The VLCC Race: US midstream companies plan to export more oil faster

Since the US crude market began to grow only a short time ago, there has been a race to see who can load the most crude in the quickest time into the largest vessels possible along the US Gulf Coast.

The stakes are high. Major Asian buyers are looking to load as much oil on to one vessel in order to maximize the economics of their US purchases.

But the ports along the Gulf Coast were not built to accommodate the super tankers--Very Large Crude Carriers--which can carry around 2 million barrels of crude.

That’s double the amount of the next sizes down Suezmax (1 million barrels) and Aframax (750,000 barrels), both of which can navigate the shallower waters of US ports and can be fully loaded at many facilities.

Giant VLCCs are just too big to be fully loaded inside US ports because the water is too shallow to allow a fully-loaded VLCC to pass.

For example, the Texas City loading dock along the Houston Ship Channel is 45 feet deep, but a depth of 75 feet is required to accommodate a fully-laden VLCC.

As a result, ship-to-ship transfers must be used to complete the loading in deeper water offshore. And that is a costly, time-consuming process that takes on average 10 days to complete.

Reducing or eliminating the need for reverse lightering depends on several factors, including the API gravity of the crude grade being transported.

The going rate for an Aframax for reverse lightering in the USGC is $240,000-$250,000 per tanker, according to market sources.

So, the ability to skip reverse lightering saves between $700,000 to $1 million, sources have said.

In an effort to improve upon the process, and at the same time try to get a leg up on competition, several US midstream companies are working to more efficiently load VLCCs directly at Gulf Coast ports.

Here’s a rundown of some of the VLCC-loading milestones along the US Gulf Coast so far and what may be on the horizon:

LOUISIANA OFFSHORE OIL PORT (LOOP)

The LOOP deepwater port has been rapidly breaking its own records when it comes to the VLCC loadings.

It’s most recent export was loaded onto the VLCC Anne in a total of four days--two days faster than its previous best, which sailed only two weeks earlier.

The LOOP port was originally set up as an import point for VLCCs offloading heavy, sour crude from foreign countries.

LOOP comprises three single-point mooring buoys and a marine terminal 18 miles offshore the coast of Louisiana in 110 feet of water. A 56-inch-diameter line (100,000 barrels/hour) connects the marine terminal to an onshore pumping facility, which moves the oil 25 miles inland to a terminal with above-ground and underground storage, also known as Clovelly Hub.

LOOP began exporting US crude earlier this year, and a total of four VLCCs have been loaded so far. Loading times for each of the four cargoes have gotten shorter. It’s most recent cargo loaded in four days, compared to the 10 days it took to load the first VLCC export.

LOOP anticipates cutting loading times further. During the first few exports the terminal was intentionally moving slowly to make sure it was getting operations in order since it was a new process. As the terminal fine-tunes the process, loading times will shorten.

OXY INGLESIDE ENERGY CENTER TERMINAL/CORPUS CHRISTI

Occidental Petroleum’s Corpus Christi facility started export operations in late 2016 and is working vigorously to improve loading capabilities.

Oxy made history in May 2017 when it brought the Anne into Corpus Christi Bay for a trial run. It was the first time a super tanker had docked inside a US port.

But Anne was empty and left the port unladen. It was just a trial to prove it could be done.

Now, Oxy aims to begin partially loading VLCCs at its docks by the first quarter of 2019. The Port of Corpus Christi also is planning to develop a VLCC-loading facility at its Harbour Island, for which design studies and regulatory process is underway.

It also plans to dredge the inner harbor to 52 feet initially and later to 75 feet for full loading of VLCCs.

A contract for the work will be awarded later this month, but the Channel Improvement Project carries a price tag of $327 million--and must receive federal funding in order to get completed.

ENTERPRISE PRODUCT PARTNERS

Also in the VLCC mix is Enterprise Products Partners, which has partially loaded two VLCCs at its Texas City facility this year. Last week, Enterprise announced plans to build an offshore crude oil export terminal off the Texas Gulf Coast. No time line has been released on the project but front-end engineering and design work are underway.

Based on initial designs, the project would include roughly 80 miles of a 42-inch diameter pipeline to an offshore terminal capable of loading crude onto the super tankers at 85,000 barrels/hour.

The planned facility, which will likely be somewhere off the Texas coast, is compared with the 35,000 barrels/hour now being offered by Enterprise.

JUPITER OFFSHORE LOADING TERMINAL

Another less-talked about project is in the works farther south in Brownsville, Texas. Private company Jupiter has started the engineering, permitting and design of its Jupiter Offshore Loading Terminal. The project is will accommodate offshore VLCC loading six miles off the coast of Texas.