Project Approval Hits the SPOT for Exports

The Daley Note: December 15, 2022

Enterprise Products Partners (EPD) has won conditional approval for its Sea Port Offshore Terminal (SPOT), a key project supporting demand for barrels from the Permian Basin.

The US Maritime Administration (MARAD) on Nov. 21 issued a Record of Decision in support of SPOT. The approval marks a pivotal point in the permitting process that began in early 3Q19 after EPD greenlit the project.

Once officially permitted, SPOT would be capable of loading Very Large Crude Carriers (VLCCs) at a rate of 2 MMb/d. The project would be located in the Gulf of Mexico 30 miles offshore Houston, where it likely faces much less congestion than competing export docks positioned along the Houston Ship Channel.

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MARAD’s decision comes as growing production from the Permian Basin is pulled into international crude markets. Currently in our Crude Network Model, East Daley expects Permian crude production to grow by more than 1.5 MMb/d from 2022-2025, and total US Gulf Coast crude exports to grow by ~2 MMb/d from Corpus Christi, Houston and Louisiana. 

According to data from the Crude Network Model, much of the crude export infrastructure along the Gulf Coast is vastly overbuilt, with most facilities operating consistently below 50% utilization. SPOT’s 2 MMb/d of additional export capacity would further intensify competition for the marginal barrel, likely posing the biggest threat to Houston Ship Channel competitors including Energy Transfer (ET), Magellan Midstream (MMP) and Phillips 66 (PSX).

Crude oil volumes leaving Corpus Christi could also be at risk if SPOT moves ahead. Corpus Christi is the largest departure point for US crude exports at ~2.15 MMb/d, based on October data. But SPOT's advantages for VLCC loadings could draw terminaling business away from the South Texas port.

East Daley's unique Crude Network Model analyzes the commercial operations of the crude network. We balance and forecast flows pipeline by pipeline, in and out of the major crude hubs and export docks across North America to dissect the crude oil energy value chain. Contact AJ O' Donnell for more information on the Crude Network Model. 

East Daley anticipates EPD and 50% partner Enbridge (ENB) are likely to proceed with the SPOT project. We have yet to incorporate the proposed facility in our Crude Network Model demand stack until we have further clarification from the companies, which should come during 4Q22 earnings calls. – AJ O’ Donnell Tickers: ENB, EPD, ET, MMP, PSX.