The Louisiana Offshore Oil Port LLC is shopping around a planned service that will send crude brought in from the Gulf of Mexico to Texas refineries.
“The primary reason for this project is to re-establish the market that got cut off when the Ho-Ho (Houston-to-Houma) Pipeline got reversed about two years ago,” said Terrance R. Coleman, LOOP’s public information officer.
The pipeline began sending oil from Texas to Louisiana in 2013. During the previous 33 years, the pipeline sent oil from Louisiana to Texas.
The new project will re-establish LOOP’s reach, giving the Gulf of Mexico crudes a bigger market, Coleman said. LOOP believes there is demand for the Gulf’s medium-sour crudes, which have a higher sulfur content.
In the 1980s, Gulf Coast refineries spent billions retooling to handle heavy, high-sulfur oil from Venezuela, Mexico and other export nations. But some energy industry experts say United States shale formations are producing so much sweet, or super light, crude they could outstrip refiners’ capacity. Some refiners have repositioned themselves to handle the lighter crudes.
Greg Upton, an assistant professor at LSU’s Center for Energy Studies, said the past decade’s shale oil and natural gas boom has fundamentally changed the market for both oil and gas.
“Large infrastructural investments, such as investments in improved storage capacity and shipping, are results of these fundamental market changes, not the potential for the crude export ban’s removal,” Upton said, referring to a ban on exporting U.S. oil that has been in place since 1975.
However, removing the ban — unlikely at this point — could spur new investment opportunities for the Louisiana Gulf Coast and LOOP, Upton said.
LOOP has seen the number of foreign tankers offloading crude at its deepwater port fall, along with U.S. imports. Earlier this year, LOOP began selling storage space to traders who needed a place to park their crude while waiting for prices to recover. The facility also is adding 1.1 million barrels of storage capacity at Clovelly, giving LOOP 10.1 million barrels of above-ground storage. The facility also can store 60 million barrels underground.
Coleman said there is a limit to how much sweet crude the refiners can run, and LOOP believes that will create demand for the medium-sour crude flowing into LOOP from fields in the Gulf.
LOOP is seeking commitments from prospective shippers to use the facility’s proposed marine vessel crude oil loading services. The new services would connect LOOP’s Clovelly Hub in Galliano to its deepwater port, which is 17 miles offshore from Port Fourchon. LOOP could load a tanker a day.
The proposed marine vessel loading services could begin service in 2018.
Follow Ted Griggs on Twitter, @tedgriggsbr.