2023 United States output grows by 3.7 million barrels per day, more than half of the total global production capacity growth of 6.4 million barrels per day expected by then…The United States is well-placed to increase its role in global markets. Since the ban on exporting crude oil was lifted at the end of 2015, volumes have increased sharply…As a result, by 2023 capacity is expected to more than double from current levels to about 4.9 million barrels per day. Corpus Christi will become the main export hub in the Gulf Coast."
IHS Markit: "Oil production in the Permian Basin, already a major force in global supply growth, will rise nearly 3 million barrels per day by 2023—a level of growth exceeding most recent estimates…Total oil production in the Permian will be 5.4 million barrels per day in 2023, more than the total production of any OPEC country other than Saudi Arabia…"
Axios: “Of the 10 times exports have averaged over 2 million barrels per day for a week, nine of them have occurred this year.”
Despite an oil boom in the Permian Basin producers in Texas currently face a major infrastructure bottleneck as they try to move oil to markets where it can be sold.
Midland Reporter-Telegram: "Constraints that could limit growth in Permian Basin crude and natural gas output go beyond the current pipeline bottlenecks, according to panelists at the recent Executive Oil Conference presented by Hart Energy…"The refiners are buying all they can process. Domestic refiners are not configured to process lighter crudes," [Reed Olmstead, director, North American onshore research and business development with IHS Markit] said. "That means we have to sell it. We have to more than double exports from 2.2 million barrels a day to 4.8 million barrels a day, primarily on boats, in order to meet the expected production outlook. It's possible but we're pushing the bottleneck downstream. We need to dredge the channels, add terminals."
American Society of Civil Engineers 2017 Infrastructure Report Card: "As ships get bigger, congestion at landside connections to other components of the freight network increasingly hinders ports’ productivity. Similarly, on the water side, larger ships require deeper navigation channels, which only a few U.S. ports currently have."
Bloomberg: “From West Texas pipelines to Oklahoma storage centers and Gulf Coast export terminals, the delivery system for American crude is straining to keep up with soaring production. That’s limiting the industry’s ability to take full advantage of growing worldwide demand.”
Reuters: “The infrastructure to move it abroad is lagging…Analysts are concerned about how quickly the crude terminals at Gulf Coast ports, many initially designed for imports, can shift to handling exports.”
Morningstar: “Although Ports such as Corpus Christi are developing deeper channels and new docks that will accommodate Very Large Crude Carriers (VLCCs) these developments take time and their absence will limit outflows as well as buyer demand.”
Reuters: “Analysts believe operators will start to run into bottlenecks if exports rise to 3.5 million to 4 million barrels a day…If exports do hit a bottleneck, it would put a ceiling on how much oil shippers get out of the country. Growing domestic oil production and limited export avenues could sink U.S. crude prices.”
U.S. Energy Information Administration: “The inability to fully load larger and more cost-effective vessels has pricing implications for U.S. crude oil exports. Using a number of 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.”
S&P Global Platts: “Options for exporting more US crude oil from the burgeoning hub of Corpus Christi, Texas, continue to expand as companies prepare for a flood of crude available to head there within the next year And infrastructure expansion is sorely needed…As the area only has three refineries and two condensate splitters, with a combined capacity of about 795,000 barrels per day, much of the oil that makes its way to the port has to be exported, or transported by water…Some planned infrastructure projects in Corpus Christi have focused on the need to directly load VLCCs that can transport some 2 million barrels of crude…However, until planned dredging of the Corpus Christi main channel is complete, or until a offshore crude export terminal is built, that will be impossible as the bay is too shallow to load VLCCs currently.”
S&P Global Platts: “Looking beyond 2018, limited Permian Basin production takeaway capacity is likely to emerge as the most challenging constraint for producers.”
Texas Alliance of Energy Producers: “Oil production drives the Texas economy and as our member companies continue to increase energy dominance in the global market, TAEP is happy to support projects to transport domestic crude abroad while increasing jobs and economic activity. We support the proposed Deepwater Port License application by Texas Gulf Terminals and look forward to increasing the role of the Permian Basin in the global marketplace.”
Permian Basin Petroleum Association: “The Permian Basin is currently producing over three million barrels per day and is forecasted to double by 2023, jumping to more than six million barrels a day…Because of expected exponential growth, crude oil exports must continue to have access to options and additional access points to ship abroad from Texas port facilities along the Texas Gulf Coast…We are encouraged to see companies like Texas Terminals Inc. and Trafigura increasing avenues and options for future crude exports.”
*Source: Turner, Mason & Company, US Energy Information Administration