More U.S. oil export capacity in the works

Enterprise Products Partners said it wants to convert a gas line to carry crude oil to the Houston area, which would likely be sent out for exports.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Dec. 6, 2017 at 9:28 AM
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Dec. 6 (UPI) -- A gas pipeline running from Texas shale could be converted to send oil to the Gulf Coast by the start of the next decade, Enterprise Products Partners said.

The company announced plans Wednesday to convert a pipeline in its portfolio that carries natural gas from the Permian shale basin to a crude oil pipeline. With a new gas pipeline coming into service at the end of 2019, Shin Oak, the company said it has flexibility to repurpose another line for shale oil.

"We have had strong demand for crude oil transportation, storage and marine terminal services for crude oil production from the Permian Basin," CEO Jim Teague said in a statement.

In its latest drilling productivity report, the U.S. Energy Information Administration put the Permian shale basin at the top in terms of U.S. shale oil producers, far exceeding output from the Bakken shale basin in North Dakota. Production from the Permian shale is expected to increase by about 2 percent from November to 2.68 million barrels per day.

For gas, the Appalachian basin is by far the most productive shale reservoir in the United States, more than doubling the output from the Permian.

Overall, however, the latest monthly data from the Texas Railroad Commission, the state's energy regulator, found oil production was on the decline. The preliminary rate of 2.3 million barrels per day for September, the last full month for which it published data, was lower than the same month last year by 3 percent.

Enterprise said repurposing one of its gas lines to carry oil would lift its total carrying capacity to more than 650,000 barrels per day from the Permian shale to its crude oil hub in Houston.

A record was set in early November for exports when more than 2 million barrels per day left ports like Corpus Christi, Houston and Beaumont. Port infrastructure was damaged this year, meanwhile, by Hurricane Harvey and an official with the Texas Railroad Commission told UPI they were waiting for federal funds to support much-needed port overhauls.

Sandy Fielden, the director of oil and products research for Morningstar, told UPI that any new crude oil entering the Houston area is almost certainly there for exports. For Enterprise, the overhaul gives it a way to compete against other companies moving oil to the Gulf Coast.

"The real limitation in Houston is vessel size -- limited to 500 thousand to 700 thousand barrel cargoes versus VLCCs [Very Large Crude Carriers] that carry 2 million barrels," he said.

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