A few years ago, the VLCC market buzzed with talks of new offshore export terminals capable of fully loading VLCCs which would improve the export economics for US crude to Asia. Back in August 2023 we wrote a report on the topic, but since then interest in the matter has faded, whilst permitting has been plagued by bureaucracy and climate goals. In that report, we commented on several projects including Sea Port Oil Terminal (SPOT), Blue Water Texas, Texas GulfLink (TGL) and Blue Marlin. Given the permitting challenges and lack of regulatory support, some of these projects have stalled. However, with a new administration and a new approach, the odds of one of these terminals making it into service by the end of Trump’s term have increased significantly.
The SPOT terminal, which is to be located offshore Freeport Texas, is being developed by Enterprise Products Partners. It will be connected to the ECHO terminal which has pipeline access to the Permian Basin. The terminal is perhaps best positioned to proceed having attained a deepwater port license, but it has seen its final investment decision (FID) delayed following Chevron’s withdrawal from the project. Enterprise is seeking alternative customers to commit volumes to the terminal, yet at present there is little indication, if and when FID may be taken. Nearby, Blue Water Texas, which is being developed by P66 and Trafigura also appears to be on hold. Very little is being said about the project, which had its draft environmental impact statement revoked by the Environmental Protection Agency (EPA). Again, the terminal would have direct access to the Permian, but it is unclear if the project partners remain committed.
Also nearby is Sentinel Midstream’s TGL project offshore Freeport Texas, adjacent to the planned SPOT terminal. The project looks like a possible frontrunner, having recently attained a Record of Decision Approval (ROD) from MARAD, subject to the approval of a deepwater port permit. Further East, Energy Transfer are currently undergoing a Front-end Engineering and Design (FEED) study and awaiting their deepwater port license from MARAD for a facility offshore Louisiana. In 2023 Energy Transfer signed an agreement with TotalEnergies for offtake, subject to FID being taken.
Whilst all these projects have struggled, either in terms of regulatory approval, government or commercial backing, the odds (at least from a regulatory perspective) appear to now be in their favor. With the Trump Administration advocating for deregulation of the energy sector, including faster permitting, it now seems more likely than ever that at least one terminal will come into service. Indeed, following the ROD for Texas GulfLink, the US transportation secretary commented that “the ROD opens the floodgates for American oil exports”.
So, what would the impact be for the tanker markets? For VLCCs it is undoubtedly bullish and will increase the attractiveness of using VLCCs for US exports where receiving port restrictions are not a factor. For Suezmaxes and Aframaxes it could be bearish given just two of these proposed terminals could (theoretically) handle total US crude exports. Aframaxes in particular have benefitted from both export demand and lightering demand, whilst Suezmaxes have been useful in terms of economies of scale and port restrictions. Rising production may be one way to offset the loss of demand for Suezmaxes and Aframaxes, however, even adding just one terminal could be enough to significantly impact demand for smaller crude tankers. Given that the US currently exports around 4 million b/d, with the total capacity of these terminal projects in the 7-8 million b/d range, it is unlikely that more than two will be built. Yet, even just one has the potential to move the dial in the favour of VLCCs.
Data source: Gibson Shipbrokers