A lack of ports capable of handling the largest oil tankers is hampering the economics of U.S. crude exports as global demand increases.

Most ports along the U.S. Gulf Coast lack sufficient water depth to allow Very Large Crude Carriers (VLCCs) to enter. That places an export ceiling of about 2 million barrels per day (MMbbl/d) and makes shipping crude to marginal markets like Asia less efficient.

To work around depth restrictions, onshore U.S. ports on the Gulf Coast that actively trade petroleum often have to rely on partial loads or lightering, also known as ship-to-ship transfers. The Louisiana Offshore Oil Port (LOOP), offshore in the southern part of the state in the Gulf of Mexico, is the only facility in the U.S. able to accommodate a fully loaded VLCC.

“You want to be more efficient in your exports of crude oil, you use larger ships, but right now you don’t ports deep enough or infrastructure to be able to do that except for LOOP,” said Mason Hamilton, a diesel price analyst with the U.S. Energy Information Administration (EIA). “So you do the math and say, it’s fine, I will just pay. I will take that inefficiency, I will absorb that cost. Or it’s, I can make proper investment, I can deepen my port, I can make a terminal that can load a VLCC and then I can capture that difference.”

But a recent EIA report indicated that it is unlikely that new ports in the Gulf with enough depth to handle the larger vessels will be built. The U.S. Maritime Administration (MARAD), which issues permits for deepwater offshore ports, has no pending applications for more facilities like LOOP.

Most analysts believe the likely crude oil export projects with the intention to fully load VLCCs will be located at the Port of Corpus Christi, Texas.

Hamilton declined to define the lack of deepwater ports as problematic for exports. He said the EIA’s only purpose in issuing the report was to point out facts.

The inefficiency in the export process seems without question. U.S. crude oil exports averaged 1.1 MMbbl/d to 37 different destinations in 2017 and is averaging 1.6 MMbbl/d so far this year, way up from the 500,000 bbl/d in 2016.

Currently, the majority of U.S. Gulf Coast petroleum ports are capable of handling vessels with capacities of about 500,000 bbl of crude oil. The number of ports that can even accept vessels with capacities of 900,000 to 1 million bbl is relatively limited. Either way, it would require multiple vessels to move what one VLCC could export from the port.

The benefit of using a larger vessel is greater when traveling a longer distance like to Asia.

“It’s a math and economics problem,” Hamilton said. “It’s up to somebody to figure out, do I spend a bunch of money and try to make investments so that I can get my crude all the way around the world to the marginal market for like 50 cents a barrel but I have to spend all of this money in making these investments, or that number doesn’t really matter to me, I’m just going to use a greater number of smaller vessels.”

Terrance Harris can be reached at tharris@hartenergy.com.