New U.S. crude export facilities on the Gulf Coast may bring the world’s troubled business of operating big tankers a needed new market for transporting oil.
A trio of American energy logistics firms is preparing to build a terminal at the Port of Corpus Christi in Texas capable of handling very large crude carriers, or VLCCs, adding to a flurry of activity for U.S. oil exports that reached a record 2.3 million barrels a day last week.
Partners and refiner
formed a joint venture to build the facility at the South Texas Gateway Terminal, a major transit point for U.S. energy exports heading to international markets.
Phillips 66 and Andeavor will be the launch customers for shipping crude out of the terminal, with two deep-water docks capable of berthing VLCCs, along with 3.4 million barrels of oil storage. The South Texas Gateway Terminal is scheduled to kick off operations next year.
The project will add capacity to a booming U.S. crude trade.
The U.S. Energy Information Administration says crude exports recently averaged around 1.6 million barrels a day over four weeks. Growing production of crude, refined products and liquefied natural gas could make the U.S. a net energy exporter by 2022, according to the EIA’s Annual Energy Outlook.
Tanker owners are hoping the growing U.S. exports will boost an international crude transport market that has remained in a slump this year.
Freight rates for VLCCs recently slumped to near record lows, industry analysts say, with a glut of ships pushing daily rates to an average $6,000, far from the break-even rate of around $22,000.
“There’s a lot of bleeding out there, and there is more to come this year,” said one Singapore broker, noting daily rates stood at $26,000 in the same period last year.
Big, listed operators kicked of this year with steep losses in the first quarter.
‘Rates will stay under pressure until this process of rebalancing is much further advanced.’
Euronav, one of the world’s biggest VLCC owners, lost $39 million in the three months ending March 31. “Rates will stay under pressure until this process of rebalancing (supply and demand) is much further advanced,” Chief Executive Paddy Rogers said in announcing the earnings.
Crude stockpiles have been rising even as oil prices have pushed up to around $70 on global markets. On Wednesday, the EIA reported the amount of crude in storage rose by 6.2 million barrels last week, exceeding average analyst expectations for a 700,000-barrel build.
For crude carriers, “The overall message is that for the rest of the year, global oil stocks will remain pretty significant, which also means a significant lack of demand for oil transport,” Peter Sand, chief shipping analyst for ship broker BIMCO, said in an interview.
Tanker operators have continued to bulk up capacity despite falling prices. Mr. Sand said there were 54 orders of VLCCs last year up from only 14 in 2016, and there have been another 20 new orders so far this year.
“Just like container shipping, size does matter in oil transport, with VLCCs becoming the weapon of choice, especially with increased crude imports into China,” he said.
Brokers for oil transport estimate that tanker overcapacity is hovering at around 18% above demand.
Write to Costas Paris at firstname.lastname@example.org