US crude exports expected to see modest rise in 2022

US crude oil exports are expected to rise in 2022 and exceed an average of 3 million b/d as North American production rises amid a higher oil and gas pricing environment.

However, US exports will not spike as much as crude production volumes this year because domestic demand also is expected to increase with refineries still underutilized as the ongoing COVID-19 pandemic potentially switches to the endemic phase later this year, according to S&P Global Platts Analytics and Kpler projections.

Because of their different methodologies, Platts Analytics sees US exports rising from about 2.9 million b/d in 2021 to more than 3.04 million b/d in 2022, while Kpler has crude shipments hiking from 2.8 million b/d to 3.05 million b/d, said Matt Smith, Kpler Americas lead oil analyst.

"We're seeing strong exports now," Smith said, cautioning that US crude inventories will dip very low in the summer as domestic demand rises, keeping more barrels onshore. "Still, a 250,000 b/d increase is pretty strong."

Other factors include more heavy Canadian barrels making their way to the US Gulf Coast courtesy of the recent completions of Enbridge's Line 3 replacement pipeline and the Capline Pipeline reversal project. And the uptick in US Gulf of Mexico production since the recovery from Hurricane Ida means USGC refineries have more options with greater volumes of both Western Canadian Select and Mars grade barrels.

"We may see that kind of Mars barrel hitting the market more," Smith said, highlighting Gulf of Mexico barrels leaving on VLCCs from LOOP to Asia, while speaking Jan. 25 at the Argus Americas Crude Summit 2022.

The US Energy Information Administration said Jan. 26 that US crude exports rose to about 2.8 million b/d for the week ended Jan. 21, which is the highest weekly average since the Christmas holiday. That is up from 2.6 million b/d the week prior.

Platts Analytics sees US exports rising even more to above 3.3 million b/d in 2023. However, Smith cautioned that Canada's expansion of the Trans Mountain Pipeline west to Vancouver could create more competition for Canadian barrels to leave from its own West Coast to China. Trans Mountain has maintained a late-2022 completion timeline, although most energy analysts expect delays well into 2023.

"It could really change things up," Smith said of Trans Mountain. "There could be unintended consequences."

But the Permian Basin will remain the juggernaut when it comes to production hikes. The Permian is forecasted to hit an all-time high of almost 5.1 million b/d of crude in February and continue to grow from there, according to the EIA.

Smith said Kpler expects the Permian to spike by 500,000 b/d this year. Platts Analytics projects Permian projection to rise by 410,000 b/d in 2022, while Canadian volumes should jump by 170,000 b/d this year.

Regional competition

At the Argus summit, ConocoPhillips CEO Ryan Lance said he even sees total US crude volumes rising by 800,000 b/d this year. Executives at Energy Transfer and EPIC Midstream touted their bullishness for production volumes and exports as well.

"The privates are really getting bullish at running rigs," said EPIC Midstream Chief Commercial Officer George Millas. "So the growth on the system is coming."

Millas said its Permian pipelines to the Corpus Christi export hub currently are running at record volumes with more barrels anticipated.

Since late 2019, the Port of Corpus Christi has emerged as the nation's top crude export hub, now commanding about 60% of the market share with more export capacity still available.

"It seems as though the market wants to get the barrel on the water, and they're looking to Corpus for that," Millas said. "So we're pretty bullish."

However, more volumes also are headed into the Louisiana and Houston markets with new pipelines online, including in between at Energy Transfer's Nederland, Texas hub near Beaumont. Energy Transfer's Ted Collins Link pipeline project is slated for completion near the end of the first quarter, allowing the movement of about 275,000 b/d of crude along 75 miles from Nederland to its Houston hub, linking two of the largest oil terminal markets in the world.

"I think we're slightly more bullish on the total export number," said Adam Arthur, Energy Transfer executive vice president of crude oil, compared to the Kpler and Platts projections for 2022. "These incremental barrels are going to have to find a home."

That is why Energy Transfer is still pushing its deepwater export terminal project offshore of the Texas-Louisiana border, called the Blue Marlin Offshore Port.

Even with room to grow in Corpus Christi and other ports, the argument is that shippers want a deepwater Texas hub that can fully load VLCCs without requiring reverse lightering.

For the moment, Enterprise Products Partners' Sea Port Oil Terminal project, called SPOT, offshore of the Houston Ship Channel is in the lead in terms of regulatory timing. Enterprise executives said they expect approval this spring.

Market demand may only result in one such project being built, but everything is subject to change. And any deepwater project is at least three years from coming online.

"We're pretty passionate about our project," Arthur said. "It's a little bit of a horse race."