US CRUDE EXPORTS: REbALAnCIng ThE gLObAL … · OIL OIL SPECIAL REPORT January 2016 Luciano Battistini, Managing Editor (Crude), Americas US CRUDE EXPORTS: REbALAnCIng ThE gLObAL

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OIL SPECIAL REPORT

January 2016Luciano Battistini, Managing Editor (Crude), Americas

US CRUDE EXPORTS:REbALAnCIng ThE gLObAL mARkET

SPECIAL REPORT: OIL US CRUDE IMPORTS/EXPORTS BALANCE – A NEW WORLD ORDER

2Copyright © 2016 by Platts, McGraw Hill Financial

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

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.

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

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 RISEThe 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



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 mARkETThough 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.

TOP ORIGINS OF INCREASED US CRUDE IMPORTS

Excluding CanadaSource: EIA

(million b/d)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan-16Jul-15Jan-15Jul-14Jan-14Jul-13Jan-13

22- Month High

AngolaEquadorNigeriaIraqVenezuelaSaudi Arabia

SAUDI ARABIA AND IRAQ OSPS TO THE US

Source: Platts

($/barrel)

-7

-6

-5

-4

-3

-2

-1

0

Feb-16Dec-15Oct-15Aug-15Jun-15

Basrah heavy

Arab heavy

WAF IMPORTS CORRELATION TO BRENT�WTI

Source: EIA, Platts

(’000 b/d) (%)

*WTI/ Brent swap as a percentage of WTI outright value

0

200

400

600

800

1000

Dec-15May-15Oct-14Mar-14Aug-13Jan-130

5

10

15

20

25West African imports (left)WTI/brent swap (right)

CANADIAN CRUDE MOVEMENTS IN THE US MARKET

Source: EIA

(million barrels)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan-16May-15Sep-14Jan-14May-13

US imports of Canadian crudePADD II to PADD III

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 ShAREUS 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

� 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.

BRENT’S PREMIUM TO WTI FADES

Source: Platts

($/b, WTI brent swaps spread)

-14

-12

-10

-8

-6

-4

-2

0

2

Jan-16Nov-15Sep-15Jul-15May-15Mar-15Jan-15



0

5

10

15

20

25

30

Jan-16Sep-15May-15Jan-15Sep-14May-14Jan-14

KEY PADD III REFINERY NETBACK MARGINS

Source: Platts, Turner Mason

($/barrel)

WTI USGC crack WCS USGC cokingLLS USGC crack Mars USGC crack

2015 vs 2016 Focal point

80

85

90

95

100

Jan-16Oct-15Jul-15Apr-15Jan-15

PADD III REFINERY UTILIZATION RATES

Source: EIA

83%

(% utility rates)

Note: Re�nery utilization rates are signi�cantly below year ago levels

87%

2015 vs 2016

140

160

180

200

220

240

260

Week 52Week 42Week 32Week 22Week 12Week 2140

160

180

200

220

240

260

PADD III CRUDE STOCKS

Source: Platts

27%

(million barrels) (million barrels)

5-year avearage20152016

5-year min-max

-4

-2

0

2

4

Jan-16Jan-15Jan-14Jan-13Jan-12Jan-11Jan-10

M1�M2 CRUDE CONTANGO STRUCTURES(%)

Note: Percentage is based on front-month to second-month spread value, compared to the outright value of the front-month. Source: Platts

WTI contango depth

WTI contango M1/M2Mars contango M1/M2Brent contango M1/M2LLS contango M1/M2

WEST AFRICA CRUDES FInD OPPORTUnITIES In US mARkETImports 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 COAST2015 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 five-year average and have neared fresh new record highs in January.

US ATLAnTIC COASTCrude 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

CRUDE IMPORTS

Source: EIA

(b/d)

0

1

2

3

4

5

Jan-16Jan-12Jan-08Jan-04Jan-00Jan-96

IraqAngolaNigeriaSaudi Arabia

US CRUDE PRODUCTION

Source: EIA

(b/d)

8.0

8.5

9.0

9.5

10.0

Jan-16Sep-15May-15Jan-15Sep-14May-14Jan-14

EIA monthlyEIA weeklyBentek



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 WEST COASTIn 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

ANS VS WTI CMA CORRELATION TO WTI�DUBAI

Source: Platts

($)

-20

-10

0

10

20

Jan-16Jul-15Jan-15Jul-14Jan-14Jul-13Jan-13

WTI-Dubai swaps ANS divd. USWC vs WTI CMA M+1

ANS MOVEMENTS TO US WEST COAST

Source: Platts cFlow

('000 b/d)

0

100

200

300

400

Dec-15Jul-15Feb-15Sep-14Apr-14

Benicia, WASamish, WASan Francisco, CAPort Angeles, WAAnacortes, WARichmond, CALos Angeles / Long Beach, CA

ECUADOR, ESPO, PERSIAN GULF CRUDE MOVEMENTS TO US WEST COAST


('000 b/d)

0

300

600

900

Jan-16Jul-15Jan-15Jul-14Jan-14

ESPO to USWC

18-Month High

Ecuador to USWCPersian Gulf to USWC

shipped. Crude-by-rail movements were 12% higher than year-ago 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.

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.

PADD II TO PADD I CRUDE�BY�RAIL MOVEMENTS

Up 19% 2015 over 2014

('000 b/d)

0

100

200

300

400

500

Sep-15Apr-15Nov-14Jun-14Jan-14Aug-13Mar-13

Source: EIA

PADD I CRUDE STOCKS

Source: EIA

($) ($)

8

10

12

14

16

18

20

Week 52Week 42Week 32Week 22Week 12Week 28

10

12

14

16

18

20

2015 (right)2016 (right) 5-year average (right)

5-year min-max(left)

-5

0

5

10

15

20

Jan-16Oct-15Jul-15Apr-15Jan-15Oct-14Jul-14Apr-14Jan-14

Bakken USAC crackBonny Light USAC crackHibernia USAC crack2015 vs 2016

KEY PADD I REFINERY NETBACK MARGINS

Source: Platts, Turner Mason

($/barrel)



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.

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.



ASIAIt 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 / CARIbbEAnNeighboring 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.

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.

EUROPEAside 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.

EXPORTS BY COUNTRY

Source: Platts

0 5 10 15 20 25 30 35

France 4%Singapore 5%Italy 8%Korea 11%

Germany 1%India 2%Brazil 4%China 4%

Netherlands 13%Spain 13%Switzerland 35%

Crude Price Comparison Value API gravity Loading/DeliveryNorth Sea Dated Brent $33.11/b 37.5 10 Days – full month-ahead forward Oseberg $34.815/b 37.8 10 Days – full month-ahead forwardWest Africa Bonny Light FOB Nigeria $34.97/b 35 25-55 days forward NYMEX @ Cushing , OK $33.73/b 38-42 Front month, US pipe shipping schedule WTI Midland, TX $33.43/b 38-44 Front month, US pipe shipping scheduleUSA Light Houston Sweet (WTI Houston) $34.48/b 38-42 Front month, US pipe shipping schedule Eagle Ford Condensate @ Houston $32.28/b Mid 50s Forward month Bakken @ Williston, ND $30.74/b 38-42 Front month, COLC shipping schedule Bakken @ US Atlantic Coast $37.11/b 38-42 Front month, COLC shipping schedule

Source: Platts (Assessment Date: Dec. 24, 2015)

US EXPORTS OF CONDENSATE �EXCLUDING CANADA

Source: EIA (April 2015-September 2015)

(’000 b/d)

0.0

0.5

1.0

1.5

2.0

Nov-15Aug-15May-15Feb-15Nov-14Aug-14May-14

Latin AmericaAsiaEurope

Louisiana

Mississippi

AlabamaTexas Louisiana

Mississippi

AlabamaUNITED STATES

MEXICO

UNITED STATES

TANKERS MOVEMENTS FROM MEXICO TO US GULF COAST OIL TERMINALS AND REFINERIES

Source: Platts cFlow tanker movements from Mexico’s Altamira and Dos Bocas ports to Houston, Texas, Texas City, TX, and O�shore Galveston, TX

Paci�c Ocean

Gulf of Mexico

Atlantic Ocean

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

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.



Gulf of Mexico

Caribbean Sea

Paci c Ocean

Atlantic Ocean

Puerto Armuelles

Chiriquí Grande

Panama Canal

Cartagena/Covenas Aruba

Curaçao(Willemstead, Bullen Bay)

Bonaire

Jose TerminalPuerto La Cruz

Point-e-Pierre

St. Eustatius

Grand Bahama (BORCO)

CRUDE TANKERS MOVEMENTS FROM WEST AFRICA TO CARIBBEAN DESTINATIONS


(tankers)

0

50

100

150

200

250

300

Jan-16Jul-15Jan-15Jul-14Jan-14

ArubaBullen BayCovenasJose terminal

Puerto La CruzKingston

BonaireCartagenaSt. Lucia

WillemsteadSt. EustatiusPoint a Pierre

mEXICOPemex 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 extra-light 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.

Mexico is likely to consider US crude grades such as West Texas Intermediate, West Texas Sour, Light Louisiana Sweet, and Mars.

CARIbbEAnUS 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 AmERICAVenezuela 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.

CRUDE TAnkER mOVEmEnTS FROm mEXICO TO US gULF COAST (b/d)Date Texas City Texas City houston houston Off galveston Off galveston to Altamira to Dos bocas to Altamira to Dos bocas to Atamira to Dos bocasOct-14 25.1075 0 28.9089 21.6183 39.3456 87.6003Nov-14 14.7561 0 0 67.4501 30.3917 22.2955Dec-14 15.1312 21.6687 14.8989 0 74.1274 64.8398Jan-15 0 37.7733 0 53.9455 26.9066 101.336Feb-15 0 0 13.8977 71.8797 13.8977 22.5439Mar-15 0 0 30.0851 23.7076 0 23.7076Apr-15 0 58.0902 28.5068 93.0349 28.7581 313.494May-15 0 54.0412 27.6672 185.367 27.6672 304.818Jun-15 54.3228 62.4609 0 216.349 22.7501 404.467Jul-15 14.8989 41.0532 30.3499 207.535 44.8951 292.312Aug-15 14.9233 21.9429 14.808 153.225 14.9233 355.445Sep-15 0 22.3626 12.9898 136.922 0 214.339Oct-15 12.5369 77.9757 42.6296 112.665 52.627 154.705nov-15 14.7561 0 0 47.9726 29.6924 246.778Dec-15 0 0 23.0232 230.757 23.0232 203.996




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.

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.

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.

Gulf of Mexico

Caribbean Sea

Paci c Ocean

Atlantic OceanUNITED STATES

ECUADOR

PANAMAPuerto Armuelles

Esmeraldas

Chiriquí Grande

Panama Canal

US CRUDES POSSIBLE ROUTES TO ECUADOR




US gulf Coast: Corpus Christi, houston/galveston, nederland/Port Arthur, LOOP/nOLA

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.

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.

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

Source: Platts

Texas

UNITED STATES

MEXICO

Oklahoma

Louisiana

Arkansas

New Mexico

Wichita Falls

Corpus ChristiGulf of Mexico

Lissy

Houston

Corsicana

Freeport

Texas City

Nederland

Lake Charles

New Orleans

Houma

Colorado City

MidlandOdessa

Crane

McCamey

Wichita Falls

Gardendale Three Rivers

Corsicana

McCamey

Crane

OdessaMidland

Colorado City

Houston

Gardendale Three Rivers

Cushing

Aggregated crude pipeline capacity (Permian, Eagle Ford basins, and Cushing, OK): 2.175 million b/dRe�neriesPort Arthur/Nederland Motiva (610,000 b/d) ExxonMobil (359,000 b/d) Valero (310,000 b/d) Total S.A. 174,000 b/dHouston Valero (90,000 b/d) LyondellBasell (268,000 b/d) Petrobras (100,000 b/d) Shell (327,000 b/d) ExxonMobil (561,000 b/d)Texas City/Galveston: Marathon (460,000 b/d) Marathon (80,000 b/d) Valero (245,000 b/d)Total 3.584 million b/d

Permian basin

Eagle ford

Port

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)

Shell Houston-to-Houma (350,000 b/d)

Exxonmobil Pegasus (95,000 b/d)

Kinder Morgan KMCC (300,000 b/d)

Louisiana o�shore oil port (300,000 b/d)

Cactus (330,000 b/d)Plains All American/ Enterprise Eagle Ford JV (470,000 b/d)

FACT bOX: mAIn EXPORT TERmInALS



Crude Oil Storage Capacity at USgC Terminals

Facility Location Capacity (million barrels) Facility Capacity (million barrels)Louisiana Offshore Oil Port (LOOP) Clovelly 58 Enterprise Crude Houston Oil (ECHO) 5.25International-Matex Tanker Terminals (IMTT) St. Rose 16.3 Enterprise Oil Tanking (OTI) 8.4NuStar Energy LP St. James 11 Enterprise Oil Tanking Appelt (OTI) 6.9Plains All American Pipeline, LP St. James 8.3 Magellan East Houston 4.8

Crude Stocks at Other USgC Terminals

USgC Area Capacity (million barrels)Port Arthur-Beaumont-Nederland 41.5Corpus Christi 19

Source: Platts, Houston oil terminal analysis

PLATTS LIGHT HOUSTON SWEET �LHS� VERSUS LOUISIANA LIGHT SWEET

Source: Platts

($)

-8

-6

-4

-2

0

2

Jan-16Jul-15Jan-15Jul-14Jan-14Jul-13

CONDENSATE PIPELINE FLOWS CORRELATION TO LLS�BRENT SPREAD

Source: Platts, analysis from Houston-area terminals

('000 b/d) ($)

0

100

200

300

400

500

Oct-15Jun-15Feb-15Oct-14Jun-14-8

-6

-4

-2

0

2LLS X brent (right)

Rancho �ows (left)KMCC (left)

CONDENSATE PIPELINES(%) (%)

Source: Platts data applied to a third-party analysis attributable to a Houston-area oil terminal

-100

-50

0

50

100

Oct-15Jun-15Feb-15Oct-14Jun-14Feb-14

257% 270%

-110%-2192%

-100

-50

0

50

100

Rancho (right)LLS vs Brent (left)KMCC (left)

PLATTS LIGHT HOUSTON SWEET �LHS� CORRELATION TO WTI PIPELINE FLOWS


('000 b/d) ($) ('000 b/d) ($)


0

100

200

300

400

500

600

Oct-15Jul-15Apr-15Jan-15Oct-140

200

400

600

800

1000

1200

Oct-15Jun-15Feb-15Oct-14Jun-14Feb-14Oct-13-2

-1

0

1

2

3

4

-2

-1

0

1

2

3

4

LHS vs WTI (right)

LHS vs WTI (right)

Bridge Texas (left)Longhorn (left)

Seaway (left)Seaway Twin (left)

hOUSTOn, TEXASTexas 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 Houston-area 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 Houston-area 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.



PLATTS LIghT hOUSTOn SWEET (LhS) VERSUS LOUISIAnA LIghT SWEETTrading 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

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.



hOUSTOn-AREA TERmInALSUS 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.

Houston

Texas

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 junctionShell’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 junctionPetrobras Pasadena (100,000 b/d)Shell Deer Park (327,000 b/d)OTI/Deer Park junctionSeaway (850,000 b/d)Morgan’s Point (2 million barrels)Genoa junctionECHO terminal (6 million barrels)Seaway Jones Creek to ECHO lateral (850,000 b/d)Webster/Anahauc JunctionJones 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)Valero (245,000 b/d)

2 233

6 6

1010

12

12

1111

20

20

17

17

9

9

8

8

16

16

18

18

15

15

22

22

21

21

14

14

1313

7

74

4

19

19

25

25

2323

26

26

24

24

2727

28 282929

30

30

55

1

1

HOUSTON-AREA TERMINALS

Source: EIA, Platts, company websites

Oiltanking houston Inc. (known as OTI or OTh)

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)Dock 4: (Vessels, Barges –Clean and Crude)Draft: 40 ft.; Beam: 160 ft.; Length Overall: 900 ft. (DWT – 160,000 tons)Dock 5: (Vessels, Barges –Clean and Crude)Draft: 45 ft.; Beam: 175 ft.; Length Overall: 950 ft. (DWT – 160,000 tons)Dock 6: (Vessels, Barges –Clean and Crude)Draft: 45 ft.; Beam: 145 ft.; Length Overall: 900 ft. (DWT – 160,000 tons)Dock 7: (Vessels, Barges –Clean and Crude)Draft: 40 ft.; Beam: 160 ft.; Length

Overall: 950 ft. (DWT – 160,000 tons) magellan midstream – galena Park14.7 million barrels of storage capacity Dock 1: (Vessels, Barges – Chemical & Fuel Oil)Draft: 40 ft.; Beam: 116 ft.; Length Overall: 810 ft. Dock 2: (Vessels, Barges – Chemical & Fuel Oil)Draft: 40 ft.; Beam: 116 ft.; Length Overall: 810 ft. 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)Draft: 45 ft.; Beam: 145 ft.; Length Overall: 900 ft. Dock 2: (Vessels, Barges – Crude and Fuel Oil)Draft: 40 ft.; Beam: 145 ft.; Length Overall: 900 ft.Dock 3: (Vessels, Barges – Crude and

Fuel Oil)Draft: 45 ft.; Beam: 145 ft.; Length Overall: 850 ft.Dock 4: (Vessels, Barges – Crude and Fuel Oil)Draft: 45 ft.; Beam: 165 ft.; Length 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 tank-to-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 TerminalDock 1: (Vessels, Barges – Clean & Crude Oil)Draft: 40 ft.; Beam: 160 ft.; Length Overall: 860 ft.

Brazoria

Chambers

Fort BendGalveston

Harris

Jeerson

Liberty

Matagorda

Magellan’s Galena Park14.7 million barrels

Oiltanking Houston Inc. (OTH or OTI)11 million barrels

Houston fuel oil terminal12.9 million barrels of fuel oil

OiltankingTexas City Terminal

Waller

Wharton

Texas

Pasadena

Baytown

Galveston

Gulf of Mexico

Houston

HOUSTON TERMINALS


Terminal



Texas

Louisana

Port Arthur

Beaumont

Sabine Lake

NEDERLAND/PORT ARTHUR, TEXAS


24” crude pipeline to XOM’s Beaumont re�nerySunoco’s Millennium pipeline – 12” crude to Longview and Sour Lake (Citgo)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 SPRSunoco’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

ExxonMobil Beaumont345,000 b/d

Phillips 66Beaumont terminal4.7 million barrels of crude oil storage

Sunoco LogisticsNederland terminal22 million barrels crude & products

ValeroLucas terminal1.9 million barrels of crude oil storage

Total Port Arthur225,500 b/d

Motiva Port Arthur600,000 b/d

Valero Port Arthur330,000 b/d

Martin Energy Services Port Arthur dock1.65 million barrels

Terminal

Port

Sunoco Logistics nederland - beaumont Texas Dock 5:(Vessels, Barges – Crude Oil)Draft: 40 ft.; Beam: 138 ft.; Length Overall: 900 ft. Dock 1:(Vessels, Barges – Crude Oil, Naphtha, VGO)Draft: 40 ft.; Beam: 137 ft.; Length Overall: 875 ft.

Dock 2:(Vessels, Barges – Crude Oil )Draft: 40 ft.; Beam: 150 ft.; Length Overall: 1000 ft. Dock 3:(Vessels, Barges – Crude Oil )Draft: 40 ft.; Beam: 150 ft.; Length Overall: 1000 ft. Dock 4:(Vessels, Barges – Crude Oil )Draft: 40 ft.; Beam: 150 ft.; Length Overall: 1000 ft.

nEDERLAnD/PORT ARThUR, TEXASNederland 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.



Corpus Christi

TexasTexas

MEXICO

CRUDE PIPELINE CONNECTIONS TO CORPUS CHRISTI AREA TERMINALS AND REFINERIES


Plains All American Viola terminalStorage: 1.5 mil blsLoading capacity: 75,000 b/d

Tra�guraTexas dock & rail terminalStorage: 2 mil blsLoading capacity: 30,000 b/d

Flint Hills re�nery290,000 b/d

ETP / Tra�gura Rio Bravo pipeline

PAA-EPP Eagle Ford JV pipeline

Kinder Morgan Double Eagle pipeline

NuStar-Pettus South Three Rivers Oakville pipeline

Harvest-Pearsall & Gardendale pipelineETP / Tra�gura Rio Bravo pipeline

Buckeye

PAA / EPP JV

Valero West re�nery200,000 b/d

Magellan & Citgo Valero East re�nery115,000 b/d

Flint Hills/Koch Ingleside terminalStorage: 2.6 mil blsLoading capacity: 200,000 b/d

Magellan Midstream terminalStorage: 3 mil bls(1 mil b/s of condensate)100,000 b/d from Double EagleLoading capacity: 25,000 b/d

Martin Midstream terminalStorage: 900,000 blsThroughput capacity: 160,000 b/dReceives up to 150,000 b/d of crude and condensate from HPG pipeline

NuStar North Beach terminalStorage: 2 mil blsLoading capacity: 400,000 b/dCitgo re�nery

163,000 b/d

Terminal

Re�nery

nuStar north beach Terminal 2 million-barrel storage capacity400,000 b/d throughput capacityCan load Panamax-size vessels (350k-500k barrels)Can receive up to 240k b/d of crude and condensate from the company’s Three Rivers facilitiesConocoPhillips is NuStar’s anchor shipperDock 1: (Vessels, Barges –Crude and Chemicals)Draft: 45 ft.; Beam: 160 ft.; Length Overall: 1,000 ft. (DWT – 150,000 tons)

Lines to docks: 1 x 36” Crude line; 1 x 24” Crude lineLoading 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 lineLoading Rates: up to 30,000 BPH (VCU limit)Dock 2: (Dedicated to Barge Traffic only)

Draft: 15 ft.; Width Overall: 130 ft.; Length Overall: 300 ft.Lines to docks: 2 x 12” Crude lines

Trafigura’s Texas Dock & Rail terminal600,000-barrel storage capacity (more 2 million barrel potential future expansion)Receives up to 100,000 b/d of condensate from McMullen County50,000 b/d condensate splitterCan load Aframax-size vesselsDeepwater 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. Lines to dock: 2 x 12” Crude linesPlains All American Viola Barge Dock Terminal120,000-barrel storage capacity in four 30,000-barrel tanksReceives crude and condensate from Enterprise Products Partners/Plains All American 470,000 b/d Eagle Ford Venture PipelineFour public docks: Draft: 10 ft.; Width: 57 ft.; Length: 297 ft. Plains All American has priority access through a throughput commitment

PORT OF CORPUS CHRISTI

Source: Port of Corpus Christi

('000 b/d)

0

100

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400

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600

700

800

Nov-15Dec-14Jan-14Feb-13Mar-12

Condensate outboundCrude outbound

PORT OF CORPUS ChRISTI, TEXASThe 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.

Corpus Christi

Lyssy

Pettus

Three Rivers

CRUDE PIPELINE CONNECTIONS TO CORPUS CHRISTI AREA TERMINALS AND REFINERIES


Gulf of MexicoTexas

MEXICO

Atascosa

Bee

De WittFrio

Goliad

JimWells

Karnes

La Salle Live OakMcmullen

Nueces

Refugio

San PatricioSan Patricio

Victoria

Wilson

Zavala

Kinder Morgan Helena station

McMullen terminalKinder Morgan central station (KBD)

George West terminal

Gardendale terminal

Eagle Ford pipeline LLC’s terminal

Terminal

Port

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



Gulfof

Mexico

AtlanticOcean

CANADA

MEXICO

UNITED STATES

Re�neryMultiple re�neriesLoop LLCOutbound pipelineInbound pipeline

ILIN

KY

LA

MIMN

MS

OH

TN

TX

WV

LOUISIANA OFFSHORE OIL PORT (LOOP)

Source: Company website

Port Arthur

Houston

Galveston

Texas

Gulf of Mexico

Louisiana

GALVESTON, TEXAS LIGHTERING AREA


Tankers

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.

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 (300,000-500,000 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.

Flint hills Resources Ingleside Terminal 200,000 b/d loading capacityDock 4: (Crude)Draft: 40 ft.; Beam: 150 ft.; Length Overall: 1,000 ft. Lines to dock: 2 x 12” Crude linesDock 5: (Crude)Water Depth Alongside: 37 ft.; Beam: N/A; Length Overall: N/ALines to dock: 2 x 12” Crude lines

magellan midstream Terminal3 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 GardendaleMagellan 50k b/d condensate splitter leased to TrafiguraConnected to Trafigura’s terminalThree public docks: Draft: 45 ft.

martin midstream Partners LP terminal600,000-barrel storage capacity30,000 b/h throughput capacityTermination point for 250,000 b/d Harvest pipeline systemDedicated marine Dock: (Throughput capacity 160k b/d)Two public docks: Draft: 45 ft.



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COnCLUSIOnWhile 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.

Documents

US CRUDE EXPORTS: REbALAnCIng ThE gLObAL … · OIL OIL SPECIAL REPORT January 2016 Luciano Battistini, Managing Editor (Crude), Americas US CRUDE EXPORTS: REbALAnCIng ThE gLObAL