NuStar targets to move 600,000 b/d of Permian crude to US Gulf Coast in 2024

NuStar Energy is targeting to move 600,000 b/d of land-locked crude from the Permian basin in 2024 to refineries and export facilities in Southern Texas and along the US Gulf Coast, CEO Brad Barron said Feb. 1.

The company’s Permian Crude System delivered 584,000 b/d of WTI barrels in the fourth quarter of 2022, 13% higher compared to the last quarter of 2021, Barron said on an earnings call. In Q4 2021, the pipeline system had a throughput of 508,080 b/d.

The Permian Crude System is a series of interconnecting short-haul pipelines in the Midland and Colorado City areas of the basin that use pipelines owned by other midstream players to ship volumes to refineries in Southern Texas and along the USGC, NuStar’s executive president for business development and engineering, Danny Oliver, said separately in a call Feb. 1.

On its own, the company does not own a long-haul pipeline to move WTI from the Permian basin to markets, Oliver said.

S&P Global Commodity Insights assessed Platts American GulfCoast Select at $81.25/b on Jan. 31, a $2.15/b premium to the NYMEX WTI strip, or a $3.15/b discount to the Dated Brent Strip.

Besides the Permian Basin, NuStar also serves producers in the Eagle Ford Basin, also in Texas, utilizing its Corpus Christi Crude System which moves both light and heavy barrels from the basin to a storage and marine export facility called North Beach Terminal at the Port of Corpus Christi, Oliver said.

“In South Texas, total crude throughput on the Corpus Christi Crude System averaged over 368,000 b/d in the fourth quarter of 2022, which is above our minimum volume commitments (MVC) for the system and 8% higher than volumes in the third quarter of 2022 [of 338,560 b/d],” Barron said.

MVC is the minimum volume contracted by a shipper that makes it commercially viable for a midstream player to operate a pipeline.

Barron did not give a comparative figure for throughput in Q4 of 2021, but said: “We are encouraged by the continued improvement we saw in January on that system, as our average volumes rose to nearly 400,000 b/d.”

In 2023, NuStar has allocated a spend of $60 million to expand the Permian Crude System in a “basket of smaller projects”, CFO Tom Shoaf said on the same call.
Permian pushback

Despite the “historic inflation and volatility” in 2022 that made it a bumpy ride for midstream players in the US, NuStar’s total crude throughput was 1.41 million b/d last year compared with 1.40 million b/d in 2021, Barron said.

A slowdown in the rate of crude production growth in the Permian Basin could potentially be a headwind for midstream players in 2023.

“Last year we forecast growth in the Permian, but the rate was lower,” Oliver said, noting, however, that “producers are active and we expect to see some growth there.”

Oliver said the NuStar’s Corpus Christi Crude System had seen a “pick up in volumes.”

Mixed signals have emerged on what the Permian Basin growth pattern will be going forward.

ExxonMobil said Jan. 31 it was on track to reach production of 1 million b/d of oil equivalent in 2027, compared with 560,000 boe/d in Q4 2022, while fellow producer Chevron said Jan. 27 production growth in 2023 will be “a bit lower” than the 16% increase achieved during the previous year as fewer “banked” wells will be available for easy production increases and amid ongoing optimization work.

S&P Global Commodity Insights expects Permian crude and condensate production to climb to 5.7 million b/d by end-2023 and 6.3 million b/d by end-2024, up from 5.5 million b/d in January.

Crude exports

Demand for crude exports from NuStar’s facilities are on the rise, Oliver said, adding the company handled just under 400,000 b/d in Q4 from its North Beach Terminal.

The terminal receives both light and heavy barrels from the Eagle Ford crude basin via the Corpus Christi Crude System. It has a total storage of 3.9 million barrels and export docks with capacity 750,000 b/d to 1 million b/d, Oliver said.

“We can load Suezmax vessels with a crude loading rate of 30,000 barrels/hour,” Oliver said.

A Suezmax tanker can ship 800,000-1 million barrels of crude.
Source: Platts