The White House gave the green light on March 18 for foreign-flagged tankers to move crude oil and refined products between U.S. ports by waiving the Jones Act. In less than two months, about 60 waivers have been recorded. Today, we’ll dig into the new patterns that have emerged.
The White House has issued a 60-day waiver of the Jones Act, which will allow foreign tankers to move crude oil and refined products between U.S. ports in a bid to cool gasoline prices. Today, we dive into what the waiver could mean for U.S. refiners, consumers, and other market participants.
The White House is considering a 30-day waiver of the Jones Act that would allow foreign tankers to move fuel from the Gulf Coast to the East Coast to ease U.S. gasoline prices.
Back in 2013-14, a run-up in demand for Jones Act tankers and large articulated tug barges –– and a spike in time charter rates — spurred orders for a flotilla of new vessels. By the time the new tankers and ATBs were built and launched, however, demand for them had fallen off. That decline was mostly due to the mid-decade slump in U.S. crude oil production and, with the lifting of the ban on most U.S. crude exports, the drop in crude shipments from one U.S. port to another. Term charter rates plummeted and ship owners stopped ordering new tankers and large ATBs. Now, for the first time in more than five years, there are barely enough Jones Act vessels to go around, and charter rates are on the rise. Today, we discuss recent trends and how they’re impacting crude oil and refined products transportation costs.
U.S. crude oil exports from Gulf Coast ports are soaring — in January they averaged well over 2 MMb/d — and when you’re moving large volumes long distances by water, there’s no vessel as efficient as a Very Large Crude Carrier (VLCC). A number of midstream companies are planning costly offshore terminals that could fully load 2-MMbbl VLCCs, but jobs like that take years, and Moda Midstream is in no mood to wait. Since it acquired Occidental Petroleum’s (Oxy) Ingleside marine terminal near Corpus Christi last September, Moda has been adding new tankage and loading equipment to enable it to load up to 1.25 MMbbl onto a VLCC within 24 hours from arrival to departure, then send the supertanker out to the deep waters of the Gulf for a quick top-off via reverse lightering. Upon completion of further expansion programs, the terminal’s loading capabilities will reach a combined 160 thousand barrels per hour (Mb/hour) among its three berths. Today, we discuss recent and near-term enhancements at Texas’s newest VLCC loading facility.
Earlier this decade, East Coast refineries found it cost-effective to ramp down their crude imports and turn to the price-advantaged U.S. shale oil they could rail in from the pipeline-constrained Bakken or send up by tanker from the crude-saturated Gulf Coast. Things changed, though. New southbound crude pipelines out of the Bakken came online, the ban on most crude exports was lifted — providing a new outlet for Texas crude production — and the economic rationale for railing or shipping in domestic crude to PADD 1 refineries withered. Now, things have changed again. Most important perhaps, is that the price spread between WTI and Brent has widened, and once more it can make financial sense for these refineries to revert to crude-by-rail out of the Bakken and to shipping in crude on Jones Act tankers from Corpus Christi and other Gulf Coast ports. Today, we discuss these recent trends, what’s driving them, and how long they might last.
Term charter rates for medium-range Jones Act tankers have fallen by two-thirds since they peaked at $120,000/day in mid-2014, to only $38,000/day done in September 2016, which is good news for producers but a punch in the stomach for ship owners. A sharp rise in the number of vessels being added to the Jones Act fleet has surely contributed to the charter-rate collapse. Less obvious are the degrees to which the rate drop may have been influenced by the decline in superlight Eagle Ford crude oil production, or by the lifting of the ban on U.S. crude oil exports. Today, we examine the evidence.
Since 2012, the capacity of the Jones Act fleet of tankers and large articulated tug barges (ATBs) has increased by more than one-third, to 22.5 million barrels, and over the next 18 months, new-build tankers and more large ATBs will add another 4.5 million barrel –– or 20% –– to the capacity total. That’s raised a lot of concern among vessel owners about a capacity glut and the potential for bargain-basement charter rates. What’s important to factor in, though, is that a lot of older Jones Act vessels are getting close to retirement age, and their exit from the shipping “work force” will help to mitigate the effects of any over-build. Today, we continue our series on recent developments in the Jones Act fleet and how they affect crude oil and petroleum products shippers.
A big build-out of Jones Act product tankers and large ocean-going barges is well under way, just as the future demand for these vessels is coming into question. Within the next 18 months, a total of 17 Jones Act product tankers and large ocean-going articulated tug barges (ATBs) with a combined capacity of more than 4.5 million barrels (MMbbl) will be delivered, boosting the total fleet capacity of these types of vessels by 20%. These new-vessel orders were made a few years ago in response to increased shipments of crude oil within the U.S. that, at the time, had resulted in a shortage of Jones Act product tankers and large ATBs. This in turn led to higher charter rates and the resulting increased costs of shipping crude oil and petroleum products in the coastwise trade. Now though, the decline in U.S. crude oil production has upended expectations. Today, we begin a series on the impact of hydrocarbon market changes on the Jones Act fleet.
Most of the gasoline, diesel, heating oil and jet fuel consumed in the U.S. East Coast region is piped in via long-distance pipelines from Gulf Coast refineries, but substantial amounts are moved in by ship—either from the Gulf Coast by Jones Act vessels or from overseas. These shipped-in volumes then need to make their way from port to consumer. Today we continue our examination of how transportation fuels and heating oil are delivered to East Coast users with a look at the ports and connecting pipelines that help move these critically important fuels.
