Crude oil exports rise 120% in 2017, up so far in 2018

U.S. crude oil exports rose more than 120% to 1.1 million barrels per day in 2017, from 2016, and so far in 2018, the exports have been an average of 1.6 million barrels, according to the U.S. Energy Information Administration. The rise in exports was achieved using smaller and less cost-effective ships as U.S. ports along the Gulf Coast cannot fully load Very Large Crude Carriers (VLCC), the largest and most economic vessels for crude oil transportation.

A VLCC can transport 2 million barrels of crude oil, but U.S. ports in the Gulf Coast that trade petroleum are in inland harbors and connected to the ocean through channels or rivers and aren’t deep enough for fully loaded VLCCs. Ships that transport crude oil from the ports are partially loaded or must complete ship-to-ship transfers. A ship-to-ship transfer known as lightering is when a ship partially unloads onto a smaller vessel. Reverse lightering is when a smaller vessel transfers its load onto a larger ship. These transfers take place in designated areas outside the largest U.S. petroleum ports.

In the United States, the two largest ports of call for ships carrying crude oil and petroleum products are lightering zones, including the South Sabine Point Lightering Zone and the Southtex Lightering Zone. In 2015, the two previous zones had nearly 250 million deadweight tons of tanker traffic. Deadweight tons refer to a ship’s capacity by weight, and the number of barrels per ton depend on the density of the petroleum product or crude oil.

Most U.S. ports in the Gulf Coast can handle AFRAMAX ships with capacities of 500,000 barrels of crude oil, and a limited number of ports can accommodate SUEZMAX ships with capacities between 900,000 and 1 million barrels.

The use of smaller ships leads to an increased price spread between U.S. crude oil and international oil prices “to compensate for the lower economies of scale and costs associated with reverse lightering and partial loadings,” according to the EIA. The cost to use smaller ships for exports over shorter distances are less of a factor, but as exports to Asia rise, the costs will be more important.

The Louisiana Offshore Oil Port (LOOP), which is offshore of southern Louisiana in the Gulf of Mexico, is the only U.S. port that can accommodate a fully loaded VLCC. The port was an import facility until it was modified to allow for exports earlier this year.

So far in 2018, U.S. crude oil exports have exceeded more than 2 million barrels per day four times, during the weeks of Feb. 16 and March 30, when LOOP loaded a VLCC.