In December of 2015 the United Stated lifted its ban on exporting domestic oil, and terminals up and down the Gulf Coast began vying for that business. Prior to the ban being lifted, only 10 countries were importing U.S. crude. Since then, that number has grown to 33. And it’s a trend likely to continue.
The U.S. currently produces some 9 million barrels of crude daily, but most of it is lighter than refineries here are built to process. These days, much of the excess is in-demand overseas. In fact, shipments via Very Large Crude Carriers (VLCCs) are expected to spike 52-fold this year, according to shipping analysts.
The lure of LOOP
Against that backdrop, the Louisiana Offshore Oil Port (LOOP) is poised to become the major exit point for North American crude oil as early as 2018. The privately-owned company is currently seeking contracts with shippers to make that happen. The idea makes sense, not only from a logistical standpoint, but also from an economic one.
Until now, LOOP's business has been focused on taking in oil imports. But the shale boom has brought with it the opportunity for expanding the company's services. While LOOP isn’t the only U.S. port eyeing the export trade, it is the deepest one. And as such, it alone is capable of handling VLCCs when they’re fully-loaded to maximum capacity of up to 2 million barrels of crude.
“LOOP is the most obvious place for U.S. crude exports since as a deepwater port it makes it more manageable to load up a large ship such as a VLCC,” the head of commodities and energy research at Morningstar, Sandy Fielden, told Bloomberg.
According to officials at LOOP, this expansion of services—adding outgoing to incoming—can be achieved without major modifications to the facility’s existing infrastructure.
This screenshot of PortVision 360 shows the vessel track of the VLCC Anne during its visit to LOOP from May 22nd- 24th.
The deepwater advantage
Most other ports along the Gulf Coast lack the kind of deep water that allows VLCCs to come in close for loading. Typically, export shippers load crude oil onto smaller tankers, then transfer that cargo to the VLCCs waiting offshore.
The disadvantages to this approach are obvious. The two-step process is both time-consuming and costly, not to mention the fact that a vessel-to-vessel oil transfer at sea presents a sizable environmental risk.
“Today, customers are seeking the optionality to safely and efficiently load or offload, which is a natural request for a port,” LOOP President Tom Shaw said. “This service offers our customers the scalability to fully load a VLCC.”
As North American producers rush to send their abundant crude to new markets overseas, the Gulf Coast is seeing considerable expansion of ports in the region, beyond the ever-busy—and more expensive—Port of Houston. At the end of May, the Port of Corpus Christi welcomed its first VLCC, though unlike LOOP, its waters aren’t deep enough to accommodate that vessel when it’s loaded to full capacity.
This screenshot in PortVision 360 shows the vessel track of the VLCC Anne during its visit to OXY's Ingleside Terminal in Corpus Christi on May 26th, 2 days after visiting LOOP.
With the natural and man-made advantages Louisiana Offshore Oil Port offers exporters, it seems only a matter of time before LOOP overtakes Corpus Christi—the current U.S. leader in oil exports—as the Number One exit point for North American crude.