Very Large Crude Carrier

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.)

U.S. exports of crude oil really took off in 2017, and the exporting pace has only accelerated this fall. In the 10 weeks since mid-September, crude exports have averaged nearly 1.6 million barrels/day, with the vast majority of that oil leaving by ship out of ports along the Gulf Coast. The lifting of the ban on most crude exports two years ago this month and the growth in exports since then have put a spotlight not only on coastal storage facilities, pipelines and marine docks, but also on the huge vessels used to transport crude to far-away destinations. Today, we discuss crude-export vessel configurations, tanker chartering practices, ship-loading challenges and transportation costs.

For the first time ever, a Very Large Crude Carrier (VLCC) carrying Bakken crude has sailed from the Gulf of Mexico to Asia, and more may follow. With the startup of the Dakota Access Pipeline set for June 1, Bakken producers are only days away from gaining easier, cheaper pipeline access to the Gulf Coast, and are looking for new markets. Asian refineries are willing to pay a premium for Bakken-type crudes, and want other types of U.S. crude as well. And every 18 hours or so, a VLCC arrives at the Louisiana Offshore Oil Port—the only U.S. port capable of handling the mammoth vessels—offloads crude and leaves LOOP empty because the port is currently an import-only facility. Today we consider the potential for transporting more light, sweet crude to Asian refineries on VLCCs, either via ship-to-ship transfers or by reworking LOOP to enable exports.

On Monday, September 3, 2007, dignitaries and thousands of Panamanian citizens watched a huge explosion level a hill near Paraiso, a village north of Panama City. That day launched work on a project that would eventually cost more than $6 billion (U.S.) to double the capacity of the Panama Canal and allow for the passage of longer and wider ships. Nearly nine years later on June 26, 2016, the expansion is finally scheduled to be open for business.   The new canal capacity will be a major event in global energy markets, especially for growing volumes of U.S. natural gas, liquified petroleum gas (LPG) and petroleum product exports.   In honor of this historic development, RBN will take you there!   Rusty will be traversing the canal this Thursday, April 14th and will have the skinny on what is happening in Panama right now, with pictures to show for it.  In today’s blog we set the stage for our voyage across the Panamanian Isthmus.