As West Texas drillers pump more crude in coming years, they’ll have to ship almost all of the increase in the Permian Basin’s output to buyers overseas – and most of those exports will pour out of Corpus Christi in South Texas, analysts say.
Energy research firm Wood Mackenzie believes U.S. oil producers will pump more than 11 million barrels of oil a day by 2023, lifting production by more than 4 million barrels a day over 2016 levels.
“We see a big export surge ahead for Corpus Christi,” said John Coleman, senior analyst of North American crude oil markets at Wood Mackenzie in Houston. “There’s going to be a lot of investments to go alongside that.”
Oil companies are building two major pipelines from the Permian Basin to reach Corpus Christi, but virtually all of the crude headed to the South Texas city will be consumed overseas, not domestically.
U.S. refiners, outfitted to process heavy crudes from the Middle East, Canada and elsewhere, have become saturated with the kind of light, sweet crude that comes from U.S. shale plays.
Refinery demand for U.S. crude has dropped, Coleman said. For example, in the fourth quarter, when Houston midstream company Enterprise Products Partners increased the amount of crude flowing to Houston on its pipelines by 300,000 barrels a day, Houston crude exports rose by the same amount.
Analysts said U.S. oil producers will be able to crude into a growing market as global demand grows quickly over the next five years.
“The size of the pie is growing but U.S. producers are taking a lot of that growth for themselves,” Coleman said.
Through 2022, U.S. exports to Europe will likely climb to 1.6 million barrels a day, where American oil producers will have lower transportation costs than in Asia.
But after U.S. exports reach their peak in Europe, companies will start sending more crude to Asia, up to 1.3 million barrels a day in 2023, with about half that amount going to China, Wood Mackenzie estimates.
All told, U.S. exporters will ship 4 million barrels a day of crude around the world, Wood Mackenzie said. Meanwhile, refining capacity in the Middle East and West Africa is set to increase, so those producers will keep more barrels within their own countries.
Even if most of that U.S. oil is refined in overseas markets, American consumers will still benefit from lower gasoline prices, said Amy Myers Jaffe, director of the program on energy security and climate change at the Council on Foreign Relations in New York.
“It means there’s more oil on the market,” Jaffe said. “It doesn’t matter if it’s refined in Asia. There will be more products sloshing around. It’s a swimming pool.”