(Repeats earlier item; no changes to text)
By Anna Louie Sussman
July 1 (Reuters) - Thanks to the U.S. shale energy boom, theonce-quiet niche of U.S.-flagged oil tankers is in unprecedentedflux.
A half-dozen vessels that typically carried gasoline toFlorida are now rushing crude oil along the Texas coast. Majorinvestment at the port of Corpus Christi, which now exports morethan half of all Eagle Ford shale oil, suggests more to comeeven as new pipeline projects promise further market shifts.
The shale oil revolution, now in its third year, has alreadyscrambled the inland U.S. crude market, forcing pipelines toreverse direction and fuelling a revival in railway oil trade.
Since the start of this year, the U.S. oil tanker industryhas jumped into the act, with traders including BP andRoyal Dutch Shell racing to charter a handful of thethree-dozen U.S.-flagged tankers permitted, per a century-oldlaw called the Jones Act, to carry oil between U.S. ports.
The trade is helping Gulf Coast refiners such as Valero cut costs and wean plants off imported sweet crude.
Christos Papanicolaou, director of business development forthe Greenwich, Connecticut-based shipbroker Charles R. Weber CoInc, said it's the first time the Jones Act market has beenclearly profitable in the 20 years he has worked in shipping.
"The cost of entry and the duration of contracts were suchthat any venture was a leap of faith," he said. Investment inthe Jones Act trade required hiring expensive unionized crewswith no guarantee the ship would find a fixture.
"Nobody wanted to trade in the U.S., because there was nooil here."
Shale oil has changed that abruptly, specifically Eagle Fordin south Texas, where output swelled from near zero to more than500,000 barrels per day in three years. Unlike the land-lockedBakken of North Dakota, the field is less than 100 miles (160km) from the Gulf of Mexico and the "refinery row" that liesalong the Texas-Louisiana coastline.
While markets have largely adapted to changes in inlandtrade patterns, the flux in tankers is still evolving. Each newtrain terminal or pipeline threatens to rewrite the economics ofseaborne trade; limited tanker supply and rising rates aresqueezing traditional routes like shipping fuel to Florida.
Since February, the number of ships plying the route fromcrude-loading hubs in Houston and Corpus Christi to eastern GulfCoast ports such as Beaumont, Texas and the Louisiana OffshoreOil Port (LOOP), has jumped to six from one. Daily rates forthose ships have risen 50 percent over the past year to historichighs, boosting profits for operators such as Crowley MaritimeCorp and Overseas Shipholding Group.
While the eastern Gulf Coast is a refining hub, pipelinecapacity to move oil from west Texas is limited and the regionhas relied largely on imports. Shipments from the port of CorpusChristi have surged from near zero to more than 340,000 barrelsper day, over half of total Eagle Ford output, in the past year.Two-thirds of that oil has remained in the Gulf, with much ofthe rest heading to Canada, shipping data shows.
JONES ACT: SO HOT RIGHT NOW
The Jones Act requires ships moving between U.S. ports to beU.S.-owned, U.S.-made, and U.S.-crewed, making them three timesmore expensive than foreign-flagged vessels. The majority oflarge Jones Act tankers and coastal barges in use take refinedproducts such as gasoline from the Gulf Coast to Florida, whichis far from refinery centers and not linked to any pipelines.
Fewer than 40 are oceangoing tankers able to carry 235,000barrels or more; smaller articulated barges and 11 Alaska-tradetankers make up the rest of the 300-strong coastal fleet.
More Jones Act tankers and barges for the non-Alaska tradeare on order, but the new tonnage will not be delivered until2015. That's partly due to backlogs at the few commercial U.S.shipyards, which include Aker Philadelphia Shipyard and General Dynamics NASSCO in San Diego.
Limited supplies have traders competing fiercely to chartervessels, and the percentage of ships in long-term charter hasgone from around 20 percent to 100 percent over the past year.
Rates for medium-range 330,000-barrel tankers used in theGulf Coast trade have risen from $45,000 to around $75,000 aday, excluding fuel costs of another $25,000 a day when the shipis in transit, shipbrokers said.
Rates are so high that "the most profitable area right nowfor a Jones Act tanker owner is to relet it out and shipgasoline to Florida by barge," said Donald Bogden, director ofresearch at Stamford, Connecticut-based shipbroker MJLF.
When a tanker does open up in the spot market or for relet,the day rate can reach $100,000 before fuel, brokers say.ExxonMobil paid that near-record sum in June when theAmerican Phoenix was relet, shipping brokers said.
"Because of the changing dynamics of the crude oil market inthe U.S., most of these vessels that were designed to movepetrol products have been trading crude oil," said BasilKaratzas, president of Karatzas Marine Advisors, a shippingfinance firm based in New York.
"That's primarily the reason the Jones Act tanker market isso hot right now."
SWITCHING GEARS
The switch in Jones Act traffic has come on fast, as theprofit opportunities from the short-haul Gulf Coast cabotagetrade upended expectations late last year that the ships wouldcarry Texas crude to East Coast refiners or gasoline to Florida.
"It suggests that (the western Gulf Coast area) is the mostacute bottleneck at the moment," said Julius Walker, globalenergy markets strategist at UBS in New York.
In the six months through June 6, Jones Act vessels havemoved over 22.5 million barrels of oil from ports around Houstonand Corpus Christi to nearby Gulf Coast refineries compared witharound 4.6 million in the six months prior, according tocalculations by Reuters based on historical vessel tracks.
A trip from Corpus Christi, which takes much of the EagleFord crude, to Nederland, Texas refineries, takes about a week.
Carrying 340,000 barrels at a time, the Overseas Texas City,a Jones Act vessel chartered by BP, made 18 trips in the 180-dayperiod analyzed by Reuters, delivering more than 6.15 millionbarrels. When BP relet the tanker in January 2013 from Conoco, it had been carrying refined products, or "clean" fuel,to Florida, vessel track data suggests.
Three of the ships plying the inter-Gulf Coast crude oiltrade are on charter to Shell, two to BP, and one to Conoco,brokers said. The companies declined to comment.
At a per-day rate of $75,000, it costs around $2 per barrelto ship crude from the western Gulf Coast to oil centers such asPort Arthur and Beaumont in Texas, or LOOP, according to Reuterscalculations.
FLUX AHEAD
The rapid build-out in infrastructure suggests more changesahead for Gulf Coast shipping. If more tankers taking fuel toFlorida switch to carrying oil, it may have to import gasoline.The state already buys much of its jet fuel, diesel and ethanolfrom countries like Venezuela, South Korea and the Netherlands.
Corpus Christi port, meanwhile, is in the midst of amulti-year expansion that will add eight docks to its current 27by June 2014 and 10 million barrels of crude tanker storage, a33 percent gain, suggesting plans for even greater seabornetrade.
But some refiners currently taking Eagle Ford crude bytanker may soon have cheaper options. By the end of 2013, thereversal of a crude pipeline from Houston to Houma, Louisiana,will pump up to 250,000 bpd to the eastern Gulf of Mexico forrates as low as 59 cents per barrel.
That capacity would ease some of the sea traffic, but withHouston refiners receiving plenty of shale oil from the Midwest,Eagle Ford oil will likely still need a seaborne outlet.
"The growth in crude production has been so far beyond whatanyone anticipated that the infrastructure just isn't there todeal with it," said Andrew Weissman, senior energy adviser atlaw firm Haynes and Boone in Washington, D.C. (Reporting by Anna Louie Sussman; Editing by Jonathan Leff,Matthew Robinson and Dale Hudson)
