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Shell behind test-run VLCC crude oil export out of US' LOOP terminal, market sources say

Shell will claim the continental US' first true VLCC export of crude -- an export without the need for reverse lightering -- when the vessel Shaden sails from the Louisiana Offshore Oil Port later this week laden with a medium sour crude, according to market sources.

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The Louisiana Offshore Oil Port said late Monday it "has moored a VLCC and initiated its detailed test and checkout procedure." The Shaden will receive crude from LOOP's newly bidirectional pipeline connecting LOOP's onshore infrastructure with an offshore deepwater mooring station.

Market sources said Shell chartered the Shaden, a Saudi Arabian-flagged VLCC owned by Bahri (the top VLCC owner globally) that entered service at the end of 2017, and will take the crude into its refining system. Market sources were split on what grade Shell is taking, with two saying offshore Gulf of Mexico, Shell-produced Mars and another two saying the crude blend LOOP Sour. Both Shell and LOOP declined to comment.

The Shaden was seen Tuesday at LOOP's offshore mooring stations and arrived there February 11 from the Offshore Galveston Lighterage Zone, according to Platts vessel-tracking software cFlow. It arrived at OGLZ on February 3 after having sailed from Ras Tanura, Saudi Arabia, the loading port for Saudi crudes Arab Heavy, Medium, Light and Extra Light.



LOOP HISTORICALLY AN IMPORTS-ONLY FACILITY


The LOOP deepwater port comprises three single-point mooring buoys and a marine terminal about 18 miles offshore 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.

Over the past several months, that 56-inch line was converted to become bidirectional, which preserves LOOP's traditional business of receiving crude while adding the ability for LOOP customers to export as well.

LOOP, which began operations in 1981, is the first and only deepwater oil port in the US. It is presently the only US oil facility capable of offloading vessels as large as VLCCs and ULCCs, as well as a range of smaller vessels such as Aframaxes, MR tankers and Articulated Tug Barges. LOOP is owned and operated by LOOP LLC, a joint venture of Marathon Pipe Line, Shell and Valero.

LOOP is likely to continue to be the only USGC port capable of VLCC exports. The Port of Corpus Christi and one of its tenants, Occidental Petroleum-subsidiary Occidental Energy Marketing, are separately working on projects that will allow VLCCs to be partially laden up to 1.2 million to 1.4 million barrels (about 60%-70% full); however, there are currently no announced projects that will allow fully laden VLCCs elsewhere along the USGC.

LOOP's ability to do so removes the need to send crude to St. James, Louisiana, via the 48-inch LOOP-operated LOCAP pipeline, which saves about 8-9 cents/b. It further cuts reverse lightering costs from arbitrage calculations and export math. The daily Aframax rate is currently around $300,000-$340,000, according to market sources, which would be roughly 60-68 cents/b.

Texas and Louisiana exported about 891,000 b/d in 2017, or about 81% of total US crude exports, according to US Census data. Exports were particularly strong in Q4, averaging 1.4 million b/d out of Texas and Louisiana, or 90% of the US total.


MARS, LOOP SOUR FLOATED AS POTENTIAL EXPORTED GRADES


Market sources were split on whether Shell would take Mars or LOOP Sour. Platts assessed Mars at a $1.65/b discount to March cash WTI, while LOOP Sour was a further 80 cents/b cheaper, or cash WTI minus $2.45/b.

"Shell is a big seller of Mars, but a buyer of domestic sours, such as LOOP Sour," a trader said late Monday.

Shell is the majority owner of the Mars field, with BP owning the minority stake. Mars is typically 29.4 API, 1.95% sulfur, and it delivers into the Clovelly Hub, another name for LOOP.

LOOP Sour is comprised of the US Gulf of Mexico grades Mars and Poseidon and a crude blend called Segregation 17, into which the Middle Eastern grades Arab Medium, Basrah Light and Kuwait Export Crude can be delivered. LOOP Sour is typically 30.1 API, and 2.33% sulfur. Basrah Light accounted for 28% of all waterborne imports at LOOP (about 113,000 b/d) in 2017 compared with 17% for Kuwait (67,000 b/d) and 8% for Arab Medium (32,000 b/d). It is important to note that not all LOOP Sour-deliverable crudes that arrive at LOOP will be delivered into the LOOP Sour cavern.

LOOP pipeline receipts of Mars and Poseidon are not available; however, Platts Analytics estimated Mars/Amberjack and Poseidon production to average 532,000 b/d in 2017.

--John-Laurent Tronche, john-laurent.tronche@spglobal.com
--Alan Tomczak, alan.tomczak@spglobal.com
--Sarah Raslan, sarah.raslan@spglobal.com
--Edited by Richard Rubin, richard.rubin@spglobal.com