Royal Dutch Shell Plc  .com Rotating Header Image

Enterprise, Teppco to Construct Biggest U.S. Oil Port (Update3)

Bloomberg

 

 

Enterprise, Teppco to Construct Biggest U.S. Oil Port (Update3) 

By Joe Carroll

Aug. 18 (Bloomberg) — Enterprise Products Partners LPTeppco Partners LP and a unit of Marquard & Bahls AG plan to build a $1.8 billion Texas oil port that will be the biggest U.S. crude-import terminal when it opens in 2010.

The facility, known as Texas Offshore Port Systems, or TOPS, will take deliveries from tankers 36 miles (58 kilometers) offshore and pump the oil to onshore refineries through a subsea pipeline, according to a statement today.

TOPS will mostly handle light crude shipments from West Africa and the Persian Gulf for Texas-based gasoline producers, said Dan Duncan, the Houston billionaire who controls Enterprise. The port will cut costs for refiners who now rely on barges to haul oil to inland ports. It will also be less susceptible to fog that hinders deliveries.

“This is going to relieve bottlenecks and allow for more efficient routing of crude oil to refineries,” Darren Horowitz, an analyst at Raymond James & Associates Inc., said in a telephone interview. “It’s really going to improve the efficiency” of importing crude.

Demand for the port’s capacity will be driven by environmental rules that are making it harder and costlier for refiners to ship crude through the Houston Ship Channel and other waterways in smaller vessels, Duncan told investors and analysts today on a conference call.

Exxon, Shell Accord

Exxon Mobil Corp., the world’s biggest oil refiner, and Motiva Enterprises LLC, a joint venture of Saudi Aramco and Royal Dutch Shell Plc, have already agreed to lease 40 percent of the port’s capacity.

Enterprise rose 41 cents, or 1.5 percent, to $28.67 at 10:56 a.m. in New York Stock Exchange composite trading. Teppco gained 2 cents to $30.33.

The subsea pipeline will cross onshore at Freeport, Texas, and extend along the coast to a 3.9-million-barrel storage facility at Texas City. A second pipeline will run 75 miles from Texas City to a new storage center near Port Arthur, Texas, which will hold about 1.2 million barrels.

TOPS will be 80 percent larger than the biggest existing U.S. oil port, the Louisiana Offshore Oil Port known as LOOP. It will be able to handle shipments from the world’s largest supertankers that can haul 3 million barrels each, supplanting LOOP’s monopoly on the U.S. market for such deliveries.

Duncan’s Stakes

Duncan, ranked the 39th richest American last year by Forbes magazine, is chairman and the biggest holder of Enterprise and its general partner, Enterprise GP Holdings LP. Duncan is also the largest investor in Teppco, controlling an 18 percent stake based on a Feb. 28 public filing.

Duncan, 75, started Enterprise in 1969 with one truck, two partners and $10,000. After buying his partners’ stakes, Duncan took the company public in 1998. Forbes estimated Duncan’s fortune at $8.2 billion.

Enterprise, Teppco and Marquard’s Oiltanking Holdings America will contribute $600 million each to the project and own equal stakes.

Enterprise and Teppco were considering an offshore port project at the same time Marquard was mulling a similar development to serve the same market,Michael Creel, chief executive officer at Houston-based Enterprise, said on today’s conference call.

Offshore Expertise

The companies combined their plans into one project at the request of oil shippers, he said. Enterprise and Teppco will draw on the expertise Marquard developed with other offshore projects, including a deepwater terminal in Indonesia, he said.

The partners expect to spread construction expenditures over four years, with spending peaking in 2010 at about 50 percent of total costs, Creel said.

LOOP, owned by Shell, Marathon Oil Corp. and Murphy Oil Corp., is located 18 miles south of Grand Isle, Louisiana, in 110 feet of water. The terminal is connected to underground caverns and above-ground storage tanks that can hold 53.6 million barrels of crude.

TOPS won’t compete with new pipelines being planned to carry oil to Gulf Coast refineries from Canada’s tar sands region, Duncan said. Those pipelines will supply refineries that relied on heavy, high-sulfur oil that traditionally came from Mexico and Venezuela, two declining sources of supply, Duncan said.

Surging Costs

About two-thirds of Texas coastal refineries get their oil by offloading crude from tankers at sea and carrying it ashore on barges, a practice known as lightering. Costs for such shipments are expected to surge as the 2015 deadline approaches by which all lightering vessels in U.S. inland waterways must be double-hulled to prevent spills, Creel said.

The Gulf Coast is home to 48 percent of U.S. oil- refining capacity, according to the Energy Department in Washington.

To contact the reporter on this story: Joe Carroll in Chicago at[email protected]

Last Updated: August 18, 2008 11:37 EDT

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Enterprise, Teppco to Construct Biggest U.S. Oil Port (Update3)”

Leave a Comment

%d bloggers like this: