reverse lightering

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 tomorrow at xPortcon in Houston.)

In 2018, a handful of midstream companies started racing to develop deepwater export terminals along the Gulf Coast that can fully load Very Large Crude Carriers (VLCCs) with 2 MMbbl of crude oil from the Permian and other plays. While some of those companies are moving toward final investment decisions (FIDs) that would bring their plans to fruition in the early 2020s, terminal operators with existing VLCC-capable assets — both onshore and offshore — turned up the volume in a major way in December. Today, we outline the strides made in recent days by the export programs of the Louisiana Offshore Oil Port (LOOP), Seaway Texas City and Moda Midstream.

U.S. crude oil exports from the Gulf Coast remain at a high level, as does interest in transporting crude to Asia and Europe in Very Large Crude Carriers (VLCCs) capable of carrying as much as 2 million barrels (MMbbl) each. The catch is that only one Gulf port — the Louisiana Offshore Oil Port (LOOP) — can send out fully loaded VLCCs, and so far LOOP has loaded only one; other Gulf ports need to fill or top off the gargantuan tankers in open waters using reverse lightering. Plans are afoot to allow greater use of VLCCs, but how long will they take to implement? Today, we discuss the economic benefits of exporting crude on supertankers, the growing use of VLCCs for Gulf Coast exports and the challenges exporters face in utilizing them even more this year and next.