A Quick Look Into the Proposed USG Terminals
March 6, 2020
Since 2018 and along with the significant gains in US crude oil production, there have been announcements regarding the development of terminals in the US Gulf capable of loading VLCC tankers. These proposed investments seem like a natural outcome following the boom in crude oil exports from the US. At the moment there is only one operational terminal that can load the large ships (Louisiana Offshore Oil Port -or LOOP). Additional VLCCs depend on smaller ships for lightering operations, which allow them to receive full cargo.
According to the latest available information, there are at least seven proposed docks or terminals that can fulfill that requirement, all of them in different stages varying from proposal, to permitting and construction. With the latest news this week of international trader Trafigura and oil & gas company Phillips 66 forming a joint venture to develop one of these offshore projects, we take a high-level view on the expected demand for such projects in the US Gulf.
For the analysis, we used ton-mile demand data as well as voyage information to project the expected number of VLCC loadings from the US Gulf from 2019 to 2024 (forecasted data). We also used available public information regarding the loading rates of the proposed projects as well as the number of ships they can service simultaneously.
Our findings suggest that VLCC loadings with fluctuate between 238 and 248 a year, with the peak in 2021. At the same time, the average number of VLCCs these terminals are expected to handle per year is close to 180. With that information, we can graph the expected terminal utilization rates based on how many of them end up being constructed. We can see that while one terminal is not enough to handle the entire volume, adding a second one in the Gulf will cut their utilization to a little over 60%, while a third one under 50% and so forth (Figure 1). We must note here that these numbers look only at VLCC loadings although it is expected for these terminals to handle Suezmax vessels as well and we can expect utilization rates to increase slightly with these added ships. Overall though, from an investment point of view, up to two new terminals will be enough to handle all the expected volumes out of the US Gulf, especially with growth in production and export projected to stagnate after 2021.
Figure 1 – Map with Existing and Proposed VLCC Terminals, With Projected Loadings and Terminal Utilization
Source: McQuilling Services
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