USG VLCC Terminal Projects: A Game Changer
Sept. 13, 2024
The need for enhanced crude export capabilities has been identified amid rising production and exports out of the US Gulf, with several VLCC Terminal projects scheduled to take place. According to US EIA, US crude production is expected to rapidly increase from 12.5 mil b/d in 2023 to 14.4 mil b/d in 2030, raising the US’s crude balance above the 4.0 mil b/d mark and pushing over 6.5 million b/d of crude to be exported from the US Gulf region. Currently, the Louisiana Offshore Oil Port (LOOP) is the only US Gulf port capable of fully loading a VLCC, while draft at Enbridge's Ingleside at Corpus Christi further dredged to 51 feet, allowing VLCCs to load around 1.2 million barrels directly at the terminal before topping-up by one Suezmax tanker via ship-to-ship transfer. However, the challenge of both LOOP and Corpus Christ for exporting US crude has been their limited access or capped pipeline throughput of grades produced from the Permian Basin, where a majority of the increased US production comes from. Of the four VLCC terminal product projects in the US Gulf, three terminals (Enterprise’s SPOT, Energy Transfer’s Blue Marlin and Sentinel’s Texas GulfLink) are planned off Houston or Freeport with P66/Trafigura’s project being the only one near the port of Corpus Christi. At the time of printing, Enterprise is the only one to receive a deepwater port license with operations expected to start in 2027.
As the larger vessels will be able to load and bypass the need for STS lightering, this would create large freight advantages due to the potential ability to avoid operational delays and demurrage charges related to reverse lightering. Calculated from our long-term freight projections for US Gulf crude exports to Europe, VLCC direct load could save US $2.0/bbl on average for 2027-28 compared to using Aframax-sized tonnages, or US $0.7/bbl lower than the current 1VLCC+1Suezmax mode. Ongoing dredging projects have also been announced for Corpus Christi, increasing the max draft to allow VLCCs to consistently load 1.4 million barrels directly at the terminal and change the ship-to-ship lightering mode to 1VLCC+1Aframax.
Figure 1: Long-term US Crude Exports Figure 2: USG>UKC Freight Comparison
Source: McQuilling Services; US EIA
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