U.S. Gulf Coast port limitations impose additional costs on rising U.S. crude oil exports

U.S. crude oil exports averaged 1.1 million barrels per day (b/d) in 2017 and 1.6 million b/d so far in 2018, up from less than 0.5 million b/d in 2016. This growth in U.S. crude oil exports happened despite the fact that U.S. Gulf Coast onshore ports cannot fully load Very Large Crude Carriers (VLCC), the largest and most economic vessels used for crude oil transportation. Instead, export growth was achieved using smaller and less cost-effective ships.

Each VLCC is designed to carry approximately 2 million barrels of crude oil. Because of their large size, VLCCs require ports with waterways of sufficient width and depth for safe navigation. All onshore U.S. 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. 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.

To circumvent depth restrictions, VLCCs transporting crude oil to or from the U.S. Gulf Coast have typically used partial loadings and ship-to-ship transfers. The ship-to-ship transfer process known as lightering refers to a larger vessel partially unloading onto a smaller vessel. Reverse lightering occurs when smaller vessels load onto a larger vessel. These transfers take place in designated lightering zones and points that exist outside many of the largest U.S. petroleum ports…

 

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