Page 7 - NorthAmOil Week 02

NorthAmOil COMMENTARY NorthAmOil
scrambling to accommodate higher volumes. However, according to Genscape, a market intelligence provider, this additional crude has been absorbed following the addition of almost 2mn bpd of inbound pipeline capacity and 5mn barrels of storage capacity in Cor- pus Christi in 2019. A further 18mn barrels of storage capacity were reported to be under construction in the Corpus Christi area in the
week up to January 3.
Infrastructure expansion
Meanwhile, an expansion project is underway at the Port of Corpus Christi to enable it to accom- modate larger vessels. And a number of com- panies have proposed crude export terminals, mainly offshore, that would have the capacity to fully load very large crude carriers (VLCCs). These super-tankers can transport up to 2mn barrels of oil, and offer economies of scale that are attractive for delivering US crude to des- tinations that are further away, such as Asian countries.
Not all of these proposed export terminals will go ahead – and those that do are still several years away from start-up – but several applica- tions to build such projects have been lodged with regulators and are now under review. The US Maritime Administration (MARAD) oper- ates on a 356-day timetable for issuing deepwa- ter port licences, but there have been warnings that applications could encounter delays. The US Coast Guard can recommend that MARAD stop the clock on the process if there is an issue, and such pauses can drag out the timeline for reg- ulatory approvals to be granted. Environmental concerns or insufficient information provided are among potential reasons for pauses to the regulatory approval process.
In addition to potential regulatory headaches, the crowded field competing to build crude export projects is putting off some of the par- ticipants involved. In October, Carlyle Group, a private equity firm, said it had dropped out as a stakeholder in the proposed Lone Star Ports terminal, planned for the Corpus Christi area. Regulatory delays and strong competition from a rival project being developed in the same area by Trafigura are thought to have played a part in Carlyle’s decision.
This pullback from oil export terminals amid intensifying competition is also evident beyond the Corpus Christi area. In early January, Cal- gary-based Enbridge withdrew its application to build the Texas COLT project offshore Freeport, Texas. The move is being made so the company can focus on jointly developing another nearby port project, the Sea Port Oil Terminal (SPOT) offshore Houston, with Enterprise Products Partners.
The SPOT project has already advanced fur- ther thanks to long-term agreements with Chev- ron, which is expanding its oil production in the Permian Basin. Indeed, Enterprise announced a final investment decision (FID) on the SPOT project in July, even though the facility still needs to obtain regulatory approval from MARAD.
Enbridge said, however, that it would con- sider re-filing the application for Texas COLT or a similar project in the future if market demand for additional export capacity were to grow.
The race to build export terminals playing out currently comes as US crude output continues to grow. However, given the timelines involved and the expectations of a slowdown in produc- tion growth, it would not be surprising if more players proposing new crude infrastructure back out over the next year or so.™
This pullback from oil export terminals amid intensifying competition is also evident beyond the Corpus Christi area.
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