America’s biggest oil port set for the previously unthinkable
The Louisiana Offshore Oil Port LLC (LOOP) has been a symbol of United States’ dependence on foreign oil for more than 30 years, pumping Nigerian and Saudi Arabian crude from the world’s biggest supertankers into underground storage caverns beneath the marshes of southern Louisiana.
Buoyed by growing shale oil production at a 28-year high, LOOP’s managers want to reverse the flows and send North American oil out as well as take foreign oil in, a move that hitherto was unthinkable. It underscores how shale drilling and oil-sands mining have altered energy flows in North America.
To be an outbound hub, the port needs financial commitments from shippers to build needed infrastructure, and even under the most optimistic scenario, it will be a year before it loads the first tanker, Barb Hestermann, LOOP’s business development manager, reportedly said last week.
The terminal was conceived in 1972, a year before the Arab oil embargo, and opened in 1981. It’s owned by units of Marathon Petroleum Corp., Valero Energy Corp. and Royal Dutch Shell Plc. It remains the only port in the U.S. that can unload Ultra Large Crude Carriers and Very Large Crude Carriers, the two biggest classifications of oil tankers.
Shipments into the port peaked in 2005 at 1.18 million barrels per day (bpd), according to Louisiana state records, about 12 percent of total U.S. imports. Deliveries dropped below 1 million bpd in 2009 and last year fell to 658,000, the fewest since 1985.
The decline mirrors that of total US imports, which fell to 6.47 million bpd in the week ended May 16, the least since 1997, US Energy Information Administration data show.
Improvements in horizontal drilling and hydraulic fracturing have drawn crude from previously unreachable formations in Texas and North Dakota, propelling US output to 8.5 million bpd, the highest level since 1986.
Preliminary planning on two projects that would allow the reversed flows was said to have been completed by engineers. One would make the existing pipeline between the buoys and storage bi-directional, and would take about a year to mechanically complete. The port is still receiving enough inbound shipments that it would be challenging to switch the flows long enough to load a vessel, Hestermann said.
The long-term solution is building another pipeline dedicated to loadings. That would take about two to three years, and would require new permits, she said.
The U.S. Commerce Department recently told two companies that some ultra-light oil from the Eagle Ford known as condensate, which goes through a stabilising process at the oil field that includes a distillation tower, can also be exported.
Clearly, the last is yet to be seen on the impact of the US shale revolution in the country and on the global oil market.
FEMI ASU