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Coastal Desk

The Working Coast: Even As Prices Drop, Crude Oil Flows Through South Louisiana

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Tegan Wendland
/
WWNO
Billy Smith runs Smith Tank and Steel out of Gonzales with his brother. He’s been hired to help build seven new oil storage tanks at LOOP. ";

Even as the price of oil drops, and offshore drilling slows down, huge amounts of crude oil keep flowing into Louisiana’s oil ports. The biggest is LOOP, the Louisiana Offshore Oil Port. It’s a major pass-through point for a lot of U.S. crude. But instead of heading out to refineries, oil is being stockpiled at LOOP.

LOOP has a huge port about 20 miles out in the Gulf of Mexico, south of Port Fourchon. It’s the largest point of entry for crude oil coming into the country via water. Big ocean tankers pull up there and unload the oil, which is then pumped through pipelines, another 20 miles north.

Security is tight all along the way. LOOP has a command center with staff monitoring all onshore and offshore operations 24/7, using video cameras. LOOP handles 10 percent of US domestic oil. From here in the tiny bayou town of Clovelly, underground pipelines connect to most of the refineries in the country. An accident or sabotage here could cause a crisis.  

Once through security, it’s a long drive through grassy cow pastures surrounded by woods. Then the trees clear away to reveal a group of huge, round white metal tanks. Each tank can hold about 350,000 barrels of oil. That’s seven million gallons of gas. One could drive around the earth 8,000 times in a Toyota Corolla with that much gas.

LOOP is building even more tanks. Billy Smith runs Smith Tank and Steel with his brother out of Gonzales, Louisiana. It’s one of many local companies hired by LOOP to build seven new oil storage tanks. It’s a $25 million project, so LOOP can store two million more barrels of oil.

 

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Credit Tegan Wendland / WWNO
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WWNO
LOOP is constructing seven new oil storage tanks at its onshore facility near Clovelly to meet the growing demand for storage.

Smith says his crew constructs the metal tanks after the foundation is laid, and then there are electricians, pile drivers, electricians and others who work together to complete them.

Tom Shaw, the president of LOOP, says that despite the downturn in oil prices, as long as people are buying gasoline the refineries will need to process oil into gas. “It is a good time to be in the storage business. Whether you’re here at LOOP or in Texas – wherever there is storage it tends to be filling up.”

Companies plan to keep producing oil, too. The U.S. Energy Information Administration forecasts record highs for offshore oil production in the Gulf of Mexico in 2017. Those drilling projects were planned over a decade ago, when oil prices were high. Once a company invests big money into drilling a well and building a platform, there is really no going back.

Shell, Anadarko, and Freeport McMoRan are all starting new deepwater wells. But they can afford to sit on what they produce. Shaw says the companies will be looking to store that oil, and even though drilling is down, “There are a number of large projects that have already been sanctioned in the Gulf, and we think that there’s going to be several hundred thousand barrels a day of crude oil coming onto shore and… we’re in a good spot to handle that.”

The increase in drilling activity and the current glut of crude oil all line up to make storage profitable right now. More oil is being produced than consumed, and companies expect the price to bounce back to $100 a barrel or even more. They just don’t know when.

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Credit Tegan Wendland / WWNO
/
WWNO
LOOP is constructing seven new oil storage tanks at its onshore facility near Clovelly to meet the growing demand for storage.

Storing oil has always been big business, that’s why LOOP was built in the first place, for an oil boom in the late 1970s. Most of the oil in Clovelly -- about 60 million barrels -- is stored in natural caves, or underground salt domes. Once those were full they started building tanks.

Carey Speyrer is one of about 250 people building the newest tanks. In a community where many have been laid off from oil rigs, his co-workers are still buying new houses and trucks. “Everyone’s working, it’s good,” says Speyrer. “Guys are making money, supporting their families.”

But the thing is, storing oil is a short-term win for a handful of people. It’s oversupply that got us here in the first place. The storage companies and traders make money, but as more oil is stockpiled, prices stay low. Workers who serve many existing oil wells stand to see more layoffs.

Support for WWNO's Coastal Desk comes from the Greater New Orleans Foundation, the Coypu Foundation and the Walton Family Foundation. 

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