Thursday, December 5, 2013

RPT-Enterprise builds oil 'switchyard' near Houston that could export

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* Hub provides better routing of incoming crude to refineries

* Three access points to water could handle exports if needed
By Kristen Hays
HOUSTON, (Reuters) - The 6 million barrel crude oil "switchyard" Enterprise Products Partners is building in Texas will tie together a slew of pipelines to better feed U.S. Gulf Coast plants with a fifth of U.S. refining capacity and could - if the government lifts a ban on domestic crude exports - help export oil.
Although the company says it is not outwardly pushing for exports or building the system to that end, it says clients want it to be prepared to handle exports in the future from the sprawling Enterprise Crude Oil Houston (ECHO) storage and distribution complex in south Houston.
"Talking to the customers we're talking to, this is a big driver when they choose a storage facility," said Brent Secrest, vice president of onshore crude oil, pipelines and terminals for Enterprise. "We have several opportunities, several options," which includes loading crude vessels, he said.

With rising U.S. output on track to top what refiners can absorb - particularly when it comes to abundant light-sweet crude not favored by refiners geared to run heavy - many in the industry think the export ban imposed after the 1973 Arab oil embargo will eventually be scrapped.
It's just one more illustration of how U.S. crude production, which is booming thanks to horizontal drilling and hydraulic fracturing, has upended traditional oil flows.
Traditional infrastructure takes imports from tankers at coastal docks and moves it inland via pipelines. Now, companies are building pipelines, storage and rail infrastructure to move inland crudes toward coastal refining centers.
Growing output from Texas and North Dakota's Bakken shale oil play, as well as others, have prompted calls to re-examine the ban. Refiners running full-bore are already exporting record amounts of refined products.
Mike Mears, chief executive of pipeline company Magellan Midstream Partners LP, with assets including distribution and storage infrastructure in Houston and a marine terminal in Corpus Christi, told Reuters last week that the industry should be prepared for eventual U.S. crude exports, though he noted there is no certainty the ban will be lifted.
John Mayes of the consultancy Turner Mason & Co has said the U.S. will be saturated with its own light-sweet by 2017.
Several refiners, including Valero Energy Corp and Phillips 66, have already stopped taking light-sweet crude imports into the Gulf.
"We're rapidly approaching an issue that needs to be resolved," Mayes said.

By 2022, Turner Mason expects about 2 million barrels per day of some kind of crude-based exports on top of existing refined product exports, Mayes said. At this point, the U.S. lacks the infrastructure to handle that kind of crude outflow.

ECHO isn't planned as a smaller version of the U.S. crude futures hub at Cushing, Oklahoma. It's designed to hold crude for less than two weeks on its way to refineries, executives said. Cushing, which has capacity of nearly 80 million barrels, can park oil for months.
Crude export readiness, if needed, is part of further expansion plans that already have Enterprise executives envisioning an ECHO II and ECHO III, Secrest said.
Enterprise has docks in Texas City, and is working with the Port of Texas City to access others. The company's Morgan's Point marine terminal on the Houston Ship Channel handles only barges, but Enterprise has already done an engineering study on what it would take to expand it to handle tankers, Secrest said.
Docks at Freeport, Texas, the endpoint of Enterprise's joint-venture Cushing-to-Texas Seaway Pipeline, also could become an export facility.
"In the past, Texas City and Freeport, all these docks in this area, handled imports," Secrest said.

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