EIA: Gulf Coast port limitations may drive crude export costs higher

US Gulf Coast onshore ports’ limited tanker loading capacities could increase crude oil export costs because the ports are not able to accommodate very large crude carriers, the US Energy Information Administration warned. Exports have grown using smaller and less-effective vessels to get the crude to designated lightering points farther from shore where it can be transferred to a VLCC, EIA said in a May 16 report.

“All onshore US ports in the Gulf Coast that actively trade petroleum are located in inland harbors and are connected to the open ocean through shipping channels or navigable rivers,” it explained. “Although these channels and rivers are regularly dredged to maintain depth and enable safe navigation for most ships, they are not deep enough for deep-draft vessels such as fully loaded VLCCs.”

VLCCs carrying crude to and from the Gulf Coast typically have used partial loadings and ship-to-ship transfers in designated zones farther from shore, the report said. The process is called lightering because it originally involved moving some of the imported crude from a VLCC to smaller vessels which have shallower drafts and can carry it to onshore ports.

US crude exports grew from an average of less than 500,000 b/d in 2016 to 1.1 million b/d in 2017 and averaged 1.6 million b/d so far in 2018, according to EIA.

Using many smaller ships requires a wider price spread between US and international crude prices to compensate for the lower economies of scale and costs associated with reverse lightering and partial loadings, EIA said.

“The costs associated with using smaller vessels are less of a factor for exports over shorter distances. However, as exports to Asia are a growing share of total US crude oil exports, these costs will become more important,” it pointed out.

Contact Nick Snow at [email protected].