As a result of difficulty delivering crude to Baton Rouge and the shutdown of shipping docks at terminals along the river, traders are considering a diversion of crude tankers to discharge at the Louisiana Offshore Oil Port (LOOP).
“Some oil companies are trying to divert their ships to LOOP, but many more
ships are waiting offshore,” a shipping source said.
A diversion to LOOP would allow the ships to discharge cargoes, and the crude supplies could be pumped via pipelines to oil terminals in the New Orleans area, including NuStar’s St. James terminal.
Most refineries in the area are connected to that pipeline network.
LOOP will work with potential customers hoping to divert a tanker from the river to the offshore port for cargo discharge, a LOOP spokeswoman told OPIS.
She declined to say if there has been any inquiries so far.
However, she noted that the ship discharge schedule for May for LOOP was full, but LOOP will look at emergency spot discharge on a case-by-case basis.
LOOP will allow spot discharges if there were gaps in the schedule.
Although the lower Mississippi River remains open to vessel traffic, oil tankers are facing restrictions, strong currents, dock closures and low bridge clearance. At least one Aframax tanker was forced to turn around to sail back downriver after failing to get past the Interstate 10 bridge.
The rising water problem in the river is expected to escalate over the next few days. This problem could be averted if the Morganza Spillway is opened to relieve the swollen river.
“There are some adjustments going on (for crude supply logistics). Refiners are trying to get more domestic crude supplies via pipelines, and redirect waterborne foreign imports to other parts of their refining system if possible,” a trader said.
As the shipping bottleneck problem continues to mount, force majeure could
be an option for companies receiving the stranded crude cargoes.
It will depend on the sales’ contractual terms and the individual buyer.
If a force majeure is not declared, the buyer or both buyer and seller would have to pay the costly demurrage for the ships.
The high water problem could take at least one to two weeks to resolve.
NuStar will suspend all deep draft vessel operations at its St. James crude oil terminal when the river stage reaches 32 feet at Donaldsonville, which is forecasted to reach this level on Friday.
The company will suspend all inland barge marine activity when the river stage reaches 33 feet at Donaldsonville, which is forecasted to happen this Sunday.
The rising water levels in the lower Mississippi River are expected to peak
May 20-24.