With geopolitical and macroeconomic influences making for some appealing oil prices, U.S. crude exports continue to exceed projections. Last year, nationwide crude exports averaged 2 million barrels per day, up 72% from 2017. Currently, four-week crude oil exports are averaging 3.165 million barrels per day, hovering between 2.5 million b/d and 3.2 million b/d since February, according to the EIA.
Eighty percent of the nation’s crude oil ships out of the Texas Gulf Coast. Right now, the US Gulf Coast’s crude export capacity is approaching 6 million b/d, and as U.S. production increases, so does the need for Gulf Coast infrastructure.
A 50:50 joint venture between Phillips 66 and Plains All American Pipeline LP has just confirmed plans to construct the Red Oak Pipeline system – a $2.5 billion pipeline set to transport crude from Cushing, Oklahoma and the Permian to export facilities in Houston, Beaumont, Corpus Christi and other Gulf regions.
How does the Gulf distribute all this crude? The majority ships out of the Houston Ship Channel. The Port of Houston nearly tripled its crude export volumes over the past two years, exporting over 700,000 barrels per day in 2018. For comparison, Beaumont exported 460,000 barrels a day last year where as Corpus Christi exported some 440,000 barrels a day.
Simply put, the Houston Ship Channel is among the best suited in the Gulf to handle our globe’s largest tankers. The shallow Corpus Christi port makes loading the larger supertankers with 2 million-barrel capacities difficult. In fact, there’s only one U.S. export facility is capable of loading 2 million-barrel supertankers – the Louisiana Offshore Oil Port. And last year, Louisiana and Mississippi combined shipped only around 250,000 barrels of crude per day.
This means new export terminals along the Houston Ship Channel are in high demand. But there’s a catch. Congestion along the highly active Houston Ship Channel is getting rough. As crude tankers traverse the channel, they face 150-foot wide container ships, one-way traffic, and channel shut-downs, potentially resulting in millions in lost revenues.
Many are considering constructing crude oil export facilities around the mouth of the channel as a potential solution. For example, export facility locations south of the convergence of the five waterways would prevent the need for tankers to traverse the channel itself, evading the congestion, offering safer, economical alternatives, and lessening environmental impact.
Meanwhile, Texas legislators are working to implement new laws aimed at easing traffic in the Houston Ship Channel by addressing two-way traffic shutdowns, and other controls over channel traffic. You can learn more about Houston’s role in our Export Nation in my new book - Giant Shifts - Energy Trends Reshaping America's Future.