The Trump administration touted the brand new licensing on Feb. 3 of the Texas GulfLink challenge—a crude oil-exporting terminal proposed within the deepwater Gulf of Mexico, about 30 miles offshore of Texas—claiming the nation is restoring its “maritime dominance” and unleashing a brand new “golden age of American energy.”
However one key voice was lacking from the celebration: Texas GulfLink’s developer. Dallas-based Sentinel Midstream declined to touch upon the administration’s announcement, and didn’t subject any press launch for its politically ballyhooed challenge approval.
Sentinel’s silence was a symptom of an even bigger disconnect within the gulf. What as soon as was a race to construct a collection of deepwater terminals previous to the pandemic—together with the involvement of family names equivalent to Phillips 66 and Chevron—has now became silence over stalled tasks that will by no means come to fruition.
There merely isn’t sufficient crude demand or buyer assist to justify constructing them any longer, though U.S. oil output is hovering close to all-time highs, power analysts stated. At finest, tasks may very well be revisited in 2027, when and if the U.S. oil trade rebounds from a weaker value atmosphere, stated Keland Rumsey, East Daley Analytics power markets analyst.
“Certainly, in the short term, it doesn’t really seem like it’s a necessity, or that these people would be incentivized to actually build the offshore export facilities,” Rumsey instructed Fortune, noting that the potential inflow of extra Venezuelan oil creates added uncertainty.
Shifting objectives
When Congress lifted the nation’s 40-year ban on exporting oil—in place for the reason that Arab oil embargo—on the finish of 2015, U.S. oil manufacturing was booming. Firms have been build up oil-export terminals to ship Permian Basin oil abroad from the Houston Ship Channel and the Port of Corpus Christi.
The U.S. now routinely exports greater than 4 million barrels of crude oil every day—about as a lot as Iraq pumps from the bottom in complete.
There was only one catch. The largest crude oil tankers, VLCCs—sure, they’re referred to as Very Massive Crude Carriers—both couldn’t dock or refill all the best way at Texas ports due to the shallower water depths. As a substitute, smaller tankers should load the crude after which switch the oil to the VLCCs in deeper waters—a extra time-consuming and costly maritime train.
Therefore, got here the concept—and the following mad sprint—to license and construct deepwater oil terminals offshore of Texas.
The main contenders have been Enterprise Merchandise Companions’ Sea Port Oil Terminal, referred to as SPOT, with Chevron signed on because the anchor buyer; Texas GulfLink; Vitality Switch’s Blue Marlin challenge; and Phillips 66’s Bluewater terminal.
However, simply because the race was heating up, the COVID-19 pandemic struck and quickly collapsed oil markets. As a result of the terminals are proposed offshore, they wanted U.S. Coast Guard and Maritime Administration approvals for a brand new sort of infrastructure. The Biden administration wasn’t precisely fast-tracking the method.
By the point the primary challenge, Enterprise’s SPOT, was absolutely licensed in 2024, Chevron had left because the anchor buyer and so had the three way partnership developer, Enbridge.
Moderately than export extra crude oil, Chevron stated it determined to deal with domestically refining extra of its oil into petroleum merchandise, equivalent to diesel and jet gas, after which exporting these higher-value merchandise as a substitute.
Enterprise spokesman Rick Rainey stated the corporate continues to be “working to commercialize the project” with potential prospects, and can then determine whether or not to proceed with development or not.
Funding the SPOT
Enterprise co-CEO Jim Teague final talked about SPOT throughout an earnings name 12 months in the past, when he complained concerning the extended allowing course of and stated SPOT needs to be the “poster child” for reform. However he acknowledged the trade’s fundamentals had shifted as effectively.
Teague stated the trade wrongly forecasted that crude exports would have grown much more by now. What’s extra, he added, due to Europe transferring away from Russian oil after the Ukraine invasion, extra U.S. oil goes to Europe as a substitute of Asia. The shorter journeys to Europe don’t require as lots of the largest tankers—undermining demand for the deepwater terminals.
“We have not gotten enough traction in commercializing SPOT, though we continue to promote SPOT as we are the only company with a license to construct,” Teague stated a yr in the past.
Now, Texas GulfLink is licensed as effectively, however it’s seemingly not ready to behave on its license in the meanwhile.
The Blue Marlin and Bluewater tasks stay unlicensed. Vitality Switch hasn’t talked about its challenge in an earnings name since 2024 and, for Phillips 66, it’s been even longer.
Phillips 66 nonetheless has pending emissions points with the challenge’s air allow utility below the Environmental Safety Company. Phillips 66 spokesman Al Ortiz stated in a press release, “We will await the decisions and next steps of the permitting agencies.”
Within the meantime, the Trump administration stays enthused concerning the Texas GulfLink licensing.
“The war on American oil and gas is over,” stated Transportation Secretary Sean Duffy in a press release. “The Texas GulfLink project is proof that when we slash unnecessary red tape and unleash our fossil fuel sector, we create jobs at home and stability abroad. This critical deepwater port will allow the U.S. to export our abundant resources faster than ever before.”
