industry infrastructure. Particularly important is the geography of 

 crude oil pipelines, transshipment terminals, refineries, product pipelines, 

 and the technical and business organizations that build and operate such 

 facilities. Existing infrastructure is of great importance because 

 it requires an immense fixed and working capital investment that can 

 neither be abandoned nor moved to a new location. At best, existing 

 infrastructures that is undesirably located (in an economic sense) with 

 respect to new offshore sources of crude oil will be gradually phased 

 out by industry as it rebuilds and reorganizes around the newer energy 

 sources. Therefore, a new OCS field may not be accompanied by a huge 

 buildup of facilities on the nearest adjacent coast. Contrariwise, one 

 would expect that platforms would be built at existing yards, that the 

 crude product would go for processing to present refineries and that 

 only service facilities would spring up immediately in the local area. 



In addition to Texas and Louisiana, there are sizable concentrations 

 of infrastructure in Southern California and along the east coast in New 

 York, Pennsylvania, New Jersey, Delaware and Maryland. Infrastructure 

 is also spread throughout the north central states. For years, the east 

 coast infrastructure has been supported by oil imported via tankers; 

 thus it is near existing harbors. Much of this infrastructure was built 

 to handle imports from the Caribbean Islands. 



Refineries in the Caribbean Islands have historically processed 

 heavy South American crudes (mainly from Venezuela) into residual oils 

 for the east coast utility (mostly electric power) market. As Venezuelan 

 oil production has declined, these refineries have turned to eastern 

 hemisphere crude sources. 



It appears that an excess of refining capacity will be available in 

 the Caribbean for some time. Since the Caribbean Islands lie directly 

 on the route of tankers from the Persian Gulf, this area has become 

 highly favored as a refining and transshipment center. Transshipment 

 seems feasible since oil can be transported to the Caribbean in 

 supertankers and then moved to the U.S. in shallower draft tankers 

 capable of directly entering all U.S. ports. 



The availability of crude oil to a region is the most critical 

 factor affecting the establishment and growth of refining capacity. On a 

 large geographic scale, as crude sources shift, refining capacity will 

 do likewise, continuing to locate where crude can be made readily 

 available. 



Also, refinery location is dependent on the availability of water 

 for two reasons. First, location of refineries in proximity to navigable 

 waterways allows inexpensive transport of oil and products. Second, 

 large quantities of water are used for cooling in the refining process. 



The Gulf Coast region has more refining capacity than any other 

 region of the United States--41 percent of the total. This compares to 



10 



