Texas’ oil success relies on better ports
Tuesday, March 19, 2019
If you travel along the Texas Gulf Coast today, look closely and you will take in a scene that would have seemed near impossible a decade ago - more domestic oil loaded onto ships for export than international oil being imported. This turn of events ultimately means greater energy security for the United States, but there is still work to be done.
In the last ten years, technological innovation sparked a shale revolution, enabling the U.S. to reenter the global oil conversation as a producer. Three years ago, Congress voted to lift an outdated export ban on U.S. crude oil. Freed from landlocked prices and spurred by changes in technology, U.S. crude production has surged to a record 12 million barrels of oil per day. The U.S. is now the top oil producer in the world and Texas has been the lead actor in this shale revolution story with the bulk of oil growth coming from the Permian Basin in West Texas and the Eagle Ford Shale in South Texas. Home to an industrious workforce, low cost reserves and advantaged legacy infrastructure, Texas possesses all of the key ingredients to lead the way toward American energy security.
However, yesterday’s infrastructure is not sufficient for tomorrow’s production. Like many Permian operators, Parsley Energy has seen, and navigated through, some of the challenges created by the growth in the basin. In December the U.S. Interior Department named the Permian Basin home to the largest oil and natural gas resources ever assessed. This is one of the many indicators that our collective work is far from complete.
Although lower oil prices may moderate the trajectory of production growth in the near-term, many market analysts still project the Permian Basin to be the engine that drives U.S. oil production. Underinvestment on the infrastructure side can directly impact the bottom line of Texas-based producers and service providers and the budgets of state and local governments. Last December, a barrel of oil in Midland was selling for $15 less than the one sold in Houston. This is a timely example of the real-world impacts of logistical bottlenecks. Midstream providers have recognized this opportunity and stepped up to the plate, with funding in hand for a host of new pipeline projects linking West Texas supply to Gulf Coast demand outlets and significant construction already well underway.
The Texas port system represents a critical final link between U.S. producers and the world oil market. It is here that both industry and policymakers must remain vigilant and forward thinking. In 2017, the American Society of Civil Engineers issued a grade of C-plus for our nation’s ports, citing congestion that limits productivity and insufficiently deep navigation channels to accommodate larger ships. On the latter point, many U.S. ports currently lack the infrastructure to fully load very large crude carriers (VLCCs), which are typically the most effective way to transport crude internationally.
There is strong demand for our crude around the world, but infrastructure limitations at Texas ports, docks and terminals will need to be addressed if the U.S. is to remain on equal footing in the global oil marketplace. We need to invest heavily in export facilities across the country and especially along the Gulf Coast to ensure hard-earned economic and strategic benefits for the U.S. and Texas remain.
We are moving in the right direction, with a handful of projects in various stages of completion. Expedient collaboration between the private sector and policymakers on projects like the deepening of the ship channel in Houston, the expansion of the port in Corpus Christi, and new deep-water ports like the Texas Gulf Terminals Project will be critical. Environmentally responsible efforts to expand and create new export facilities should be prioritized and streamlined. A robust oil export economy creates jobs and injects millions of dollars into the economy through new construction and transportation investment. This is an issue that is bigger than any individual project and a collective solution is essential to maintaining Texas’ role as a leader in the global energy market.
We have something special in the Permian Basin. A generational resource that is a key ingredient for affordable and reliable energy and the products we use every day. However, to get this resource to market, we need all of the options that 21st century export infrastructure has to offer. The time to improve our port facilities is now.