The Louisiana Offshore Oil Port could be transformed into a “crude blending and trading hub” if improvements are made to handle exports, a consulting group says in a report.
Turning LOOP into an export facility is only at the drawing board stage. Making that a reality will require “significant” infrastructure investments, RBN Energy LLC said.
Those include making a 48-inch pipeline that connects LOOP’s Clovelly storage facility to St. James flow in both directions or building a new parallel line.
In late November, LOOP began shopping the idea of shipping Gulf of Mexico crude to Texas refineries. Those refineries have been tweaked to handle the lighter crude from shale formations but can still use the heavier crude produced in the Gulf of Mexico.
LOOP is in discussions with a number of refinery customers for the Gulf of Mexico crude, said spokesman Terrance R. Coleman.
LOOP is capable of moving oil to tankers headed overseas, but that doesn’t mean the market for that crude exists … yet, Coleman said.
“When things like this happen, there’s bright people out there and there’s entrepreneurial folks out there that create a market,” Coleman said. “So perhaps one day, something could happen. Really the immediate need is to get the Louisiana crude to a marketplace where it’s not stranded.”
RBN said LOOP could draw the oil to be exported through two routes:
- From the Bakken Shale in North Dakota through pipelines that are planned or under construction.
- By reversing the Capline pipeline that runs from St. James to Pakota, Illinois. The pipeline mainly feeds refineries in the Midwest and is operating at a fraction of capacity. That’s because shale formations in the Rockies, North Dakota or western Canada are supplying those refineries.
Converting LOOP into an export terminal would lower shipping costs, which could help open Asian markets for U.S. shale or Gulf of Mexico crudes, RBN said. LOOP can accommodate “ultra-large crude carriers” at its deepwater port, which is 17 miles offshore from Port Fourchon. The ULCCs hold up to 3 million barrels, and the larger the ship, the lower the freight cost per barrel.
The ability to export oil would also make LOOP’s Clovelly storage facilities more valuable to traders, RBN said. The facility can store close to 70 million barrels of crude, and LOOP is already selling storage space to traders.