The "Long Pole In The Tent" -- US Crude Oil Exports -- May 20, 2019

For background, see these two posts:

• May 15, 2019; later;
• May 15, 2019; earlier

The issue is the "long pole in the tent" when it comes to US crude oil exports. Today, RBN Energy provided a nice update / analysis, re-posting:

RBN Energy: crude exporters navigate gulg coast terminal constraints. Archived.

This blog is based on research from Morningstar Commodities. A copy of the original report is available here.

U.S. crude exports out of the Gulf Coast averaged more than 2.4 MMb/d in the first four months of 2019 — using infrastructure that is increasingly constrained by a lack of deepwater ports. U.S. crude is reaching destinations worldwide, with large volumes traveling long distances to Asia on gargantuan 2-MMbbl vessels — Very Large Crude Carriers (VLCCs) — loaded offshore by ship-to-ship transfer. Shipments to Europe are primarily on smaller Suezmax and Aframax vessels. Overall, the increased marine activity is testing the limits of existing infrastructure. Today, we analyze the past 16 months of crude export vessel movements and their impacts on Gulf Coast ports. (We’ll also be discussing this and other critical trends related to U.S. export markets live and in person.

Some other data points and narrative from that analysis:

We’ve covered the development of U.S. crude exports extensively in the blogosphere since the ban on most overseas shipments was lifted in December 2015. Exports from the Gulf Coast are growing and expected to increase further as new pipelines from the Permian and Eagle Ford come online over the next two and a half years (see Hard Hat and a Hammer). In the less than four years since wide-open exporting began, the rapidly developing export market has overcome a number of challenges, like poor price transparency (see The Race is On) and the lack of deepwater terminals to load exports (see Rock The Boat). Actual shipments still require considerable logistical juggling as crude is loaded from smaller tankers onto long-distance VLCCs for voyages to Asia, as detailed in Berth In Reverse. And, as we’ve been discussing in our Slow Ride series, ports like the Houston Ship Channel are contending with increased congestion and the resulting difficulties in scheduling. Plans to expand the onshore ports — and build new deepwater terminals offshore — are in the works, but funding and executing on these projects is not easy and can take many years.

With the exception of the Louisiana Offshore Oil Port (LOOP) terminal 20 miles off the Louisiana coast in the Gulf of Mexico, the Gulf Coast is not blessed with deepwater ports that can accommodate massive VLCCs. These supertankers and a handful of their giant brethren — the 3-MMbbl Ultra Large Crude Carriers (ULCCs) — require at least a 75-feet of draft to load fully and are the workhorses of long-distance oil transport between continents. Most Gulf Coast terminals are restricted to a 45-foot draft that only allows them to fully load Aframax tankers holding 500-650 MBbl of crude or to partially load Suezmax tankers that hold up to 1.3 MMbbl. Analysis of the Crude Voyager data shows that during the 16-month period from January 2018 to April 2019, 548 different vessels made a total of 1,402 crude export shipments from Gulf Coast terminals. Of these shipments, 69% involved Aframax tankers, 21% Suezmax, and 6% smaller Panamax (less than 500 Mbbl); 3% were loaded directly onto VLCCs. (As we’ll get to in a bit, many of the smaller tanker loadings were for ship-to-ship transfers to VLCCs.)

RBN Energy then provides an in-depth look at current export terminal capabilities.

The detailed logistics involved in getting U.S. crude out of Gulf Coast terminals and on their way to export markets underlines the ingenuity of shippers that have built export volumes from next to nothing to more than 2.4 MMb/d in just four years. The upcoming tsunami of crude from new pipelines out of the Permian and Eagle Ford over the next two years will surely test the export infrastructure. That’s the reason behind a slew of new project proposals to build deepwater Gulf of Mexico terminals off the coast of Freeport (TX), Texas City (TX), Corpus Christi, Brownsville (TX) and Louisiana, as well as plans to expand part of the Corpus Christi harbor channel to accommodate fully loaded VLCCs. 

If one or more of the new deepwater terminals are built, they would reduce the number of ship-to-ship transfers needed to load export cargoes. Then, in theory at least, pipelines could seamlessly feed deepwater terminals and load VLCC tankers directly and efficiently. If for any reason those deeper terminals don’t get built, expect to see increased congestion as existing Gulf Coast docks struggle to handle ever-larger crude export volumes.

Two very important data points were not addressed:

• congestion: as we saw earlier this month, a small collision resulting in a small spill can shut down the entire port; and, 
• as we saw last year -- and see almost every summer -- hurricanes will definitely shut down the port