Texas ports will soon have major competition in the crude export game

Very Large Crude Carriers (VLCC) can carry up to 2 million barrels of oil in their holds. Using these massive tankers reduces shipping costs for export companies, which is now relevant since the U.S. is exporting more and more oil since the ban was lifted in 2015.

Refiners in Asia are taking a greater interest in American crude and using VLCCs makes the trip much more economical for potential buyers. Currently there is only one port in the U.S. that can handle a fully loaded VLCC, the country’s main crude import facility the Louisiana Offshore Oil Port (LOOP).

“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. It makes huge sense from a logistical perspective as it will allow for more efficient cargo shipments,” said Sandy Fielden, director of commodities and energy research at Morningstar Inc.’s Austin, TX office.

LOOP is the United States’ single largest point of entry for waterborne crude oil. The facility is located 18 nautical miles offshore in southeastern Louisiana. LOOP sends the offloaded oil to the Clovelly Hub storage facility via a 48-inch diameter pipeline. Clovelly Hub has 8 underground caverns capable of storing a total of 60 million barrels of crude oil and also has 15 above-ground tanks capable of storing 600,000 barrels of oil each.

LOOP is operated by LOOP LLC, which is a joint venture of Marathon Pipe Line LLC, Shell Oil Company, and Valero Terminalling and Distribution Company. Three of the caverns at Clovelly Hub are dedicated to incoming Gulf of Mexico crude blends, Thunderhorse and Mars blends. Both blends have recently been purchased by Asian refiners, including refiners in the rapidly growing market of India.

Now LOOP wants to turn its impressive import facilities towards exporting American crude. The VLCC capability puts the port a step ahead of the Port of Houston and Port Corpus Christi. The Port of Houston concentrates more on exporting liquefied natural gas instead of crude oil, but Port Corpus Christi is in the midst of an expansion project with the hopes of luring in VLCCs to take advantage of exporting West Texas crude.

Port Corpus Christi became the number-one oil export hub this year for U.S. and Canadian oil producers. However, the Texas port has to load crude onto smaller vessels then transfer the oil onto a VLCC sitting further offshore, adding time and money to the shipment.

Commenting on LOOP’s efforts to shift part of its operation to exports by early next year, the facility president Tom Shaw said in a statement, “Today, customers are seeking the optionality to safely and efficiently load or offload, which is a natural request for a port. This service offers our customers the scalability to fully load a VLCC.”

Once LOOP begins full scale export operations next year, Port Corpus Christi will have its hands full trying to remain number one in crude exports.

Article written by HEI contributor Raymond Arrasmith.

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