For the first time ever, U.S. crude oil exports have hit the 3 MMb/d mark — a once-unthinkable pace equivalent to sending out 10 fully loaded Very Large Crude Carriers a week. VLCCs, with their 2-MMbbl capacity and rock-bottom per-bbl delivery costs, are the most cost-effective way to transport crude to distant markets like China and India. But there’s still only one terminal on the Gulf Coast that can fill a VLCC to the brim — the Louisiana Offshore Oil Port — and pipeline connections from key Texas and Oklahoma plays to LOOP are limited. Elsewhere along the coast, VLCCs need to be loaded in offshore deep water by reverse lightering from smaller vessels — a slower and more costly loading process. Change is a-comin’, though. Companies are testing the docking and partial loading of VLCCs at terminals along the Texas coast, and plans for a number of greenfield facilities capable of partially — or even fully — loading the gargantuan vessels at the dock are being considered. Today, we review the latest efforts to streamline the loading of VLCCs and what they mean for crude-export economics.
As we said in our last look at VLCCs a few months ago (Rock the Boat), the use of the supertankers during the U.S.’s 40-year ban on most crude exports was largely limited to imports to LOOP, occasional shipments out of the Valdez Marine Terminal in Valdez, AK (the southern terminus of the Trans-Alaska Pipeline System) and into Andeavor’s Berth 121 in Long Beach, CA — the two other U.S. facilities designed to handle VLCCs. Since the export ban was lifted in December 2015, though, crude exports — and interest in using VLCCs for exports out of the Gulf Coast — have been on the upswing. Figure 1 shows that in 2015, the last year the ban was in place, exports (almost all of them to Canada) averaged 465 Mb/d, according to the Energy Information Administration (EIA). Exports rose 27% (to just about 590 Mb/d) in 2016, then almost doubled in 2017 (to more than 1.1 MMb/d).