The first Alaskan crude export in a decade may herald increased demand for US-built oil tankers because they’re the only kind permitted to handle the cargoes, said Arctic Securities ASA, an Oslo-based investment bank.
The Polar Discovery, a crude tanker owned by ConocoPhillips and flying the US flag, is sailing to Yeosu in South Korea, having previously been to Valdez, according to signals from the vessel.
It’s the first to export Alaskan crude in a decade, according to Erik Nikolai Stavseth, an analyst specialized in trade and shipping at Arctic.
The shipment is because oil refineries on the US West Coast, traditional buyers of Alaska’s oil, are turning to other domestic suppliers as the nation’s oil production rises to the highest since 1986, Stavseth said.
Crude from the Trans-Alaskan Pipeline System has to be transported on Jones Act tankers like Polar Discovery that are built in the U.S. and crewed by Americans, according to the Congressional Research Service.
“We see this situation as a positive for the Jones Act shipping market,” Stavseth said in a report today.
“It will effectively remove capacity from the U.S. trade.”
The Jones Act is a law from the 1920s requiring all domestic shipments of US goods to be freighted on U.S.-built, owned, and staffed ships. Exports from the Trans-Alaska pipeline must be US-owned and crewed, the Congressional Research Service said in March.
US exports are close to the highest since 1957, according to Energy Information Administration. The nation shipped 401,000 barrels a day in August, 54,000 shy of the record set in March 1957.
Alaskan crude exports “should reach sustainable levels of 100,000 barrels a day or more as more producers follow suit,” Ed Morse, the head of commodities research at Citigroup Inc., said in a research note yesterday.
The most important measure of shipping demand is ton-mile, multiplying cargoes by distances. To meet exports of 100,000 barrels a day, about three Jones Act tankers would have to be dedicated to the trade, Stavseth said.
A round trip to Korea from Valdez is about 9,000 miles and would occupy a tanker for about 24 days, according to data compiled by Bloomberg using the Polar Discovery’s current sailing speed. That compares with 4,700 miles and 12 days for a comparable cargo to Los Angeles.