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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Texas Oil And Gas Exports Are Booming

Houston

As soon as the export ban on oil - in force since 1973 - was lifted in America, producers started making global expansion plans. Oil was depressingly cheap, production was abundant, and emerging markets demand was growing. Now prices have improved, which has led to production ramp-ups, so there’s even more oil—and gas—for export.

The Gulf Coast is the natural focal point of this expansion. It has two of the ten busiest ports in the world by cargo volume: The Port of South Louisiana and the Port of Houston. Until relatively recently, the Port of Houston was where all the oil action in Texas took place. Now, things are changing, with energy companies expanding along the state’s coast, shunning the busy—and more expensive—big port.

In an extensive analysis of the situation, the Houston Chronicle’s David Hunn notes that companies such as Phillips 66, Occidental Petroleum, and Cheniere Energy, all based in Houston, have opted for export capacity outside the city and its port.

Occidental Petroleum, for example, built a terminal near Corpus Christi where last month it tested a Very Large Crude Carrier, or VLCC – a vessel capable of transporting between 1.9 and 2.2 million barrels of crude. The test was successful , and according to a senior marketing official from Occidental, VLCCs will in the future dock at the company’s terminal, load at 60 percent of capacity, and then be joined into deeper waters by smaller tankers to fill up to 100 percent. Occidental has a pretty wide footprint in the Permian, where production prices are low and the crude is internationally competitive. Related: OPEC Production Spikes – Has The Cheating Begun?

Phillips 66 chose Freeport, another Texas port, for its LNG export terminal, which was completed last year and the first cargo set off in December. LNG exports from the U.S. are on the rise and their reach is expanding globally, which has prompted a race to build export terminals. Recently, authorities approved the first floating LNG terminal, off the Louisiana coast: Delfin LNG, with an annual export capacity of 13 million metric tons.

And that’s not all. The port of Brownsville is also gaining a lot of attention from the energy industry: three LNG plants have already been planned for construction there and the port’s management has requested approval from Congress to increase the depth of its ship channel to 52 feet from the current 42.

Meanwhile, the Port of Houston, despite congestion and high prices, is not doing too badly. Earlier this week, SemGroup Corp., a pipeline and storage provider, agreed to spend more than US$2 billion on the acquisition of Houston Fuel Oil Terminal Company. The target owns one of the largest oil terminals on the Gulf Coast, with a capacity of 1.68 million barrels, located on the waterfront of the Houston Ship Channel. Though the deal was seen by some as too expensive, the company’s CEO told the Houston Chronicle that it was worth it for a presence in the Ship Channel.

At the moment, Cheniere Energy is building another export facility, this time in Portland, Texas. Worth US$13 billion, the terminal will span 2,000 acres with two docks.

The rush for export capacity seems unstoppable, especially now that international oil pries have stabilized around US$50 and despite a persistent glut on the LNG market. Thanks to all this, the face of the Gulf Coast is changing, and it is changing fast.

By Irina Slav For Oilprice.com

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