U.S. Oil Exports Grow Despite This One Big Hitch

16 May 2018

Source: EIASource: EIAU.S. crude oil exports have experienced recent growth even though Gulf Coast ports cannot fully load Very Large Crude Carriers (VLCCs), which are the largest and most economic vessels used for crude oil transportation.

The Energy Department's Energy Information Administration (EIA) says that export growth has relied on using small and less cost-effective ships.

Data show that exports averaged 1.1 million barrels per day (b/d) in 2017 and 1.6 million b/d to date in 2018, up from less than 0.5 million b/d in 2016.

According to the EIA, each VLCC is designed to carry around 2 million barrels of crude oil. Because of their large size, VLCCs require ports with waterways of sufficient width and depth for safe navigation. But all onshore U.S. ports in the Gulf Coast that trade petroleum are located in inland harbors. These are connected to the open ocean through shipping channels or navigable rivers. Although the channels and rivers are regularly dredged to accommodate most ships, they are not deep enough for deep-draft vessels such as fully loaded VLCCs.

Lightering is a technique used to transfer cargo from one oil tanker to another and is used along the U.S. Gulf Coast. Source: AET TankersLightering is a technique used to transfer cargo from one oil tanker to another and is used along the U.S. Gulf Coast. Source: AET TankersVLCCs transporting crude oil to or from the U.S. Gulf Coast have typically used partial loadings and ship-to-ship transfers, known as lighterings. Using this technique, a larger vessel partially unloads its cargo onto a smaller vessel. So-called reverse lightering occurs when smaller vessels load onto a larger vessel. These transfers take place in designated lightering zones and points that exist outside many of the largest U.S. petroleum ports.

EIA says that data from the U.S. Maritime Administration (MARAD) for 2015, the latest year for which data are available, indicate that the two largest ports of call for tankers carrying crude oil and petroleum products are lightering zones. The South Sabine Point and Southtex lightering zones each had nearly 250 million deadweight tons of tanker traffic volume in 2015.

Source: EIASource: EIACurrently, most U.S. Gulf Coast petroleum ports are capable of accepting vessels with capacities of approximately 500,000 barrels of crude oil. The number of ports that can accept vessels with capacities of approximately 900,000–1,000,000 barrels is relatively limited.

The inability to fully load larger and more cost-effective vessels has pricing implications for U.S. crude oil exports, EIA says. Using a number of smaller ships requires a wider price spread between U.S. crude oil and international crude oil prices to compensate for the lower economies of scale and costs.

By comparison, EIA says that other nations that export large volumes of crude oil generally have deeper and wider navigable waterways that are not located in inland/onshore harbors. For example, in Yanbu, Saudi Arabia, located along the Red Sea, the crude oil export facility uses a jetty trestle that extends out to berths in water deep enough to fully load VLCCs.

At present, the Louisiana Offshore Oil Port (LOOP), located offshore southern Louisiana in the Gulf of Mexico, is the only U.S. facility able to accommodate a fully loaded VLCC. LOOP includes storage, undersea pipelines, and single-point mooring facilities in deep water, and was used as an import facility only until it was modified to allow exports earlier in 2018.

EIA says that trade press and company announcements suggest the most likely crude oil export projects to fully load VLCCs will be located near the port of Corpus Christi in Texas. That port has access to light-sweet crude oil from the Permian Basin and Eagle Ford and regularly exports crude oil from the Oxy Ingleside Energy Center and other facilities.

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