The United States can't export crude oil, yet. But that's not stopping Buckeye Partners (BPL) and Phillips 66 (PSX -3.64%) from getting into position for the day when crude oil exports are legal. That was pretty obvious after Buckeye Partners announced the $860 million acquisition of an 80% interest in a Corpus Christi, Texas, terminal complex and associated Eagle Ford shale assets. The deal gave the company a fourth energy hub, all of which are centered on moving crude oil and petroleum products. The deal also follows on the heels of Phillips 66's own quiet positioning for exports through acquisition of a Gulf Coast crude oil and refined products terminal. These recent deals place the pair among the early leaders in readying for crude oil exports.
Perfectly positioned to export Eagle Ford oil
Buckeye Partners' latest deal includes a deepwater marine terminal on the Corpus Christi Ship Channel. Additional acquired assets include a condensate splitter and LPG storage complex in Corpus Christi, as well as three crude oil and condensate gathering facilities in the Eagle Ford shale. Each asset possesses significant expansion opportunities. Taken together with its three other energy hubs in Chicago, New York, and the Caribbean, Buckeye Partners is in a prime position to profit when America finally ends its crude oil export ban.
As the following slide notes, Corpus Christi is in an ideal location for an Eagle Ford shale crude oil export facility.
Source: Buckeye Partners.
Crude oil and condensate production in the Eagle Ford is expected to surge 55% through the end of the decade. That growing production presents a problem as American refineries can't handle the volume of light oil and condensate being pumped out of the shale.
Corpus Christi is likely the best port to handle exporting this output as it has three times as much crude oil takeaway capacity as Houston. Furthermore, it's cheaper to ship oil to Corpus Christi where pipeline tariffs are lower and the Corpus Christi Ship Channel is less congested. That gives Buckeye Partners' facility a leg up on Phillips 66, which acquired a marine terminal in Beaumont, Texas, that doesn't have those advantages.
Optionality ensures profits even if crude oil exports fail to materialize
Buckeye Partners sees its strategically placed Corpus Christi facility becoming a key export facility, not just for crude oil but for condensate and LPG. As the following slide points out, the port could be a particularly key asset in exporting condensate from the Eagle Ford shale.
Source: Buckeye Partners.
The facility has significant storage capacity for condensate, and it will soon have a condensate splitter -- with more splitting capacity on the way. These splitters turn the condensate, which is an ultra-light crude oil, into a refined petroleum product. That's vitally important because minimally refined condensate is technically a refined petroleum product, meaning in can potentially be exported even if the crude oil export ban is never lifted. That will help to lock in profits for the company.
Investor takeaway
Buckeye Partners is one of just a handful of companies quietly preparing to profit from crude oil exports. That first-mover status could earn its investors a very strong return if the ban is lifted. However, it's still not making an outright bet that crude exports will be authorized, as the facility it is acquiring has significant flexibility to export refined petroleum products. That will help ensure Buckeye earns investors a very strong return no matter what the government decides when it comes to shipping crude oil to other nations.