US CRUDE EXPORTS: REbALAnCIng ThE gLObAL mARkET

Transcription

US CRUDE EXPORTS:
rebalancing the global market
OIL SPECIAL REPORT
January 2016
Luciano Battistini, Managing Editor (Crude), Americas
www.platts.com/oil
OIL
SPECIAL REPORT: OIL
US CRUDE IMPORTS/EXPORTS BALANCE – A NEW WORLD ORDER
Nine hours to the end of 2015, an oil tanker called the Theo T set sail away from US shores from the NuStar North
Beach terminal in Corpus Christi, Texas.
Destined for Europe, the tanker had begun many voyages
departing from US ports before. This time, however, it found itself
in unchartered waters: The Theo T carried US crude oil after four
decades of restrictions that kept most US crude grades from being
part of the global oil trading equation.
On December 18, 2015, the US government passed the 2016
spending bill, which included a provision lifting restrictions on
crude oil exports, thus ending the quasi ban on US crudes in the
global market. The move came as a surprise to many observers.
Conventional wisdom had held that any serious effort to
remove the export ban would lead to political gridlock, and the
restrictions largely had been expected to continue indefinitely.
With the political hurdle now cleared, US crude exports are solely
dependent on economics, which are currently not in their favor,
considering the tight spread between ICE Brent and NYMEX light
sweet (WTI) crude oil futures.
US crude imports, on the other hand, seem to have replaced
recent declines in US domestic production. Imports climbed
during the second half of 2015 as crudes related to ICE Brent
futures contracts pricing became more attractive due to
PART 1: US CRUDE IMPORTS & STOCK BUILD
US crude stocks reach new record highs
US crude production shrinks from the June 2015 peak
US crude imports increase year on year
Before discussing possible outcomes and impacts of US crude
oil exports, it is important to understand the current state of
the US domestic crude balance. The economic conditions that
brought on the crude glut seen in 2015 remain in place and have
actually intensified.
The recent global oil price collapse has shown to have had
some impact on the resilient US crude oil production volumes.
After years of impressive incremental production growth, total
US crude oil production stood at 9.2 million b/d in January, a
slight decrease from the four-decade peak of 9.6 million b/d
seen in June 2015.
Crude imports during the first three weeks of 2016 averaged
7.86 million b/d, bringing domestic crude oil supply to 17.06
million b/d, which is still under the US total refining nameplate
capacity of 18.125 million b/d. However, US refineries processed
about 95% of the US total domestic supply, allowing crude oil
stocks to continue to build.
US commercial crude stocks stood at 495 million barrels in
January, a new record high, representing 74% of adjusted
working US storage capacity utilized, and if 2016 continues the
crude oil stocks incremental trend seen in recent years, this
Copyright © 2016 by Platts, McGraw Hill Financial
2
the narrower Brent/WTI spread. At the same time, a deep
contango created the economic incentive to store crude as
the market continues to be awash with oil.
Nevertheless, the option to export US crudes is expected
to help bring balance to the global market and chip away at
US crude discounts that reflected destination restrictions.
Before the year ended, Swiss oil trader Vitol had already
found an economic opportunity to export two cargoes of US
crude, the first aboard the Theo T as mentioned above, and
the second on a vessel called Angelica Schulte, which set
sail towards Europe during the first week of 2016 from an
Enterprise Products Partners oil terminal in Houston, Texas.
The export of these cargoes despite a tight Brent/WTI spread
suggests that the market will need to look beyond the spread
when considering the opportunities for placing US crudes
in a global market. In this two-part special report, we will
examine current market conditions regarding US crude
imports and exports, along with potential export channels
and destinations, as the world accommodates yet another oil
producer in the marketplace.
figure should continue to increase in months to come. During
the last four years, the growth from the fourth quarter of one
year to the second quarter of the next year has averaged 13%,
at which pace US crude stocks could reach 550 million barrels
by this spring.
BRENT’S PREMIUM TO WTI FADES
AND US CRUDE IMPORTS RISE
The ICE Brent crude futures premium over NYMEX WTI that
has been the norm for the last few years is eroding and the
relational value of the two futures contracts has recently
inversed multiple times.
The fading Brent premium to WTI changed the dynamics of
global crude economics. As Brent’s premium began to wane
in March, WTI-based crudes started to lose their economic
advantage against Brent-based crudes, and thus waterborne
imports became more attractive for US refiners. Even
though crude imports in 2015 were 64,000 b/d less than in
2014, crude imports in January averaged 7.86 million b/d, a
480,000 b/d year-on-year increase, helping offset a similar
estimated domestic production loss since the June 2015
peak at 9.6 million b/d.
The rapid growth in US domestic light crude oil production has
in recent years allowed favorable pricing for refiners as these
domestically produced grades were more competitive against
waterborne imports of similar crude oil grades. At current
price levels, the US market is largely still seen as a refiner’s
(buyer’s) market but whether that holds for the rest of the
SPECIAL REPORT: OIL
TOP ORIGINS OF INCREASED US CRUDE IMPORTS
BRENT’S PREMIUM TO WTI FADES
2
($/b, WTI brent swaps spread)
3.5
0
3.0
-2
2.5
-4
22- Month High
Angola
Equador
Nigeria
Iraq
Venezuela
Saudi Arabia
2.0
-6
1.5
-8
1.0
-10
0.5
-12
-14
(million b/d)
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
0.0
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Excluding Canada
Source: EIA
Source: Platts
A higher value for ICE Brent futures contracts over NYMEX light sweet
crude (WTI) futures has generally made US crude more economically
advantageous for US refineries to process than similar foreign grades.
But when WTI gains on Brent, waterborne crude imports to the US tend to
increase as those crudes become competitive.
year will largely depend on the ability of refinery margins
to remain positive. Refinery utilization rates for January
averaged at 90.42%, slightly higher than year ago levels;
however, refinery margins for light crudes are lower as the
crude oil glut becomes a refined products glut.
US Gulf Coast refiners have in recent years been importing
increasing volumes of heavy crude oil as this type of crude
oil is not part of the US shale production boom equation
and, depending on refinery margins, may at times be more
economical to run in complex refineries like those in the US Gulf
Coast. Most of the incremental crude oil imports during the last
quarter of 2015 have originated in Canada, Saudi Arabia and Iraq,
and to a lesser extent Venezuela, Nigeria, Angola and Ecuador.
CANADA CONTINUES TO INCREASE
US CRUDE OIL MARKET SHARE
US imports of Canadian crude have averaged almost 3
million b/d in 2015, an 11% increase from 2014. In recent years,
improvements to crude infrastructure have allowed Canadian
crude to reach US Gulf Coast refiners with more ease. Pipeline
flows from the US Midwest to the Gulf Coast have nearly
doubled year on year, to a level matching one-third of total
imports of Canadian crudes. The improved infrastructure
has likewise permitted crude oil at Cushing, Oklahoma, the
delivery point for the NYMEX light sweet crude contract, to
move south towards Houston and Louisiana refineries – a vital
dynamic that has helped close the Brent-WTI value spread.
SAUDI ARABIA & IRAQ CRUDE
INCREASE PRESENCE IN US MARKET
Though still below historic levels, imports from Saudi Arabia
and Iraq at the end of 2015 jumped 55% year on year as crudes
destined for the US have been set at increasingly discounted
official selling prices.
SAUDI ARABIA AND IRAQ OSPS TO THE US
0
($/barrel)
-1
-2
-3
-4
-5
Basrah heavy
Arab heavy
-6
-7
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Source: Platts
CANADIAN CRUDE MOVEMENTS IN THE US MARKET
3.5
WAF IMPORTS CORRELATION TO BRENTWTI
(million barrels)
PADD II to PADD III
1000
US imports of Canadian crude
3.0
(’000 b/d)
(%)
West African imports (left)
WTI/brent swap (right)
25
800
20
600
15
400
10
200
5
2.5
2.0
1.5
1.0
0.5
0.0
0
May-13
Jan-14
Sep-14
May-15
Source: EIA
3
Jan-16
Jan-13
Aug-13
Mar-14
Oct-14
*WTI/ Brent swap as a percentage of WTI outright value
Source: EIA, Platts
May-15
0
Dec-15
SPECIAL REPORT: OIL
US CRUDE PRODUCTION
10.0
M1M2 CRUDE CONTANGO STRUCTURES
(b/d)
9.5
4
EIA monthly
EIA weekly
Bentek
(%)
WTI contango M1/M2
Mars contango M1/M2
Brent contango M1/M2
LLS contango M1/M2
2
9.0
0
8.5
-2
8.0
Jan-14
-4
WTI contango depth
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Source: EIA
Note: Percentage is based on front-month to second-month spread value, compared to the
outright value of the front-month.
Source: Platts
CRUDE IMPORTS
PADD III CRUDE STOCKS
5
(b/d)
260
(million barrels)
(million barrels)
240
4
Iraq
Angola
Nigeria
Saudi Arabia
3
260
240
27%
220
220
200
200
180
180
2
1
0
160
Jan-96
Jan-00
Jan-04
Jan-08
Jan-12
Jan-16
5-year avearage
5-year min-max
140
Week 2
Week 12
Week 22
160
2016
2015
Week 32
140
Week 52
Week 42
Source: Platts
Source: EIA
KEY PADD III REFINERY NETBACK MARGINS
WEST AFRICA CRUDES
FIND OPPORTUNITIES IN US MARKET
Imports of West African crudes have also recently increased.
Angolan crude exports to the US in fourth-quarter 2015 were the
highest since third-quarter 2013, while US imports of Nigerian
crude have not been higher since the second quarter of 2014.
US shale production declined by some 417,500 b/d from the
March 2015 peak to December, according to the EIA’s Drilling
Productivity Report, a sign that the OPEC strategy to take back
US market share from shale producers may be working.
US CRUDE STOCKS BUILD TO FRESH RECORD HIGHS
US GULF COAST
2015 ended with crude economics that were favorable for stock
builds, and this is expected to continue into 2016, particularly in the
USGC. The WTI contango in December was at its strongest in at
least five years as a percentage of the flat price of crude oil, making
a storage play in the Americas attractive. In the US Gulf Coast,
crude oil stocks in 2015 soared 27% higher, compared to the fiveyear average and have neared fresh new record highs in January.
US ATLANTIC COAST
Crude stocks in PADD I averaged 15.6 million barrels in 2015,
36% higher than the five-year average. This increase is
attributable to crude-by-rail movements from the US Midwest,
from where Bakken and some Canadian crude grades are
4
30
($/barrel)
2015 vs 2016
WTI USGC crack
LLS USGC crack
25
Focal point
WCS USGC coking
Mars USGC crack
20
15
10
5
0
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
Source: Platts, Turner Mason
PADD III REFINERY UTILIZATION RATES
100
(% utility rates)
2015 vs 2016
95
90
87%
85
83%
80
Jan-15
Apr-15
Jul-15
Oct-15
Note: Refinery utilization rates are significantly below year ago levels
Source: EIA
Jan-16
SPECIAL REPORT: OIL
PADD I CRUDE STOCKS
ANS MOVEMENTS TO US WEST COAST
($)
20
($)
2016 (right)
2015 (right)
18
5-year average (right)
5-year min-max(left)
20
18
16
16
14
14
12
12
10
10
8
Week 2
Week 12
Week 22
Week 32
Week 42
8
Week 52
('000 b/d)
400
300
Benicia, WA
Samish, WA
San Francisco, CA
Port Angeles, WA
Anacortes, WA
Richmond, CA
Los Angeles /
Long Beach, CA
200
100
0
Apr-14
Sep-14
Feb-15
Jul-15
Dec-15
Source: Platts cFlow
Source: EIA
ECUADOR, ESPO, PERSIAN GULF CRUDE MOVEMENTS
TO US WEST COAST
PADD II TO PADD I CRUDEBYRAIL MOVEMENTS
500
('000 b/d)
900
Up 19% 2015 over 2014
('000 b/d)
400
18-Month High
600
300
ESPO to USWC
Ecuador to USWC
Persian Gulf to USWC
200
300
100
0
Mar-13
Aug-13
Jan-14
Jun-14
Nov-14
Apr-15
Sep-15
Source: EIA
15
Jul-14
Jan-15
Jul-15
Jan-16
KEY PADD I REFINERY NETBACK MARGINS
20
0
Jan-14
ANS VS WTI CMA CORRELATION TO WTIDUBAI
($/barrel)
20
Bakken USAC crack
Bonny Light USAC crack
Hibernia USAC crack
2015 vs 2016
($)
WTI-Dubai swaps
ANS divd. USWC vs WTI CMA M+1
10
10
0
5
-10
0
-5
Jan-14
-20
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Source: Platts, Turner Mason
Source: Platts
shipped. Crude-by-rail movements were 12% higher than yearago levels, averaging 404,102 b/d from January to November,
with a peak at 472,467 b/d in May. Crude oil imports into the US
Atlantic Coast dropped marginally to 649,000 b/d.
Bakken crude, on the other hand, saw its US Atlantic Coast
refinery netback margins near and below breakeven levels
during the fall and into the winter. The rail cost to ship Bakken to
US Atlantic Coast refineries is approximately $8-10/b, and offers
of the grade into the region have been at multi-dollar premiums
to front-month ICE Brent crude futures, which seems to not be a
competitive level versus delivered cargoes from offshore fields
in East Canada and other overseas origins.
US Atlantic Coast refinery cracking netback margins, however,
are mixed, with those for Bakken and Bonny Light below year-ago
levels, while margins for Hibernia are higher. Prices for Hibernia,
along with other offshore East Canadian crude grades, came
under downward pressure due to the recently expanded and
reversed Line 9 crude pipeline, which now delivers competing,
mostly light sweet Canadian crude from Sarnia, Ontario, to
refineries in the Montreal area of Quebec.
5
US WEST COAST
In the US West Coast, crude imports are also likely to continue. The
frontline WTI-Dubai swap spread was recently at its widest since
July 2010, such that WTI-based crudes became less competitive in
SPECIAL REPORT: OIL
Asia. The arbitrage for Ecuadorean crudes to Asia remains mostly
closed, making the US West Coast the prime destination for those
grades. At the same time, the West Coast is taking increased
volumes of Dubai-based crudes like Oman and the occasional
Russian Eastern Siberian Pipeline Oil (ESPO) crude barrel.
6
As a result, Alaska North Slope crude oil has up until recently been
weakening in order to stay competitive in the US West Coast. ANS
averaged at the calendar month average of the January NYMEX
light sweet crude futures contract minus 59 cents/b in December,
its lowest differential since September 2010.
SPECIAL REPORT: OIL
PART II: US CRUDE EXPORTS
The US produces about 9.2 million b/d of crude oil, 5.5 million
of which is light crude oil (35-50 API). The most notable
production areas include the Williston basin, which is mostly
Crude Price Comparison
North Sea
Dated Brent Oseberg
West Africa
Bonny Light FOB Nigeria
NYMEX @ Cushing , OK
WTI Midland, TX
USA
Light Houston Sweet (WTI Houston)
Eagle Ford Condensate @ Houston Bakken @ Williston, ND
Bakken @ US Atlantic Coast
located in North Dakota, and the Permian and Eagle Ford
basins, which are mostly located in Texas. Together, the
three produce the typically more-valuable light and sweet
crudes, which are now free to fetch better premiums in the
international market.
Value
$33.11/b
$34.815/b
$34.97/b
$33.73/b
$33.43/b
$34.48/b
$32.28/b
$30.74/b
$37.11/b
API Gravity
37.5
37.8
35
38-42
38-44
38-42
Mid 50s
38-42
38-42
Loading/Delivery
10 Days – full month-ahead forward
10 Days – full month-ahead forward
25-55 days forward
Front month, US pipe shipping schedule
Forward month
Front month, COLC shipping schedule
Front month, COLC shipping schedule
Source: Platts (Assessment Date: Dec. 24, 2015)
Canada had already been importing about 500,000 b/d of
US crude oil prior to the lifting of export restrictions, and
that is expected to continue. In addition, the US has allowed
the exportation of processed condensate since April 2014.
US condensate has tended to be used in processing plants
configured for ultra-light crudes.
EUROPE
Aside from Canada, Europe has imported the lion’s share of
US processed condensate. Oil trading company Vitol owns
a 68,000 b/d refinery in Cressier, Switzerland and Koch
Industries owns a condensate splitter in The Netherlands
where a significant amount of US processed condensate has
been sent.
US EXPORTS OF CONDENSATE EXCLUDING CANADA
2.0
(’000 b/d)
1.5
Latin America
Asia
Europe
1.0
0.5
ASIA
It has also been reported that Japan’s Cosmo Oil and JX Nippon
Oil & Energy have each bought US crude and condensate since
the export restrictions were lifted, in order to conduct test runs
in Asian refineries and processing facilities. The volumes were
bought in combined cargoes close to 1 million barrels in volume,
signaling that the economics of loading multi-crude grades in
larger cargoes may work in that region.
LATIN AMERICA / CARIBBEAN
Neighboring countries should be able to reap the benefits of
US crude exports. Already Venezuela’s PDVSA has bought a
US crude cargo delivered into the 335,000 b/d Isla refinery in
Curacao at a $3.96/b premium to the NYMEX light sweet crude
futures contract. Mexico’s Pemex has long wanted to import
light crudes from the US, with the intention of blending them
with Mexican grades to increase production of gasoline and
distillates in three refineries that are configured for cracking.
Latin American and Caribbean countries have been importing
increasing volumes of light crude oil, mostly from West Africa –
the same grades that were previously largely displaced in the US
by domestic shale crude output. The same displacement also
occurred in Canadian markets that had access to US crude.
TANKERS MOVEMENTS FROM MEXICO TO
US GULF COAST OIL TERMINALS AND REFINERIES
Mississippi
0.0
UNITED STATES
May-14 Aug-14
Nov-14
Feb-15
May-15 Aug-15
Nov-15
Texas
Alabama
Louisiana
Source: EIA (April 2015-September 2015)
Gulf of Mexico
EXPORTS BY COUNTRY
MEX ICO
Switzerland
Spain
Netherlands
Korea
Italy
Singapore
France
China
Brazil
India
Germany
0
5
10
15
20
25
30
Source: Platts
7
35
35%
13%
13%
11%
8%
5%
4%
4%
4%
2%
1%
Atlantic Ocean
Pacific Ocean
Source: Platts cFlow tanker movements from Mexico’s Altamira and Dos Bocas ports
to Houston, Texas, Texas City, TX, and Offshore Galveston, TX
SPECIAL REPORT: OIL
CRUDE TANKERS MOVEMENTS FROM WEST AFRICA TO CARIBBEAN DESTINATIONS
Gulf of Mexico
Grand Bahama (BORCO)
300
(tankers)
Kingston
Puerto La Cruz
Bonaire
Cartagena
St. Lucia
Aruba
Bullen Bay
Covenas
Jose terminal
Willemstead
St. Eustatius
Point a Pierre
Atlantic Ocean
250
200
St. Eustatius
Caribbean Sea
Cartagena/Covenas
Curaçao
(Willemstead, Bullen Bay)
Bonaire
Point-e-Pierre
Aruba
Panama Canal
Chiriquí Grande
Jose Terminal
Puerto La Cruz
150
100
50
0
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Puerto Armuelles
Pacific Ocean
Crude Tanker movements from Mexico to US Gulf coast (b/d)
Date
Texas City
Texas CityHoustonHouston
Off Galveston
Off Galveston
to Altamira
to Dos Bocas
to Altamira
to Dos Bocas
to Atamira
to Dos Bocas
Oct-14 25.1075
028.908921.618339.345687.6003
Nov-14 14.7561
0
067.450130.391722.2955
Dec-14 15.131221.668714.8989
074.127464.8398
Jan-15
037.7733
053.945526.9066101.336
Feb-15
0
013.897771.879713.897722.5439
Mar-15
0
030.085123.7076
023.7076
Apr-15
058.090228.506893.034928.7581313.494
May-15
054.041227.6672185.36727.6672304.818
Jun-15 54.322862.4609
0216.34922.7501404.467
Jul-15 14.898941.053230.3499207.53544.8951292.312
Aug-15 14.923321.9429 14.808153.22514.9233355.445
Sep-15
022.362612.9898136.922
0214.339
Oct-15 12.536977.975742.6296112.665 52.627154.705
nov-15 14.7561
0
047.972629.6924246.778
Dec-15
0
023.0232230.75723.0232203.996
MEXICO
Pemex owns and operates six refineries in Mexico with a combined
nameplate capacity of 1.7 million b/d, significantly lower than its
domestic crude oil production, which averaged 2.3 million b/d in
2015. However, Mexico’s crude oil production is predominantly
heavy, which as causes a mismatch as these refineries are
designed to take primarily the country’s own light and extralight domestic crude oil grades, called Isthmus and Olmeca,
respectively. These crudes are produced in the offshore Litoral de
Tabasco field and onshore in Mexico’s southeastern states.
On October 22, the US agreed to a proposal to exchange up
to 75,000 b/d of crude oil with Mexico, an agreement that is
now obsolete. Nevertheless, Mexico had initially proposed to
exchange 100,000 b/d, which may lend itself as a good starting
figure for US-Mexico crude movements.
Oil tanker movements between US Gulf Coast and Mexican
ports are already common, as Mexico exports heavy Mayan
crude to US Gulf Coast oil terminals and refineries. This
makes Mexico well-positioned to receive preferential freight
rates for tankers carrying US light crude oil on the backhaul
to Mexican shores.
8
Mexico is likely to consider US crude grades such as West Texas
Intermediate, West Texas Sour, Light Louisiana Sweet, and Mars.
CARIBBEAN
US crude could be used in blending operations in the Caribbean,
where oil companies have been importing West African crude.
US light crudes are likely to be competitive due to their similar
specifications and their proximity.
SOUTH AMERICA
Venezuela has been importing West African crudes, blending
them in Caribbean terminals for refinery consumption, and plans
to expand operations to import light grades to blend with its
heavy crude oil in order to continue to meet its current crude oil
export volumes. Current oil market conditions have forced the
country to delay building six crude oil upgraders, instead opting
for light crude imports as the most economically sensible option
in the short term. PDVSA may consider importing US light crudes
such as Eagle Ford as part of its strategic planning, and even
though the offers may be interesting, PDVSA will still need to
make sure any newly introduced light crude is appropriate for
the dilution operations in the production of heavy crude oil in the
country’s Orinoco Belt.
SPECIAL REPORT: OIL
Either way, the country stands to benefit from US exports since
the availability of Eagle Ford crude may cause West African
crude differentials to weaken. In addition, the introduction of US
light crudes into market should theoretically strengthen their
differentials, widening the price spread between light and heavy
grades (LLS versus Mars), giving US refiners incentive to run
heavier crudes – which in turn would benefit Venezuela’s heavy
crude values.
US CRUDES POSSIBLE ROUTES TO ECUADOR
UNITED STATES
Atlantic Ocean
Gulf of Mexico
Caribbean Sea
Colombia imported about two cargoes of light sweet crude
oil each month during the fourth quarter of 2015 for the
recently modernized Cartagena refinery REFICAR. The
country imported four 400,000-barrel cargoes of Bonny
Light and two 400,000-barrel cargoes of Varandey. US shale
oil could be a direct competitor to those barrels.
Panama Canal
Chiriquí Grande
Puerto Armuelles
PA NAMA
Pacific Ocean
Esmeraldas
Ecuador has an outstanding tender to import up to 30 million
barrels of crude oil with a gravity of 28 API in 2016. Now with US
crude in play, it could look to take its share of US light crude oil.
9
ECUA DOR
SPECIAL REPORT: OIL
FACT BOX: MAIN EXPORT TERMINALS
US Gulf Coast: Corpus Christi, Houston/Galveston,
Nederland/Port Arthur, LOOP/NOLA
Now that they are allowed, US crude exports may include such grades
as Eagle Ford, WTI, West Texas Sour and Bakken, alongside exports of
Canadian heavy crudes such as Western Canadian Select and Cold Lake.
US Gulf Coast refineries receive crude oil from multiple locations in
the US and Canada. Infrastructure development over recent years has
allowed for a reversal of historical crude flows. While the focus used
to be on moving crude imported into the US Gulf Coast north to the
country’s Midwest refineries, pipelines now ship in the reverse direction,
allowing both US and Canadian crudes to flow towards Gulf Coast oil
refineries and terminals.
Logistical restrictions may limit US crude exports, however. Since the US has
largely been a crude-importing country, it is not set up for large-volume exports.
For example, only one US Gulf Coast terminal is able to offload Very Large Crude
Carriers (VLCCs), and it is not set up to load them. A number of US Gulf Coast
terminals can accommodate medium-range vessels of about 500,000 barrels
maximum, so volume economics will lend an advantage to crudes exported
from overseas oil terminals able to accommodate anything larger.
MAJOR CRUDE PIPELINE CONNECTIONS TO US GULF COAST AREA TERMINALS AND REFINERIES
Aggregated crude pipeline capacity
(Permian, Eagle Ford basins,
and Cushing, OK): 2.175 million b/d
Refineries
Port Arthur/Nederland
Motiva (610,000 b/d)
ExxonMobil (359,000 b/d)
Valero (310,000 b/d)
Total S.A. 174,000 b/d
Houston
Valero (90,000 b/d)
LyondellBasell (268,000 b/d)
Petrobras
(100,000 b/d)
New
Mexico
Shell (327,000 b/d)
ExxonMobil (561,000 b/d)
Texas City/Galveston:
Marathon (460,000 b/d)
Marathon (80,000 b/d)
Total 3.584 million b/d
UNITED STATES
Plains All American Basin (450,000 b/d)
Enterprise Eagle Ford (350,000 b/d)
Magellan Longhorn (275,000 b/d)
Magellan/PAA Bridgetex (300,000 b/d)
Sunoco West Texas Gulf (300,00 b/d)
Sunoco Permian Express phase 1 (150,000 b.d)
Enterprise Seaway (850,000 b/d)
Transcanada Gulf Coast (700-300,000 b/d)
Arkansas
Shell Houston-to-Houma (350,000 b/d)
Exxonmobil Pegasus (95,000 b/d)
Kinder Morgan KMCC (300,000 b/d)
Louisiana offshore oil port (300,000 b/d)
Cactus (330,000 b/d)
Plains All American/ Enterprise
Eagle Ford JV (470,000 b/d)
Permian basin
Eagle ford
Port
Cushing
Oklahoma
Texas
Wichita
Falls
Wichita
Falls
Colorado City
Odessa
Midland
Corsicana
Louisiana
Crane
Texas City
McCamey
Houston
New Orleans
Nederland
Lake Charles
Lissy
Freeport
M E X I CO
Gardendale
Corpus Christi
Source: Platts
10
Houma
Three Rivers
Gulf of Mexico
SPECIAL REPORT: OIL
Crude Oil Storage Capacity at USGC Terminals
Facility
Louisiana Offshore Oil Port (LOOP)
International-Matex Tanker Terminals (IMTT)
NuStar Energy LP
Plains All American Pipeline, LP
Location
Clovelly
St. Rose
St. James
St. James
Capacity (million barrels)
58
16.3
11
8.3
Facility
Enterprise Crude Houston Oil (ECHO)
Enterprise Oil Tanking (OTI)
Enterprise Oil Tanking Appelt (OTI)
Magellan East Houston
5.25
8.4
6.9
4.8
Crude Stocks at Other USGC Terminals
USGC Area
Port Arthur-Beaumont-Nederland
Corpus Christi
41.5
19
Source: Platts, Houston oil terminal analysis
CONDENSATE PIPELINE FLOWS CORRELATION TO LLSBRENT SPREAD
500
400
('000 b/d)
($)
LLS X brent (right)
KMCC (left)
Rancho flows (left)
2
CONDENSATE PIPELINES
100
-2
200
-4
0
Oct-14
Feb-15
Jun-15
Oct-15
-8
Source: Platts, analysis from Houston-area terminals
HOUSTON, TEXAS
Texas ships about 90% of all US condensates exports, most
of which come from the Enterprise Texas City and Oiltanking
terminals in Galveston Bay, near the Houston Ship Channel.
Flows of Eagle Ford crude and condensate shipped to Houstonarea terminals through the 340,000 b/d Enterprise Rancho pipeline
and the 300,000 b/d Kinder Morgan Crude & Condensate pipelines
have moved directionally with the front-month LLS-Brent futures
spread more times than not, with volumes rising as the LLS’ value
increased compared to Brent (Rancho 55% of the time, KMCC
71%). Values of Eagle Ford condensate for export from Houstonarea terminals have been quoted as discounts to LLS so as LLS’s
value against Brent increases, Eagle Ford condensate differentials
to LLS must weaken to stay competitive in the European market.
100
50
0
0
-50
KMCC (left)
LLS vs Brent (left)
Rancho (right)
-6
Jun-14
270%
257%
-50
100
(%)
50
0
300
(%)
-100
Feb-14
Jun-14
-2192%
-110%
Oct-14
Feb-15
Jun-15
-100
Oct-15
Source: Platts data applied to a third-party analysis attributable to a
Houston-area oil terminal
PLATTS LIGHT HOUSTON SWEET LHS VERSUS LOUISIANA LIGHT SWEET
2
($)
0
-2
-4
-6
-8
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Source: Platts
PLATTS LIGHT HOUSTON SWEET LHS CORRELATION TO WTI PIPELINE FLOWS
600
('000 b/d)
($)
('000 b/d)
($)
4
1200
500
3
1000
400
2
800
2
300
1
600
1
0
400
0
-1
200
-1
200
LHS vs WTI (right)
Bridge Texas (left)
Longhorn (left)
100
0
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
-2
0
Oct-13
LHS vs WTI (right)
Seaway Twin (left)
Seaway (left)
Feb-14
Jun-14
3
Oct-14
Feb-15
11
4
Jun-15
-2
Oct-15
SPECIAL REPORT: OIL
PLATTS LIGHT HOUSTON SWEET (LHS)
VERSUS LOUISIANA LIGHT SWEET
Trading activity for the WTI Midland crude grade delivered
into Houston terminals has increased over recent months,
and the pricing point has accurately reflected supply/demand
fundamentals of Houston-area refineries. A week after the news on
12
the US crude export legislation, Platts Light Houston Sweet (LHS)
traded at a premium to LLS for the first time since October 2013.
In addition, there has been a strong correlation between pipeline
flows in BridgeTex and Seaway Twin to Houston and movements in
the LHS differential to WTI at Cushing.
SPECIAL REPORT: OIL
HOUSTON-AREA TERMINALS
1
2
3
2
3
1
4
5
5
6
6
7
4
Houston
8
8
7
11
9
16
13 14
15
Texas
10
9
12
10
11
17
12
13
18
14
20
15
19
16
21
17
22
18
19
20
21
23
22
24
23
24
25
26
25
27
27
28 29
30
28
29
26
30
Magellan / PAA BridgeTex (300,000 b/d)
Magellan’s Longhorn (275,000 b/d)
TransCanada Houston lateral (700,000 b/d)
East Houston terminal (4.4 million barrels)
Moore Road junction
Shell’s Ho-Ho pipeline (350,000 b/d)
Seaway Galena Park (1.2 million barrels)
Magellan Galena Park (12.5 million barrels)
Oil Tanking Houston terminal (12 million barrels)
Magellan Channelview (120,000 barrels)
HFOTCO (3.2 million barrels)
ExxonMobil Baytown (561,000 b/d)
Valero (90,000 b/d)
LyondellBasell (268,000 b/d)
Speed junction
Petrobras Pasadena (100,000 b/d)
Shell Deer Park (327,000 b/d)
OTI/Deer Park junction
Seaway (850,000 b/d)
Morgan’s Point (2 million barrels)
Genoa junction
ECHO terminal (6 million barrels)
Seaway Jones Creek to ECHO lateral (850,000 b/d)
Webster/Anahauc Junction
Jones Creek terminal (2.6 million barrels)
Phillips 66 (247,000 b/d)
Marathon Galveston (460,000 b/d)
Marathon TXC (80,000 b/d)
Seaway terminal (4.2 million barrels)
Source: EIA, Platts, company websites
HOUSTON TERMINALS
HOUSTON-AREA TERMINALS
US crude exports from Houston-area terminals will likely continue.
Below is a list of some of the terminals from where processed
condensate exports have originated or which will have the
capability to export crude oil in the near future.
Terminal
11 million barrels of storage capacity
Dock 1: (Vessels, Barges –Clean and
Crude)
Draft: 40 ft.; Beam: 160 ft.; Length
Overall: 860 ft.
(DWT – 128,000 tons)
Crude)
Overall: 900 ft.
(DWT – 160,000 tons)
Crude)
Overall: 950 ft.
(DWT – 160,000 tons)
Crude)
Overall: 900 ft.
(DWT – 160,000 tons)
Crude)
Houston Fuel Oil Terminal (HOFTI):
16.1 million barrels of storage capacity
(12.9 million barrels of fuel oil, 3.2
million barrels of crude oil)
Dock 1: (Vessels, Barges – Crude and
Fuel Oil)
Overall: 900 ft.
Fuel Oil)
Overall: 900 ft.
13
Houston fuel oil terminal
12.9 million barrels of fuel oil
Houston
Overall: 950 ft.
(DWT – 160,000 tons)
Magellan Midstream – Galena Park
14.7 million barrels of storage capacity
Dock 1: (Vessels, Barges – Chemical
& Fuel Oil)
Overall: 810 ft.
Dock 2: (Vessels, Barges – Chemical
& Fuel Oil)
Overall: 810 ft.
Liberty
Harris
Waller
Baytown
Magellan’s Galena Park
14.7 million barrels
Oiltanking Houston Inc.
(Known as OTI or OTH)
Jefferson
Oiltanking Houston Inc.
(OTH or OTI)
11 million barrels
Chambers
Pasadena
Texas
Fort Bend
Galveston
Oiltanking
Texas City Terminal
Galveston
Wharton
Matagorda
Brazoria
Gulf of Mexico
Fuel Oil)
Overall: 850 ft.
Fuel Oil)
Overall: 900 ft.
The docks have pumping capability
of 40,000 barrels/hour for both crude
and fuel oil.
HOFTI has nine miles of additional
intra-terminal piping to facilitate tankto-tank transfers.
Each ship dock can accommodate
four barges.
In addition to the four ship
docks, HOFTI has seven barge
docks that can service 19 barges
simultaneously, with each barge
dock offering at least 12 foot draft
and a 350 foot LOA.
HOFTI also has rail and truck capability.
Texas City Terminal
Dock 1: (Vessels, Barges – Clean &
Crude Oil)
Overall: 860 ft.
SPECIAL REPORT: OIL
NEDERLAND/PORT ARTHUR, TEXAS
Terminal
Port
ExxonMobil Beaumont
345,000 b/d
Valero
Lucas terminal
1.9 million barrels of crude oil storage
Sunoco Logistics
Nederland terminal
22 million barrels crude & products
Beaumont
Phillips 66
Beaumont terminal
4.7 million barrels of crude oil storage
Total Port Arthur
225,500 b/d
Louisana
Sabine Lake
Texas
Motiva Port Arthur
600,000 b/d
Valero Port Arthur
330,000 b/d
Martin Energy Services
Port Arthur dock
1.65 million barrels
24” crude pipeline to XOM’s Beaumont refinery
Sunoco’s Millennium pipeline – 12” crude to Longview and Sour Lake (Citgo)
Port Arthur
Valero’s Lucas pipeline (400,000 b/d)
Valero’s Nederland pipeline (600,000 b/d)
Shell’s HO-HO Nederland extension pipeline (200,000 b/d)
Sunoco’s West Texas Gulf pipeline (300,000 b/d)
Shell’s Ho-Ho pipeline (350,000 b/d)
36” Crude pipeline to/from Big Hill SPR
Sunoco’s Amdel pipeline (27,000 b/d)
Sunoco’s Millennium pipeline (65,000 b/d)
Sunoco’s Texas pipeline (28,000 b/d)
TransCanada’s Marketlink pipeline (700,000 b/d)
Motiva pipeline
NEDERLAND/PORT ARTHUR, TEXAS
Nederland and Port Arthur area terminals have access to 1.215
million b/d of crude pipeline inflows and are able to load barges
and vessels from nearby docks.
Sunoco Logistics Nederland Beaumont Texas
Dock 5:(Vessels, Barges –
Crude Oil)
Overall: 900 ft.
Dock 1:(Vessels, Barges – Crude Oil,
Naphtha, VGO)
Overall: 875 ft.
14
Dock 2:(Vessels, Barges – Crude Oil )
Overall: 1000 ft.
Overall: 1000 ft.
Overall: 1000 ft.
SPECIAL REPORT: OIL
CRUDE PIPELINE CONNECTIONS TO CORPUS CHRISTI AREA TERMINALS AND REFINERIES
Kinder Morgan Double Eagle pipeline
Plains All American
Viola terminal
Storage: 1.5 mil bls
Loading capacity: 75,000 b/d
Trafigura
Texas dock & rail terminal
Storage: 2 mil bls
NuStar-Pettus South Three Rivers Oakville pipeline
Harvest-Pearsall & Gardendale pipeline
ETP / Trafigura
Rio Bravo pipeline
Flint Hills/Koch
Ingleside terminal
Storage: 2.6 mil bls
PAA / EPP JV
Flint Hills refinery
290,000 b/d
Valero
East refinery
115,000 b/d
Magellan & Citgo
Buckeye
Valero
West refinery
200,000 b/d
ETP / Trafigura
Rio Bravo pipeline
Citgo refinery
163,000 b/d
NuStar North Beach terminal
Storage: 2 mil bls
Martin Midstream terminal
Storage: 900,000 bls
Throughput capacity: 160,000 b/d
Receives up to 150,000 b/d of crude
and condensate from HPG pipeline
PAA-EPP Eagle Ford JV pipeline
Corpus Christi
Texas
Texas
Magellan Midstream terminal
Storage: 3 mil bls
(1 mil b/s of condensate)
100,000 b/d from Double Eagle
Terminal
Refinery
MEX ICO
PORT OF CORPUS CHRISTI, TEXAS
The Port of Corpus Christi is well-positioned for exports of crude
and condensate produced in the Eagle Ford and Permian Basin. It
already loads vessels and barges destined (until now) for other US
and also Canadian ports. Port statistics show 569,313 barrels of
crude oil and 33,561 barrels of condensate left in November, with
the vast majority of the volume staying within the US Gulf Coast.
Marginal barrels are also sent to Canada and the US Atlantic Coast.
PORT OF CORPUS CHRISTI
800
CRUDE PIPELINE CONNECTIONS TO
CORPUS CHRISTI AREA TERMINALS AND REFINERIES
Gardendale terminal
Zavala
Frio
Kinder Morgan Helena station
Wilson
Atascosa
Lyssy
Karnes
McMullen terminal
De Witt
Kinder Morgan central station (KBD)
Victoria
Pettus Goliad
Bee
Refugio
('000 b/d)
Texas
600
500
Condensate outbound
Crude outbound
400
300
200
MEX ICO
100
0
Mar-12
La Salle Mcmullen Live Oak
Three Rivers Jim
Eagle Ford pipeline LLC’s terminal Wells
700
Feb-13
Jan-14
Dec-14
George West terminal
San Patricio
Nueces
Gulf of Mexico
Corpus Christi
Plains All American Eagle Ford pipeline (300,000 b/d)
Kinder Morgan/Magellan Double Eagle Gathering System (100,000 b/d)
Hilcorp Resources Harvest Gardendale (Arrowhead) pipeline (250,000 b/d)
Energy Transfer Rio Bravo pipeline (100,000 b/d)
Nustar Energy Three Rivers pipeline (100,000 b/d)
Nustar Energy 54p pipeline (30,000 b/d)
Nustar/Koch Pipeline Company Pettus pipeline (50,000 b/d)
KMCC pipeline
Nov-15
Source: Port of Corpus Christi
NuStar North Beach Terminal
2 million-barrel storage capacity
400,000 b/d throughput capacity
Can load Panamax-size vessels
(350k-500k barrels)
Can receive up to 240k b/d of crude
and condensate from the company’s
Three Rivers facilities
ConocoPhillips is NuStar’s anchor
shipper
Dock 1: (Vessels, Barges –Crude and
Chemicals)
Overall: 1,000 ft.
(DWT – 150,000 tons)
Terminal
Port
Lines to docks: 1 x 36” Crude line; 1 x
24” Crude line
Loading Rates: up to 12,000 BPH
(small VCU limit); up to 30,000 BPH
(large VCU limit)
Dock 16: (Dedicated to Vessel or
Barge Traffic – Crude Oil Only)
Water Depth Alongside: 47 ft.; Beam:
106 ft.; Length Overall: 750 ft. (DWT –
80,000 tons)
Lines to docks: 1 x 30” Crude line
Loading Rates: up to 30,000 BPH
(VCU limit)
Dock 2: (Dedicated to Barge Traffic
only)
15
Draft: 15 ft.; Width Overall: 130 ft.;
Length Overall: 300 ft.
Lines to docks: 2 x 12” Crude lines
Trafigura’s Texas Dock & Rail terminal
600,000-barrel storage capacity
(more 2 million barrel potential future
expansion)
Receives up to 100,000 b/d of
condensate from McMullen County
50,000 b/d condensate splitter
Can load Aframax-size vessels
Deepwater Dock 1: (Crude)
Draft: 45 ft.; Length Overall: 1,200 ft.
Lines to dock: 2 x 12” Crude lines
Deepwater Dock 2: (Crude)
Draft: 45 ft.; Length Overall: 850ft.
Plains All American Viola Barge Dock
Terminal
120,000-barrel storage capacity in
four 30,000-barrel tanks
Receives crude and condensate from
Enterprise Products Partners/Plains
All American 470,000 b/d Eagle Ford
Venture Pipeline
Four public docks: Draft: 10 ft.; Width:
57 ft.; Length: 297 ft.
Plains All American has priority access
through a throughput commitment
SPECIAL REPORT: OIL
Magellan Midstream Terminal
3 mil barrels storage (incl. 1 mil barrels for crude)
Termination point for Kinder Morgan/Magellan
100,000 b/d Double Eagle pipeline, which bring
condensate from Gardendale
Magellan 50k b/d condensate splitter leased to
Trafigura
Connected to Trafigura’s terminal
Three public docks: Draft: 45 ft.
Flint Hills Resources Ingleside Terminal
200,000 b/d loading capacity
Dock 4: (Crude)
Draft: 40 ft.; Beam: 150 ft.; Length Overall: 1,000 ft.
Dock 5: (Crude)
Water Depth Alongside: 37 ft.; Beam: N/A; Length
Overall: N/A
Martin Midstream Partners LP terminal
600,000-barrel storage capacity
30,000 b/h throughput capacity
Termination point for 250,000 b/d Harvest pipeline
system
Dedicated Marine Dock: (Throughput capacity 160k
b/d)
Two public docks: Draft: 45 ft.
GALVESTON, TEXAS LIGHTERING AREA
LOUISIANA OFFSHORE OIL PORT (LOOP)
Port Arthur
CANADA
Houston
MN
Louisiana
Texas
MI
IL
U N I T E D S TAT E S
IN
OH
WV
Atlantic
Ocean
Galveston
KY
Gulf of Mexico
TN
TX
LA
Refinery
Multiple refineries
Loop LLC
Outbound pipeline
Inbound pipeline
MS
MEXI CO
Gulf
of
Mexico
Tankers
Source: Company website
Louisiana Offshore Oil Port (LOOP)
LOOP is the US’ largest vessel offloading facility, but it does
not currently have export capabilities. In November, the
facility said it was looking for commitments from prospective
shippers to utilize its proposed marine vessel crude oil
loading services. The new services would provide connecting
logistics from LOOP’s Clovelly Hub in Galliano, Louisiana,
to its Deepwater Port, 17 miles offshore of Port Fourchon,
Louisiana. The marine vessel loading services would include
two mooring points with capacity to load a vessel each day.
Currently, LOOP’s Deepwater Port has the
capability to offload these same marine vessels and move
crude oil from the port to the hub.
16
USGC Lightering A more expensive way to export crude from the
US Gulf Coast would include the lightering of vessels outside the
Galveston Bay area. The cost for an Aframax tanker (300,000500,000 barrels) from Houston to ship-transfer crude onto a typical
Suezmax (500,000-700,000 barrels) in Galveston Bay has recently
been quoted at about $26,250/day for a three-day minimum.
Any demurrage cost would cost about $25,500/day. However,
volumetric economics could potentially allow this process to work.
SPECIAL REPORT: OIL
CONCLUSION
While the US will likely continue to import significant volumes
of crude in the foreseeable future, the import/export balance
is likely to see only moderate increases on the export side
from the current 600,000 b/d, given economics and logistical
limitations. Exports to Mexico could easily add 100,000 b/d,
while exports to Europe, the Caribbean and Latin America will
likely largely depend on how competitive US light sweet crude
oil is against its Middle Eastern and West African counterparts.
Crude exports should allow US producers and traders to fetch
the best returns whether within or outside US shores, opening
new opportunities in new markets. Whether or not more outlets
will translate into rising crude oil production remains to be
seen, but that should largely depend on global prices.
Operational capabilities may limit crude export options in the
short term, but US Gulf Coast oil terminals stand ready to load
Panamax tankers straight off the terminals. In addition, it is
reasonable to expect midstream companies will speed up
plans for larger-volume crude export capabilities.
Going forward, WTI is expected to reconnect to global crude
oil market fundamentals, but whether pricing references at
Houston or any other US Gulf Coast loading port continue
to gain relevance in the global market will depend largely
on transparency and liquidity of trade. Still, with new
horizons ahead, US exports should continue to dominate
the headlines as the world incorporates US crudes into the
global oil market.
For more information, please visit us online or speak to one of our sales specialists:
www.platts.com
[email protected]
North America
+1-800-PLATTS8 (toll-free)
+1-212-904-3070 (direct)
EMEA
+44-(0)20-7176-6111
Asia-Pacific
+65-6530-6430
Latin America
+55-11-3371-5755
Russia
+7-495-783-4141
© 2016 Platts, McGraw Hill Financial. All rights reserved.
17

US CRUDE EXPORTS: REbALAnCIng ThE gLObAL mARkET

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