Posted on October 16, 2024
The Houston Ship Channel is preparing for major changes expected from an offshore crude oil export terminal proposed for the Gulf of Mexico.
Houston-based Enterprise Products Partners LP (NYSE: EPD) hopes to reach a final investment decision for its Sea Port Oil Terminal by the end of the year and potentially start construction sometime in 2025. With the capacity to load very large crude carriers, commonly called VLCCs, at a rate of up to 2 million barrels per day, the terminal is likely to pull business from the Houston Ship Channel and Enterprise’s Hydrocarbons Terminal. But the channel is ready to adapt.
Bob Sanders, Enterprise’s executive vice president of asset optimization, told the Houston Business Journal that the SPOT terminal could pull at least three ships a day from the company’s existing terminal. Rather than sending smaller ships into the ship channel repeatedly to load one large ship, the VLCCs will be able to load up in the Gulf of Mexico at the SPOT terminal, which is being developed about 30 nautical miles off the Brazoria County coast.
“When we are up and running, it will reduce CO2 emissions on the Gulf Coast by as much as 320,000 tonnes a year,” Sanders said. “Today you have one big ship sailing around in a circle out there for a week to 10 days, and you have two or three little ships coming out there, going in, coming out there, going in, using all those emission.”
While the SPOT terminal is taking crude oil business out to sea, Enterprise is preparing its Houston terminal to accommodate more liquid petroleum gases, which need to be refrigerated and thus can’t be loaded offshore.
In July, Enterprise announced it was expanding its refrigeration capacity at its Houston Ship Channel terminal, increasing loading rates for LPGs while making additional capacity available for propylene exports.
The expansion is expected to start up by the end of 2026.
The expanded LPG export capacity will also be able to provide energy to people around the world who rely on wood and dung to heat their homes, Sanders said.
Charlie Jenkins, CEO of the Port of Houston Authority, is prepared for a potential drop in crude oil business in the Houston Ship Channel, but he believes that will open opportunities for the channel to expand its offerings in refined petroleum products, which are more expensive.
“I think we’re at risk of losing some of that business, and it actually excites me,” Jenkins said. “Do you think Enterprise is going to let their facilities just sit there and go idle when there’s demand for more and more liquid tonnage of higher-value refined products? I think if SPOT happens, … I think there’s a really good chance we’re going to replace that traffic with much better economic-driving jobs and markets with more refined products.”
Jenkins added that job growth could also come from converting docks to accommodate more refined products instead of crude oil.
SPOT’s progress so far
Enterprise received its deepwater port license from the United States Maritime Administration, or Marad, in April. The typically one-year process took five years with an application eventually totaling more than 33,000 pages.
“It’s probably the most scrutinized application in the history of Marad,” Sanders said.
Now, Enterprise is working on getting its platform design certified by the Coast Guard, and the company is working with Lloyd’s Register to get that certified.
Enterprise has been working on the SPOT terminal since at least 2018. The name SPOT came from its original plans in 2008 to develop an import terminal with Oiltanking Holdings, named the Texas Offshore Port System, or TOPS. Enterprise pulled out of the $1.8 billion project a year later, acquired Oiltanking in 2015, and decided to name the new export terminal SPOT as an inverse of TOPS.
