Take It to the Limit - Crude Exporters Navigate Gulf Coast Terminal Constraints

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.)

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.

To better understand the nature of the problem, we’ve been examining vessel-level data from our weekly Crude Voyager report. We reviewed every export shipment from Gulf Coast ports between January 1, 2018 and April 24, 2019, including the size of vessel, load terminal and ultimate destination as well as ship-to-ship transfers onto larger tankers. We’ll begin our discussion of what we learned with a closer look at port activity, then break down the characteristics of crude ship movements affecting marine traffic in the Gulf.

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