President Trump’s energy dominance agenda hinges on just a handful of oil export terminals on the Gulf Coast that could be overtaxed as production surges — right in the middle of an election year.
“It is one of the key issues right now,” said Dean Foreman, chief economist for the American Petroleum Institute, the lead trade group representing the oil and natural gas industry.
The U.S. is now the third largest oil exporter after Saudi Arabia and Russia, "yet we have a very antiquated export system," said Ferris Hussein, managing director of the Carlyle Group, a multinational private equity and asset management firm.
The firm is a partner in building the country's first deep-water oil export port with the company Lone Star Ports. The facility will be able to accommodate giant supertankers, rather than using smaller ships to move oil from the Texas docks to tankers out at sea, a process called “reverse lightering,” which is currently the predominant method used in Texas. The deep-water port is completely self-contained and will cut down on increased harbor traffic from lightering, which could make exporting more oil less feasible and less safe.
"We feel as though we have a distinct advantage from the customer side, from an environmental side, and from a safety and reliability side," said Jeremiah Ashcroft, CEO of Lone Star Ports.
Hussein said the Trump administration has been very supportive of the project. Trump directed his Cabinet last October to do whatever is necessary to expedite the approval of the Lone Star facility, which is set to come online in October 2020, right before the presidential elections.
[Related: Texas lessons for the Green New Deal]
Hussein said the Army Corps of Engineers will begin dredging the site at Harbor Island in Corpus Christi later this month, after the port authority gave its approval in March to begin constructing the project.
Hussein said the facility will make exporting oil more efficient, less polluting, and safer, but it's only just a first step. More facilities are needed, he said, if the nation wants to keep up with the deluge of oil coming out of Texas' Permian Basin oil fields.
Trump likes to point out that the U.S. has become the largest oil producer in the world, beating out both Saudi Arabia and Russia. But with record oil production comes record amounts of oil exports, because the majority of oil coming out of the shale regions can’t be used by most U.S. refineries on the Gulf Coast and must be exported.
This refinery mismatch is part of the reason the nation’s existing oil export infrastructure is coming into focus, experts say.
The federal government recently said that most of the new export growth last year was due to just one facility in Louisiana, the Louisiana Offshore Oil Port in the Gulf of Mexico, which was converted from being an import terminal.
[Also read: Appalachia's approaching energy boom]
The LOOP shipped 2 million barrels per day for 25 weeks straight in 2018, according to the Energy Information Administration. In 2017, that same record level of exports was only achieved for just a single week. But LOOP won't be able to handle the ocean of oil coming into the region in the next two years for export.
“In addition to LOOP, other U.S Gulf Coast export facilities in and around Houston and Corpus Christi, Texas, have been investing in increasing the scale of U.S. crude oil export cargos,” EIA said.
LOOP and an array of smaller facilities in Texas are responsible for 90% of all U.S. oil exports.
Analysts are expecting a wave of oil to rush the terminals as production is slated to rise to an average of 12.3 million barrels per day this year, an increase of 1.35 million barrels per day from 2018 levels. It will rise to just over 13 million barrels per day in 2020.
U.S. crude oil exports are expected to nearly double next year, going from 2.2 million barrels per day to about 3.9 million barrels per day, which could overwhelm terminals, said Dan Eberhart, CEO of oil services firm Canary and a Trump donor.
“Existing coastal terminals could be overwhelmed by late next year as a flurry of new pipelines come into operation,” Eberhart said.
Previously, the energy industry had blamed a lack of pipelines to move the oil to the export terminals for slowing production last year in Texas’ Permian region, the largest oil producing area in the country. But now the situation is reversing as more pipelines are being built.
Eberhart has also been keeping a close tab on the administration’s sanctions regime, which will affect exports. Trump’s sanctions on Iranian and Venezuelan oil will open the market for U.S. oil to fill the gap in the overall global supply chain, putting pressure on the existing infrastructure.
“With Venezuela and Iran barrels off the market and OPEC maintaining production cuts, there's market for U.S. producers to grab,” Eberhart said.