UPLIFTING THE U.S. CRUDE OIL EXPORT - NAVIGATION AND OPPORTUNITIES FOR SHIPOWNERS - SHI36151

ID: 0930479
ID: 0944321
BI Norwegian Business School
“Uplifting the U.S. Crude Oil Export Ban –
Navigation and Opportunities for
Shipowners”
SHI3615 – Bachelor Thesis in Shipping
BI OSLO
Submission Date:
01.06.2015
Program:
Bachelor of Shipping Management
“This thesis was conducted as part of the program at BI. This does not imply that BI endorses the
methods applied, the results obtained, or the conclusions drawn.”

Term Paper in SHI 3615 01.06.2015
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Acknowledgment
Firstly we would respectfully like to thank our thesis advisor, Doctor Mehdi
Sharif Yazdi who has given us much appreciated guidance on our journey to
completing this thesis.
Furthermore, our thanks go to Mr. Morten Lund, our lecturer in numerous classes
during our time here at BI, who has inspired and enlightened us in the world of
shipping.
Also, our acknowledgment and thankfulness goes to Mr. Paul Bell and his
colleagues at Poten & Partners in New York for providing us with valuable data,
and a U.S. perspective of the crude oil export debate.
Finally, we would like to thank DHT Holdings and their representatives for giving
us an insight to a ship owner’s point of view on the matter at hand, and providing
us with valuable and necessary information.
Petter Moxnes Harfjeld Christian Gran Svenningsen

Bachelor Thesis in SHI 3615 01.06.2015
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Abstract
There is no other country in the world that consumes as much oil as the United
States of America. In addition they are also the world’s largest producers of oil;
however, they have for many years relied on oil imports from other countries. The
dependency on oil imports has been a significant strategic weakness for the U.S.,
and they were most vulnerable during the oil crisis in the 1970’s when the bigger
oil producing countries in the Middle East cut their supply to the U.S. via
embargoes. Since then there has been a ban on crude oil exports, which has been a
way of reducing their dependency on imported oil. In spite of this, the country is
now approximately producing the same amount of oil as it is importing and they
do not have enough refinery capacity to refine all the oil, which is filling up their
strategic petroleum reserves. The significant increase in production is a result of
the “shale oil revolution”, making the production costs lower. Furthermore, the
oil cannot be exported and sold internationally, which means crude oil producers
can only sell it domestically at a significantly lower price than international prices,
something crude oil producers find quite frustrating. Hence, the debate on
uplifting the ban from 1975 is hotter than ever and will most certainly be a topic
closing in on next year’s election.
This thesis will for this reason explore the consequences and opportunities
a shipowner is subject to in the event of an uplifting of the ban on crude oil export
from the United States of America. It will be addressed by an analysis of the oil
market in the U.S., in addition to an analysis of the world’s trade routes in order to
determine where the oil shall be exported from, and where to.
Please also bear in mind while reading this thesis, that there is an
extraordinary amount of variables that could be included in the analysis.
Therefore, we have chosen to utilize the variables we saw most validating and
determining for our calculations and recommendations. Close to all graphs and
tables are constructed using raw data/variables from EIA, IEA and BP.

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Table of Contents
1 Introduction ........................................................................................................1
1.1 Motivation ....................................................................................................1
1.2 Value of Research ........................................................................................1
1.3 Problem Statement ......................................................................................2
1.4 Structure.......................................................................................................2
2 Background .........................................................................................................3
2.2 Introduction to Crude Oil...........................................................................3
2.3 Oil Products and Condensate .....................................................................4
2.3.1 Oil Products ............................................................................................4
2.3.2 Condensates............................................................................................4
2.4 Introduction to Oil Market.........................................................................5
2.4.1 Introduction to Oil Market in America...................................................7
2.5 Introduction to U.S. Crude Oil Export Ban..............................................9
2.6 Supply and Demand ....................................................................................9
2.7 Value Chain of Crude Oil .........................................................................11
2.7.1 Upstream...............................................................................................11
2.7.2 Midstream.............................................................................................12
2.7.3 Downstream..........................................................................................12
2.8 Global Crude Oil Trade Pattern ..............................................................12
2.8.1 The Middle East....................................................................................14
2.8.2 Africa....................................................................................................15
2.8.3 Europe...................................................................................................15
2.8.4 Asia.......................................................................................................15
3 Research Design and Methodology.................................................................16
4 Literature Review .............................................................................................18
5 Analysis and Results.........................................................................................20
5.1 PEST Analysis............................................................................................21
5.1.1 Political.................................................................................................21
5.1.2 Economical ...........................................................................................22
5.1.3 Social ....................................................................................................22
5.2 SWOT Analysis..........................................................................................24
5.2.1 Strengths ...............................................................................................24
5.2.2 Weaknesses...........................................................................................25
5.2.3 Opportunities ........................................................................................25
5.2.4 Threats ..................................................................................................26
5.4 U.S. Exports & Voyage Earnings Analysis..............................................27
6 Discussion, Recommendation and Conclusion...............................................30
6.1 Discussion and Recommendations ...........................................................30
6.3 Conclusion ..................................................................................................33
7 Summary ...........................................................................................................34
8 Bibliography......................................................................................................35
9 Appendixes ........................................................................................................39
9.1 Charts and Figures ....................................................................................39

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Table of Figures
FIGURE 1 CRUDE TYPES............................................................................................4
FIGURE 2 DAILY HISTORICAL WTI & BRENT PRICES ...............................................7
FIGURE 3 U.S. CRUDE OIL IMPORTS BY EXPORT AREA ............................................8
FIGURE 4 U.S. SPR CRUDE OIL STOCKS 1977-2014.................................................8
FIGURE 5 EUROPEAN OIL DEMAND & DISTILLATION CAPACITY ............................10
FIGURE 6 DAILY WTI BRENT PRICES 2010-2013 ...................................................11
FIGURE 7 CRUDE OIL VALUE CHAIN ......................................................................12
FIGURE 8 MAJOR TRADE MOVEMENTS 2013 ..........................................................14
FIGURE 9 CRUDE IMPORTS VS EXPORTS.................................................................16
FIGURE 10 SWOT ANALYSIS .................................................................................24
APPENDIX I IMPORTS AND EXPORTS 2013 ..............................................................39
APPENDIX II INTER AREA MOVEMENTS 2013.........................................................39
APPENDIX III CRUDE TRADE MOVEMENTS.............................................................40
APPENDIX IV CRUDE OIL PRODUCTS .....................................................................40
APPENDIX V WORLD CRUDE AND PRODUCT TRADE...............................................40
APPENDIX VII CRUDE TANKER SIZES.....................................................................41
APPENDIX VI U.S. CRUDE PRODUCTION MONTHLY AVERAGE PER DAY ...............41
APPENDIX VIII FUTURE ESTIMATES FOR S&D AND BRENT FORWARD PRICE ........42
APPENDIX IX HOUSTON - NINGBO..........................................................................42
APPENDIX X HOUSTON - ROTTERDAM (SUEZMAX) ................................................43
APPENDIX XI HOUSTON - ROTTERDAM ..................................................................44
APPENDIX XII BALTIC EXCHANGE DIRTY TANKER INDEX 19 FEBRUARY 2015 .....45

Term Paper in SHI 3615 01.06.2015
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1 Introduction
1.1 Motivation
The motivation for choosing this certain thesis topic began autumn 2014 when oil
condensates (a light processed crude oil) were exported from the U.S, in addition
to the shale oil boom and the fact that the U.S. were producing as much oil as
Saudi Arabia and almost as much as they were importing. The discussion of
uplifting the crude oil export ban had begun, but the media coverage on the matter
was minuscule, something which sparked an interest to explore the subject. There
has been written numerous papers/reports and articles concerning the debate and
what will happen to the U.S’s economy. However, after conducting thorough
research we discovered there were no papers or articles focusing solely on the
opportunities (arbitrage) a shipowner could be able to exploit if the ban were to be
uplifted. That is when the decision came; this opens a completely new market
with opportunities and these need to be analyzed and weighed to give an owner
incentive to reposition their fleet.
1.2 Value of Research
Uplifting the crude oil export ban in the United States of America will not only
benefit the American economy and solve the issue of reserves filling up, but it will
also be of good potential for a shipowner evaluating new markets to enter.
The value of the thesis’ research is to provide a comprehensive and clear view of
the crude oil tanker trade, with a focus on U.S. export and the opportunities an
uplifting will entitle. In order to defend the value of our research, a quote from
IEA’s (International Energy Agency) 2014 Medium Term Oil Market Report will
suffice: “The potential impact of a broader overhaul of U.S. crude export
regulations is the object of several ongoing studies by other forecasters.”
The novelty of the analysis conducted throughout the time spent on this thesis is
the depiction of the nuts and bolts of the market, crafting arguments that can be
utilized by a shipowner who eyes this emerging market as an opportunity. In
addition, we have conducted interviews with brokers and a crude oil shipowner,
both eyeing an uplifting creating a potential market for shipowners.

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1.3 Problem Statement
Since 1975 there has been a ban on crude oil exports from the U.S. following the
energy policy and conservation act (EPCA), which was an act/law passed in
congress to protect and secure the country’s energy and economical future. Its aim
when it was enacted was to control the supply and demand for energy, in addition
to the price, and a regulation within the act prohibited the export of crude oil.
Hence, all oil produced in the U.S. is then consumed or stored domestically.
Today, the amount of oil in storage is linearly increasing and is reaching its
capacity, as distillation refineries are struggling to keep up with the pace of
production, which is clearly illustrated in Appendix XIII (Reuters, 2015).
Something has to be done with the oil in storage and one option is to start
exporting. This would create a new market and can foster new possible trade
routes and opportunities. Therefore, given the facts portrayed and opportunities an
uplifting will produce, a research question has been defined:
“How should crude oil shipowners reposition their fleet in the event an uplifting
of the ban on crude oil exports from the U.S.?”
1.4 Structure
As mentioned previously, the paper is structured to depict the nuts and bolts of the
U.S./international oil market and the dominant factors in order to see the
opportunities an uplifting of the export ban will create. Therefore, the following
chapter will provide the reader with a characterization and description of the oil’s
supply chain in the U.S. and its oil reserves, concluding with what drives the
supply and demand. Given an insight to the oil’s supply chain, one can clearly see
where the oil is most likely to be exported from and where the most important
areas are. Chapter 2.8, will address the current trade routes of crude oil, this to
give an overview of where the crude oil will be transported in the event of an
uplifting. The last part will include a depiction of our results and examples to
provide an understanding of what can possibly happen. Lastly, the thesis will be
concluded by a recommendation based upon the findings from our analysis.

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2 Background
The following chapter will consist of a presentation of our research and findings
which has helped us understand and pin down the main market forces. An
introduction to the most important definitions and factors will be presented to
decipher of how this market is assembled.
2.2 Introduction to Crude Oil
Crude oil is a fossil fuel that is a mixture of hydrocarbons that have been formed
from plants and animal that lived millions of years ago. One can find crude oil as
a liquid form in underground pools and reservoirs, in minuscule spaces within
sedimentary rocks, and near the surface in tar/oil sands (EIA 2014). From crude
oil one produces different oil products through refining the oil, which will be
described later in this chapter. The quality of the crude oil is measured by its
density and sulfur content (See Figure 1), density measuring its weight relative to
water indicating if it is light or heavy, and sulfur content indicating if it is light
our sour. The density and sulfur content will determine the price of the crude oil,
where sweet is priced higher due to its ability to be easier processed than sour oil.
There exists numerous of different oil benchmarks, but there are three primary
benchmarks: Brent, WTI and Dubai/Oman (Investopedia, 2015). Brent is the most
widely used price marker and refers to four different fields in the North Sea;
Brent, Oseberg, Forties and Ekofisk. WTI, or West Texas Intermediate is the main
price marker for oil consumed in the USA. The Dubai/Oman benchmark covers
the Middle Eastern oil, which consists of crude from Dubai, Oman and is also the
main price marker for the oil coming from the Persian Gulf. (Investopedia, 2015).

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2.3 Oil Products and Condensate
2.3.1 Oil Products
After the crude oil is removed from the ground, it is sent through a refinery where
different parts of the crude oil are separated into useable petroleum products.
These are products such as gasoline for our cars, distillates including diesel fuel
and heating oil, jet fuel, petrochemical feedstock, waxes, lubricating oils, and
asphalt (EIA, 2014). See Appendix III. The U.S. market for exporting the products
coming from crude is open and free.
2.3.2 Condensates
The definition of condensates is very vague, but it can be described as a very light
hydrocarbon liquid (Bordoff January, 2015), and the difference between crude oil
and refined products lies in the fact if the crude/liquid hydrocarbon has been
lightly processed through a distillation tower.
The export ban from 1975 prohibits the exports of crude oil, but there is no
clear definition of condensate, which makes it difficult to prohibit. Characterizing
condensate is important due to the fact that a certain type of condensate is allowed
to be exported, but how much the crude oil has to be processed in order to call it a
Figure 1 Crude Types

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condensate is hard to determine since there is no single definition of what
distinguishes a condensate from ordinary crude oil (Reuters, 2014 on
Condensates). Hence, there is a bill up for introduction in congress under the
name “The Condensate Act”, which has the intention of defining condensates. A
passing of this bill will be of much help to the process of uplifting the crude oil
export ban. Our research shows that there have been a few condensate exports
from the below named ports between July last year until today, totaling at around
1,5 million metric tons.
 Texas City
 Corpus Christi
 Houston
 Brownsville
2.4 Introduction to Oil Market
Back in the early 1970s, Saudi Arabia agreed to denominate its oil sales in
U.S. dollars in exchange for arms and protection. The other OPEC (defined later)
countries soon followed suit with similar deals, and come today, the U.S. dollar is
the only currency for buying and selling crude oil. This has cemented the U.S.
economy and currency’s importance for this industry and thus changes here are
felt across the global economy.
Crude oil is also a very volatile commodity beyond the U.S. economy
alone, both regarding supply, and price. Over half of the countries in the world
extract oil from their lands, but few are seen as majors in regards to production in
barrels per day (bbl/d). Individually, the top 3 producers make up 36,8% of the
market, Russia, Saudi Arabia, and the United States of America, with 10,8 mil.
bbl/d, 11,5 mil. bbl/d, and 10 mil. bbl/d respectively(Petroleum 2014).
However, supply quantities are not all pegged by countries individually, a
group called the Organization of the Petroleum Exporting Countries, better known
as OPEC, collectively coordinate their petroleum policies for their member
countries in an effort to stabilize the market at large. In the past, their efforts have
been attributed to lowering their supply as a whole in order to keep crude oil
prices high. Although on the 27th of November last year, they took an entirely
different tactic, albeit unsurprising from the economic view of competition, was a
shock for many based on the group’s precedence.

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Before going into what that decision was, we must first take a look at the
supply glut create partially by what has been referred to as the ‘Shale Oil
Revolution’ in America. Following innovations in the field of horizontal drilling
through hydraulic fracturing for shale oil beneath the earth, companies started to
heavily invest in this technology in American (given their relaxed laws on land
ownership). These ‘plays’ exploded in popularity in 2010 when hundreds of rigs
were set up followed by more than 1,200 rigs in 2012 (Baker Hughes, 2015).
However, this technique has an exceptional twist as one has to continuously set up
new rigs in order to fully capitalize in terms of extraction quantities. Fast forward
back to November last year, rig counts in America were still sky rocketing. In
situations with growing supply like this, OPEC would normally sacrifice
production in order to maintain lucrative oil prices. Notwithstanding this norm,
OPEC took action by non action. OPEC’s 166th meeting concluded the decision
to stand their ground against rival producers in holding their supply quantities,
likely in an effort to out-sustain USA as well as other rivals on price.
As the drivers of this market are so numerous, we will be limiting this
introduction to only a few examples of how the oil supply and its price has
changed in the past:
 Civil War, Libya, 2011
o Price increase
 Oil Crisis, 1973
o Price increase
o Embargoes to certain countries
 Sanctions on Iran, 2006
o Price increase
o Embargo
 Global economic crisis, 2008
o Steep price fall

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Figure 2 Daily Historical WTI & Brent Prices
2.4.1 Introduction to Oil Market in America
Dating back to the 1940s, the United States of America has been a net importer of
oil, both crude and its derivatives. However, over the course of less than a decade,
the USA has gone from importing 1.4m bbl/d of oil products in 2005 to exporting
1.5m bbl/d in 2013. Their net crude imports have also significantly fallen from
10.9m bbl/d in 2005 to 7.8m bbl/d in 2013 (EIA, 2015). There is a clear image
here of the USA become more and more self-reliant on their domestically
extracted crude & domestically refined oil products. But, as we will be covering in
more detail in the next chapter, the U.S. crude oil exports are prohibited by law,
with the exception of a handful circumstances.
As mentioned in our ‘Introduction to Crude Oil’, the top ten oil producing
nations make up for approximately 65,3% of the world production (BP, 2014). Of
these, the U.S. is one of the few net importers. This is mainly credited to the
export ban placed on the country by the President during the oil crisis back in
1975. However it should be mentioned that the USA would likely still be a net
importer even if there was no ban in place.
Regarding their domestic demand for crude oil, the USA produces about
47% domestically. In the last 10 years, 23% of imports has come from Canada
through pipelines. The remaining 77% however, come into the country by sea
from Saudi Arabia (14%), Mexico (13%), Venezuela (11%), Nigeria (8%), Iraq
(5%), et al. (See Figure 3) (EIA, 2015).
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WTI Brent

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Figure 3 U.S. Crude Oil Imports by Export Area
The U.S. has the world’s largest supply of emergency crude oil, called the
Strategic Petroleum Reserve (SPR), which is stored in huge underground salt
caverns along the coastline of the Gulf of Mexico (ENERGY.GOV). As of April
2015, the inventory of the SPR was a total of 691 million barrels, and the capacity
of the reserve is 727 million barrels. In other words, the capacity is reaching its
limit, and measures have to be made in order to prevent an oversupply. In January
2015, there was a total production of 9,185 thousand bbl/d (see Appendix V). See
also chart for yearly and monthly supply since 1977 (see Figure 4).
Figure 4 U.S. SPR Crude Oil Stocks 1977-2014
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2.5 Introduction to U.S. Crude Oil Export Ban
The current ban on crude oil export is governed by the Bureau of Industry and
Security (BIS) which covers all the laws and restrictions that govern the export of
crude oil, among them the aforementioned EPCA from 1975. Crude oil exports
are not allowed unless they coincide with a set of specific requirements and
receive an export license from BIS. An export can also be done if one has proof of
showing that the export is of national interest (Bordoff January, 2015). Exports to
Canada are for example allowed, but only a certain amount. The specific
categories for allowing exports are the following:
 Exports from Alaska’s Cook Inlet
 Exports to Canada for consumption or use therein
 Exports in connection with refining or exchange of strategic petroleum
reserve oil
 Exports of heavy California crude oil up to an average volume not to
exceed 25,000 b/d
 Exports that are consistent with certain international agreements
 Exports that are consistent with findings made by the president under an
applicable statute
 Exports of foreign origin crude oil where the exporter can demonstrate that
it has not been comingled with oil of U.S. origin
 Exports pursuant to an exchange meeting statutory criteria
The above points were extracted from the report “Navigating the U.S. Oil
Export Debate”, and as one can see, it is far from a free trade policy for crude. As
mentioned, the product trade is open, and to an extent, so is the export of
condensate, and the distinction between crude oil and refined products is essential
to uphold the export policy as it is today.
2.6 Supply and Demand
Being a globally supplied and demanded commodity, oil is a complex commodity
to follow. Factors of how supply and demand may shift are plenty, and may also
be extremely sudden. We will attempt to cover the most appropriate variables.
First we will investigate elements that reflect changes in demand, followed by
elements affecting changes in supply. Price will also be discussed through this
section.

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Influencers causing long-term increases in demand are generally related to
population growth and economic advancement, as the case in China. Here,
economic advancement has caused investments in the construction of refineries in
the country, which will absorb a decent amount of the supply increase in the
coming years. Short-term demand spikes have been seen in the recent years where
(and particularly with the recent price drop in Brent), China, along with India,
have also been driving towards creating strategic oil reserves, similar to that of the
USA, as emergency stockpiles if the market ever goes sour. A smaller increase
and different causation, has been seen in Europe, where there has been a fall in
domestic production, giving rise to imports (see Figure 5).
Figure 5 European Oil Demand & Distillation Capacity
The consequence to the domestic supply decrease in Europe can be seen in
2008, and continues to this day. Net demand has fallen due to certain debt-ridden
economies and governments. Demand also falls where substitute sources of
energy are taken use of, such as natural gas and renewable energy sources, which
again, is the case in Europe.
The world supply of oil paints a picture different to most other markets,
this is because of the great number of countries with supply potential, and these
countries generally being subject to great geopolitical tensions. Due the nature of
geopolitical conflict and civil discontent in many of these countries, we often see
sudden drops in oil. An example of how sudden these supply decreases occur was
seen in 2011. On the 17th
of February, Libya, an oil producer of around 1,6
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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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European Oil Demand & Distillation Capacity vs Refinery Utilization
Production minus Exports Imports Distillation Capacity Ceiling Utilization %Source: EIA

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million bbl/day fell into civil war (see Figure 6). Despite only being a little over
1% of global supply, the removal of this supply from the market caused the price
of Brent to rise over $14 in less than 2 weeks! This example shows how the
demand for oil is inelastic and can cause rapid rises in price. An example of rapid
price decline has been mentioned earlier in our thesis, namely the one following
OPEC’s 27th
of November meeting last year. This proves that supply is also
inelastic. A final example of change in supply is the ‘Shale Oil Revolution’ in
America which spoke about in section 2.4.
Figure 6 Daily WTI Brent Prices 2010-2013
2.7 Value Chain of Crude Oil
Crude oil drives current civilization forward as our primary energy source. Its
derivatives are used to produce plastics, provide electricity, and fuel the majority
of our means of transportation. It is pumped out of small underground pools and
further transported by pipelines to refineries for production, storage or terminal
for transportation by land or sea.
2.7.1 Upstream
The upstream sector, is the exploration and production part of the value chain. It is
dedicated to extracting crude oil from beneath the surface where oil reserves have
been found via hydrocarbon exploration. Exploration is usually done through
magnetic, gravity, or seismic reflection surveys. Production entails the operation
of oil wells on land, or oil rigs at sea, where the physical extraction takes place,
bringing the oil out to pipelines.
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Daily Brent Prices 2010-2013
Start of Libyan civil war Libyan production back

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2.7.2 Midstream
This section of the value chain is the bulk storing, selling, and transporting of oil
as a commodity. Prior to being transported to a distillation refinery, oil is often
stored in terminals, export hubs, storage tanks, and salt caverns (as with SPR)
before being moved to the next location. When sold and a distillation refinery has
been decided, the crude oil is then transported either via tankers, barges, rail road,
or pipelines to their designated locations. Vessel sizes depend both on the amount
of oil demanded, and the distance to the end location (economies of scale). Deep
sea transportation of crude is on the four following vessel sizes; Panamax,
Aframax, Suezmax, VLCC (see Appendix VII).
2.7.3 Downstream
The final part of the value chain for crude oil is the downstream segment,
previously called distillation refineries. This entails processing and distilling the
crude oil to various ‘grades’ of hydrocarbon chains. Following this process,
comes the commercial sales of these derivatives (diesel, gasoline, jet fuel, etc.) to
retailers or end users.
2.8 Global Crude Oil Trade Pattern
To understand the potential of the export of crude from the U.S., a look at the
current geographical distribution of global crude oil trade pattern. By portraying
this, together with supply and demand, we may determine where the shipments of
Figure 7 Crude Oil Value Chain (Hazar, 2015)

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crude oil from the U.S. shall be transported. For the sake of the following
paragraphs, please regard Figure 8 and Appendix I and II, portraying the world’s
trade routes, in addition to the numbers of imports and exports. As seen in the
overview of oil importers and exporters, the Middle East is the largest source of
crude oil in the world, and acts as the marginal supplier of oil to the west and has
approximately 60 % of the world’s proven crude oil reserves (Stopford 2009). In
2003, the Middle East accounted for 43% of the world’s crude oil exports, and in
2014 export amounted to 34,9% (BP, 2014). Other bigger suppliers, who also
become a competitor to the American crude, are countries around the Atlantic;
Mexico, Venezuela, West Africa, North Africa, the North Sea and Russia (See
Appendix III).
The trade is influenced by supply and demand of crude, which further
decides the demand for ships and transportation, amounting to the trade flow in
the various routes. A good example of ship demand is depicted by Martin
Stopford; “The ship demand depends upon the source from which the oil is
obtained, and the route taken by the oil to the market.” The amount of crude
available for export from the U.S. is therefore determining for the shipowners
decision on entering the new American crude market. How many ships from their
fleet should be repositioned to take advantage of the opportunities arising will
depend on the continuing production and storage of crude.
A good source of understanding the crude oil tanker trade patterns are by
looking at the Baltic Exchange’s Dirty Tanker Index (Appendix XIII). Looking at
the third column in the table, the various cargo sizes are presented in metric tons,
correlating with these are the various vessel sizes, measured in Dead Weight Tons
(DWT). From largest to smallest these are; VLCC (160-320 DWT), Suezmax
(116-160 DWT), Aframax (80-115 DWT), Panamax (60-80 DWT), and Middle
Range (MR) (60-30 DWT). The trade routes will be mentioned several times
throughout this section, referring to them as TD[].
The global key crude trade can be divided into the most influential regions,
which are the Middle East, Africa, Europe, Asia ((IEA) 2014). The spread of
imports and exports of each country is depicted in Figure 9 for the sake of
illustrating the most important countries in the trade.

14
2.8.1 The Middle East
Being the world’s largest exporting region of crude oil (See Appendix III), Middle
Eastern oil would be a competitor to the trade when American crude enters the
international trade, and thus the supply and demand from this region will be
determining. According to IEA’s Medium-Term Oil Market Report for 2014, the
Middle East oil sector is experiencing a period of profound transformation. The
transformation occurring is explained by a quick increase of domestic oil demand
as well as an increase in refining capacity, but that does not include the whole
region, seeing there is a low production growth with continuing conflict in Syria
and Yemen. Furthermore, the sanctions against Iran following the nuclear crisis
does not contribute to any growth either, seeing that 20% of their oil exports to the
EU were to cut off when the sanctions were imposed.
IEA has forecasted that the overall Middle Eastern crude exported will
decrease in the coming years, but that they will redirect the oil to non-OECD
buyers in order to reinforce the strategic energy partnership with consumers in
emerging markets in Asia. The drop in crude exports are projected to be around 16
million barrels per day ((IEA) 2014).
There are four main trade lanes form the Middle East indexed by the Baltic
Exchange, TD1, TD2, TD3, and TD8. The first three are VLCCs trades, whiles
the last one is an Aframax trade. TD2 & 8 are to Singapore, while TD3 is the
Japan. The first trade route, TD1 is to the U.S. Gulf.
Figure 8 Major Trade Movements 2013

15
2.8.2 Africa
For Africa, the IEA reports that exports will drop tremendously due to the
disturbances and conflicts in Libya, Sudan and South Sudan. Disruptions have
also been seen post-elections in the Nigeria May this year. The oil production
facilities in West Africa (WAF) have primarily been invested in through
American oil companies, and thus their main trade has been into the U.S., this
route is better known as TD4, going on VLCCS. Another frequent route is TD20
to the European Continent. These route are used by VLCCs and Suezmaxes,
respectively. Lastly, there is TD15, which a VLCC trade to China.
2.8.3 Europe
Trade related to Europe for crude oil is dominantly imports, where the current
main export regions are, The Middle East, and North Africa (IEA, 2014). As seen
previously in the paper (Supply & Demand EUR), European production is falling
and refineries are underutilized. A lot of the oil distilled in Europe is transport to
America via product tankers. There are six dominant intra-European trade lanes.
On Suezmaxes, the TD6 leg travels from Russia in the Black Sea to the
Mediterranean, while the TD17 leg carries oil from Russia and the Baltic counties
to Western Europe (better known as ‘Continent’ in shipping terms). On
Aframaxes, the TD7 represents the trade from the North Sea to the Continent, and
TD19 is a cross-Mediterranean route. Lastly, we have two main MR legs; TD16,
being the same route as TD6, and TD18 being the same route as with TD17. With
regards to trade lanes out of Europe we have the TD12. TD12 is from ARA
(Amsterdam-Rotterdam-Antwerp) to the U.S. Gulf.
2.8.4 Asia
Asian demand primarily consists of four countries; China, Japan, India, and South
Korea. These countries primary import crude oil from the Middle East, but there is
also some shipments from South America and WAF. For large crude tankers, the
Middle East – Asia route is considered to the main trading route worldwide, its
importance is due to the distance of the leg, and the large amount of tonnage that
travels ballast back to a laden port. All the main import routes have previously
been mentioned in the sections above. We should also mention a minor route the
travels from South East Asia to the East coast of Australia, an Aframax route
better known as TD14.

16
3 Research Design and Methodology
For the sake of solving and answering our research question, a vast amount of
information had to be gathered. This chapter consists of our design of research, in
addition to the methodology utilized to create recommendations and a conclusion.
First of all we decided on our primary and secondary sources of data, primary
sources being gathered by interviews with reliable players in the industry, and
secondary being market reports from brokers and energy institutions. Our primary
data was gathered by keeping close contact with a broker based in New York,
Poten & Partners, and a shipowner based in Oslo, DHT Holdings. The
combination of these two primary sources provided us with valuable insights to
their point of views on the export ban. Having contact with a company located in
the U.S. gave us a deeper insight from an American perspective, which has been a
valuable asset. The contact with DHT gave us valuable information concerning
what they saw as most determining factors for potentially entering the market if it
opens, as well as help with gathering variables for calculations of shipping costs.
When beginning the process of writing this thesis, a plan was set on what
information we needed to answer our research question, and how we were going
to acquire said information. As previously mentioned, an overview of the crude
oil market with its supply and demand in addition to the crude oil market in the
U.S. was of importance for our thesis. Furthermore, an overview of current
worldwide trade routes was needed, which can be applied to craft a hypothesis on
where the crude oil will be transported if the ban is uplifted. The acquired reports
Figure 9 Crude Imports Vs Exports

17
have been of great importance in our research and provided us with a lot of valid
information making it possible to develop a hypothesis and examples.
The research conducted has been of an inductive manner regarding the fact
that we wish to use our observations and findings in order to develop a theory of
what will happen to the market in the event of an uplifting. An inductive approach
entitles that there are no theories applied in the beginning of the study, but
theories are formulated as an outcome of the observations during the research. Our
research question requires this method to be applied since it has not yet happened.
Our strategy has been qualitative, due to our chosen research question and
inductive manner of research. We decided to gather as much relevant information
as we could concerning the debate of crude export from the U.S. beneficial to the
answer of this thesis. This involved exploring different journals and reports
concerning the oil industry and gained a better understanding of how the market
works.
The way we have conducted our research has been quite successful and we
discovered a fair amount of relevant articles and papers that helped us answer our
question. Our research design can be labeled as a comparative study due to our
research being based on comparing articles and papers to each other in order to
find the most relevant and applicable facts and comments. In addition, the market
and trade route research is especially comparative considering the calculations
needed to be done is compared to existing trade routes, and also to determine
where the crude oil will be shipped.
Our principal orientation was an epistemology research approach, while
we contemplated between using the method positivism and interpretivism (Yin
2014). On one side, positivism helps us with the research showing ship earnings
and tonnage supply and demand, the date will be easily applicable to any
shipowner or cargo owner for discovering what execution they could and should
take if and when the export ban occurs. While on the other hand interpretivism
will allow for complexity and contextual factors to be considered. Regarding trade
routes and market sentiment, the latter method suited us best, as it was better
suited for a moving and ever changing market. The choice entailed challenging
data analysis, but we believed we could handle this burden given our ability to
talk with numerous players in the shipping industry. This qualitative method is
also known as constructivism, where we attempt to gain understandings from an
insider perspective (Creswell 2014).

18
We have also chosen to apply two analytical tools in order to analyze and
attain an understanding of the international and American oil market. The chosen
frameworks are a SWOT and PEST analysis because they help analyze the
internal and external factors in either a company or industry (Fleisher 2007). We
have applied it to the usage of analyzing a market. The SWOT analysis has helped
established the strengths as weaknesses in the American oil market, and the
opportunities and threats one can encounter if one where to enter after an uplifting
of the crude oil export ban. The SWOT analysis has been of great importance for
the conclusion of the thesis’ research question, due to the fact that it thoroughly
depicts the U.S. crude oil market in the perspective of a cargo owner, which again
will be beneficial for a shipowner.
The PEST analysis conducted indicates the external factors influencing the
possible crude oil export if the ban is uplifted. This is important in the eyes of a
shipowner when contemplating on entering this new emerging market. By
combining these two analytical tools our research is organized and utilized to
pinpoint the most determining factors for a shipowner to consider and portray the
opportunities.
4 Literature Review
Our chosen topic of study is relevant and current, therefore, there has been
published numerous articles, journal entries and reports concerning the crude oil
export debate. However, the publications we have discovered do not put an
emphasis on the potential market that will open for shipowners if the ban is
uplifted and the consequences it will have on the crude oil shipping market. The
focus is rather on the effects it will have on the American economy, especially the
gasoline prices and how it will affect employment. As mentioned, this
consequently validates our thesis together with the interest in the subject we have
discussed with our primary sources.
The literature available on the topic of U.S. crude oil exports touches upon
the subject of what an uplifting will do to the shipping market, but no reports
focus solemnly on the opportunities at hand at looking at the pure shipping aspect.
An uplifting is not at first glance positive for the world oil market, but for the
shipping market it has potential. As an example, IEA (International Energy
Association) annually release an oil market report, which depicts the oil market in
the world. When reporting the American oil market, the discussion of the ban is
mentioned and they write; “The possibility of a change in the regulatory

19
framework governing US crude exports has moved to the top of the policy agenda
since the MTOMR (Medium Term Oil Market Report) 2013.” ((IEA) 2014). IEA’s
Medium Term Oil Market Report for 2014 has been one the most important
findings for our research, and has provided us with a good insight to the world’s
oil market and the predictions for years to come.
To start off our research we created a shared document in which we copied
in links to relevant articles and journal entries, in addition to video commentaries
or presentations on the subject. We developed a system where we have
documented what has been read by both of us. This was a good way of starting the
project where we could both see our progress on the research. We discovered a lot
of good articles both online and in form of newspapers and journals at the BI’s
library. However, our most important findings were reports from brokers and
energy institutions. In our literature review we will go through our findings, which
we find to be most relevant, and can be applied to answer our research question.
We will compare our research question to existing papers or reports, in addition to
explaining the theories and methods applied during research.
One of our most important secondary sources is a report upon the
implications of an uplifting of the crude oil export ban, written by a professor at
Columbia University together with a partner from the consulting firm Rhodium
Group (Bordoff January, 2015). “Navigating the U.S. Oil Export Debate” is an 80
pages report, where knowledge spanning from the origin of the restriction, current
political debate, and economic impact are extensively covered. The strength of
this paper is their American perspective from political and economic point of
views, and provides us with valuable insights to variables to consider for the
evaluation of opportunities in the potential new market of crude export from the
U.S.
Another source of literature we have had good use of is oil reports and
country profiles from OECD’s International Energy Agency (IEA), a renowned
and trusted source on the topic of energy, and thus crude oil. They provide reports
on countries’ energy policies, and medium-term market reports for oil, looking
extensively at market analysis and forecasts spanning from 2014 to 2019. But
again, these reports mention briefly the implications the uplifting can have on the
crude shipping market, but also provides important data for our analysis.
A more relevant source the U.S. Energy Information Administration
(EIA), a branch of the US government providing independent statistics and

20
analysis of the American market. Research and data from the EIA has been of
significant help to our thesis and has given us the most important variables in
order to portray and calculate supply and demand.
We should also mention BP’s annual Statistical Review of World Energy
from 2014. The data here is the same as the information we have extracted from
EIA, however BP’s report has the extensive tables and illustrations supplied,
saving us from the labor of producing these manually. These tables and
illustrations can be found throughout our paper, as well as the appendix.
For recent and past shipping news on the topic, we have monitored various
Internet sites such as at the newspaper TradeWinds, which is one of shipping’s
leading news services, Shipping Watch, Reuters, Bloomberg and The Wall Street
Journal. The importance of monitoring these sites has been in the field of staying
up to date on the topic and having the ability to catch any updates on the matter at
hand. Staying up to date on relevant news could possibly enhance our thesis’
relevance as well.
When it comes to our calculations and theories we have utilized various
text books, some new and some we have used during our years here at BI. Martin
Stopford’s, Maritime Economics is an example of a piece of literature that has
been of great importance for many of our subjects, but also for this thesis.
Stopford gives a good analysis upon the world trade and has been be very useful
for our research question.
Our paper will provide a different twist to the current debate at hand, and
will in our opinion illuminate a perspective which has previously remained
untouched up until now. It should of course be mentioned that there are a few one-
page opinions on the topic, but nothing to the degree that we will be presenting
here.
5 Analysis and Results
Chapter 5 will provide the reader with an analysis of the background information
concerning the US crude oil export debate. The analysis will be conducted by
utilizing models/frameworks we found most suitable for this particular situation.
Firstly a SWOT-analysis since the opportunities and strengths will be revealed by
this this framework. A PEST analysis will also be conducted in order to assess the
most important factors when debating entrance, and also because it is known to be
good tool to utilize when it comes to decision making. The analysis will also

21
consist of a look at trade routes, this in order to predict how the new market could
look like.
5.1 PEST Analysis
The PEST analysis will cover the American crude oil market and the factors
affecting the possibilities in this emerging market. This will give an overview of
what one must consider before deciding to penetrate the market or not.
5.1.1 Political
Firstly, the American government is not known for being flexible and if the ban is
uplifted, there could be implemented restrictions on how much can be exported
each year or month, which can be a quite negative factor. However, the U.S. has
for many years been open to free trade and supported an open market because of
the positive effect it has on economic welfare for both importers and exporters
(Bordoff, 2015). A good point made in the report “Navigating The U.S. Oil
Export Debate” is that since America has for so long been supporters of free
trade, their commitment to free trade principles are now being put up to a test. In
other words, a free trade of crude out of the U.S. will be upheld and kept secure
and safe for both parties.
The discussion of uplifting the export ban is a current ongoing discussion
in the Capitol and there are mixed opinions. The Republican Senator, Lisa
Murkowski, is currently on a campaign to raise awareness of the implications the
export ban has on the U.S. She is trying to pass a bill proposing to amend the
Iranian Nuclear Act and later uplift the export ban (CONGRESS.GOV, 2015).
There have been multiple bill proposals in the last year to uplift the ban, but none
have made it past introduction. This validates the attention concerning the
discussion and shows that we are moving closer towards a decision being made in
the near future.
Other sources say (Aftenposten 2015) that it is likely to believe that the
ban will be uplifted in approximately two years, and more feasible under a new
president after next year’s election. A republican government will presumably be
more open to an uplifting and encourage the free trade and there are speculations
that Obama does not want to make the decision and have it on his reputation.

22
Foreign policy benefits in terms of relationships with the U.S. and the
shipowners’ homelands can be a beneficial factor for both parties and can be
looked upon as an incentive for uplifting.
5.1.2 Economical
Being a commodity deeply rooted in the domestic and global economies, an
export change would expand economic activity across numerous front. The
greatest transitions would be the changes in price of WTI and oil products, and
adjustments in the flow of oil throughout the U.S. oil value chain. Regarding sea
transportation, there would obviously be import/export changes for large cargoes
travelling long haul. In addition, particular intra-U.S. jones act vessel legs will
also be strongly affected, as crude oil may be exported directly from the U.S.
Gulf, rather than moved up to refineries around the Delaware Bay area. This will
heavily reduce, and possibly remove the demand for Jones Act crude tankers. This
is due to the extremely high cost of hiring a Jones Act vessel (Reuters, 2014).
For the Price of WTI, an export ban would raise its current artificially low
price to the levels of Brent. However, this price would only be available if the
crude were sold in the Gulf or exported internationally.
The influencer that is our main concern in this thesis is the actual changes
in flow of crude oil through sea transportation in and out of the USA. This
encompasses changes in how certain voyages change in becoming laden rather
than ballast, and vice versa. A factor covering this is also the WS price to send
cargo into America. Currently, there are is a small premium to travel this leg as
crude oil tankers cannot load new cargo in the USA and have to either travel
ballast back to Europe or down to the Caribbean.
5.1.3 Social
Price of oil will decrease giving the American people lower fuel prices. However,
jobs could be lost due to the drop in demand for oil products and refineries could
be shut down.
There are certain economic factors that are reliant on human demand, and
we have thus placed these under our social factors. The first follows in this
successive chain; household demand for transportation that requires fuel,
originating from refineries demanding crude oil from oil producers. If demand for
gasoline and diesel rise, demand will be brought to refiners, and in turn to oil

23
producers. The second is oil traders, as these are humans and their algorithms
trading oil as a commodity. With human decisions come human emotions, without
going into the psychology of emotional scares, people often tend to overreact, as it
were. The American public is blindly afraid that gasoline and diesel prices will
rise due to the uplifting, however, with the supply glut in world trade of crude oil,
this will not be the case and politicians need to assure them otherwise.
An additional factor for this industry is the increasing demand to use
modes of transport that are more “eco-friendly”, which mainly encompasses
producing more fuel efficient engines and engines with less CO2 emissions, but
also demand for alternative vehicles such as hybrid and electric vehicles. This has
causes a minor loss in demand going forward, and seems to be gaining particular
popularity in developed countries.
The issue of emissions will be important in the discussion and is
something one must consider in terms of operating ships between the U.S. and
other continents. One might have to invest in new types of vessels or technologies
in order to comply with the emission restrictions in certain areas. The restrictions
could also revised and become exceedingly strict and you will be forced to invest
in new technologies in order to actually enter the market. Not only will an
uplifting of the export ban entitle domestic environmental implications, but also
global. Crude exports from the U.S. will most likely, as we have predicted, cause
a distortion in the trade flows of crude and refined products, which will also affect
the air pollution in other areas where the vessels sail.
5.1.4 Technology
Technology in terms of ships, being for example emission restrictions and costly
alterations to ship or more costly bunkers. New types of vessels
A strong factor on the technology front is innovation in oil extraction,
whether it be for extracting previously unobtainable oil, or for extracting what has
previously been uneconomical to retrieve. At the rate of current domestic demand,
this could cause further oversupply in the USA.
Technology can also cover the rate of improved infrastructure. New and
improved pipelines, ports and export terminals are all improvements, which may
fall under this category. In order for the crude oil to be exported, there must be
dedicated export terminals/ports for this operation. Dedicated meaning the
infrastructure for handling the vessel sizes in this segment. The long term FIX for

24
exporting obviously would be to invest and create crude oil export terminals. In
the short term however, import terminals can be tweaked to handle export as well,
and the other option is to reconfigure oil products terminals to also handle crude
oil.
5.2 SWOT Analysis
Our SWOT analysis enlightens the strengths and weaknesses of the American
crude oil market in the event of an uplifting, which will give an insight to the
opportunities and threats one can encounter if one were to enter this market. The
analysis will be conducted in the perspective of a crude oil producer due to the
fact that benefits of a cargo owner will also benefit the shipowners as more cargo
needing transportation is always positive for shipping.
Figure 10 SWOT Analysis
5.2.1 Strengths
Firstly, a strength of the American crude market is the large amount of oil
in production, in addition to the amount of oil stored in the country’s strategic oil
reserves. In 2014, an average of 8,66 million barrels of crude oil was produced
each day, bringing production levels further up from previous years (See
Appendix VI). The rate of crude production and the lack of refinery capacity gives
cargo owners a large amount of supply to sell in the event of an uplifting, being a
noteworthy strength. Which is another strength for shipowners to reposition their
vessels for U.S. trade (Reuters, 2015).
Strengths Weaknesses
- Production and reserves
- Government
- Quality of oil
- Increasing supply
- Infrastructure
- Limit of export
Opportunities Threats
- Market the good quality of oil
- CoA’s
- Take advantage of Europe’s
Refinery capacity
- Diplomacy
- Political
- Competition (Fleet size needed)
- Emission Regulations
- Currency

25
Another strength is the quality of the oil produced in the US, compared to
the oil sold in the world market coming from the Middle East. The West Texas
Intermediate benchmark (WTI) labels the American oil’s quality similar to Brent,
making it attractive in the world market because of its sweetness and is a right fit
for the refineries located in for instance Europe.
5.2.2 Weaknesses
In the short term, pumping more crude oil into the world market increases supply,
which in turn would decrease prices, for crude oil seller, this can be looked upon
as a weakness, but positive for a shipowner. However, this can also be looked
upon as an opportunity (which we get back to), due to the producers being able to
sell the oil in the world market at i.e. Brent prices, which could be higher than the
U.S. domestic prices of crude.
Infrastructure can be an issue when it comes to the size of vessels needed
for the transportation of oil from various export hubs. The ports of export might
no be able to handle any kind of vessel, and investments in upgrades will
presumably be needed, or certain ports may not be accessible at all by larger
vessels. As mentioned earlier, there has been exported condensate (lightly
processed crude), and one can presume that the crude exports would occur from
these ports as well. Texas City, Corpus Christi, Houston and Brownsville have
seen condensate exports, but the question is if these ports would have the
infrastructure to handle a VLCC for example. Our research shows that a VLCC
will not be able to call many ports in the U.S, only the ports Delaware Bay a
LOOP (Louisiana Offshore Oil Port) (Bell 2015).
An uplifting of the ban does not necessarily mean that there will be a free
trade of crude, and that government might impose a limit of export, allowing only
a few selected producers to be a part of the export operations. This shall therefore
be regarded as a possible weakness when considering an entrance in the market
for shipowners. Not only could there be a limitation to who can partake in the
market as producers, but as well who will be able to perform the shipments of the
oil.
5.2.3 Opportunities
An opportunity to take advantage of is one emerging from the strengths, being the
large amount of oil being produced. The latter creates an opportunity for the sale

26
of oil to the world market for a potentially higher price than one could get
domestically, which again is an opportunity for the producers and further also for
shipowners. Not only is their opportunities related to the amount of oil to take
advantage of, but also the opportunity to market the quality of the American
crude and take advantage of its good fit for European refineries.
Given the large amount of oil both preserved and the oil being produced
every day, there lies an opportunity for cargo owners to establish long term
contracts for the transport of oil, if the future of demand looks bright and the price
is right. However, in the aftermath of the uplifting one could presume that the
voyages will be fixed on spot contracts in order to take advantage of the market.
Take advantage of the high capacity available in Europe’s refineries,
making the continent a possible final destination for North American crude.
Diplomatically, a free trade of crude oil out of the U.S. will be beneficial
for both the United States and the importing country. This will strengthen the ties
between allied countries and regions, which in turn will benefit the oil producers
in the U.S. in terms of the sale of crude to the world market.
5.2.4 Threats
The first threat one needs to look at is the political. Political decisions from
different states can have both a positive and negative impact on the crude oil
trade, and over the years there have been plentiful of incidents. Sanctions are one
political factor that can have various outcomes for the demand and price of crude
from America.
The competition is also a factor that needs to be regarded as a potential
threat for the market when it comes to prices of crude oil and for the competition
between shipowners. Depending on the volume of crude demanded to be
exported, a certain capacity of fleet and sizes of vessels are needed to transport the
oil. As an example, say the amount is large, the vessel type and size needs to be
adequate and the number of vessels in your fleet could be determinant to whether
you are able to take the fixture or not. Competition is also meant by different
types of oil coming from other countries (Brent etc.), and the price, in addition to
the quality of the American crude will be essential in the competition.
Emission control areas can also be regarded as a threat to the crude export
market from the States. An uplifting of the ban will result in increased traffic, and
will not only have an impact on the environment in the areas around the export

27
hubs, but also in the surrounding countries and the destination of the oil.
Consequently, the emission restrictions could be amended and become stricter,
which would entitle increased transport costs because of more expensive bunkers
for example. Emission controls are regarded as challenging environmental
requirements, and today’s restrictions (ECA-SOx) require vessels sailing in the
areas of the North American coast to burn low sulphur bunkers containing no
more than 0,1 % sulphur (IMO 2015). Entering the North American control areas
will therefore be an increase in transport costs and a threat to potential earnings
and profits.
Currency is a risk one must consider due to the crucial fact that the value
of crude oil is pegged to the U.S. Dollar (USD), both as a cargo owner and a
shipowner. In addition, the operation costs of a vessel are mostly accounted for in
USD, however, for a shipowner located in for example Europe will have a
percentage of their costs payable in Euro. Fluctuations in currencies will therefore
have the ability of influencing your potential profits. On the other side, this is a
well-known risk to shipowners regarding the costs of running the vessels in their
fleet, but is a risk worth monitoring and keeping in mind.
5.4 U.S. Exports & Voyage Earnings Analysis
The major importers and exporters make up the world trade, and having an
overview over these is important to determine the biggest competitors to
American crude and also understand where the demand for crude is largest. After
having covered this in our section 2.8 Global Crude Oil Trade Pattern, we will
now take a look at how U.S. export route would fit into this picture.
Europe is arguably one of the main potential importers of American crude
oil if the ban is uplifted. The opportunity window for U.S. exports to this region is
asserted by the following reasoning. Firstly, the import demand is high (albeit not
rising long term), and as we have mentioned previously, there is a short term
demand spike from refineries in this area. Secondly, their close proximity make
economic sense for the voyages, given of course the exports either load in
Delaware Bay or the Gulf Coast. Lastly, an alternative angle to this argument for
Americans that makes this route attractive and likely for America is that these
countries are strong allies of the USA through NATO and other political and
economic ties. Despite this route already taking place the other way around, it is

28
still a viable option as the arbitrage for selling crude oil swings often with the
market. It would also make sense if the crude oil is refined and promptly
transported back as oil products to the U.S. as a way of relieving American
refineries of their oversupply crude oil input.
The other obvious trade lane would be to discharge in the Fast East. This
argument follows the path of two different routes, East and West. The first would
be transporting the cargo westward across the Pacific Ocean, from load ports in
either in Alaska or the West Coast. As export terminals in Alaska are already
established, this scenario would make sense in the short term, but it should be
mentioned that these ports do not support large tankers. The other loading
alternative would be in the Gulf Coast, and then travel via the Panama Canal to
reach Asia. This alternative could only happen on Panamax tankers or smaller, as
the canal has limits on vessel dimensions, but it nevertheless a viable option.
Taking the Eastward route to Asia is a different story. Travelling either through
the Suez Canal or past the Cape of Good Hope, this would is an extremely long
voyage. For a round voyage, this would take around 90 days. Regarding earnings
on this route, it would be very profitable per ton-mile. It is also the most realistic
route for large vessels like a Suezmax or a VLCC.
As mentioned in our chapter concerning global trade patterns, there exists
a West Africa-U.S. trade lane. Keeping this in mind, together with what we have
discussed in relation to Europe, there exists here a feasible opportunity for a
triangulation route here. Where a vessel loads cargo in the U.S. Gulf or Atlantic,
then discharges in Europe, and consequently sailing down to West Africa for
another loading, and finally travelling back to America for Discharge. This
triangulation may then be repeated, or switching around which legs are laden and
which legs are ballast, depending of which arbitration is most profitable.
With these analysis given, we will now discuss how our freight calculator
was used in forecasting earnings for certain routes. For this voyage earnings
analysis we have designed a shipping cost calculator with aid from DHT and
Poten & Partners as well as other sources, which should remain confidential.
These calculations are done in order to analyze the potential earnings of a spot
export trade from the U.S.
Regarding exports from America, possibilities arise in four areas, Alaska,
the Pacific coast, The Gulf coast, and the Atlantic coast. In Alaska, the main port
is in Anchorage, where there already exists a crude oil export terminal for minor

29
exports, though this is very limited. For the Pacific coast, there are four main port
areas, Los Angeles, San Francisco, Portland, and Seattle. In the Gulf coast, the
main ports consist of Corpus Christi, Brownsville, Houston, Freeport, Mobile,
Tampa, Pascagoula, Baton Rouge, Texas City, Beaumont, Lake Charles,
Garyville, and many others. Finally, along the Atlantic coast, there are Searsport
and the ports along the Delaware River (EIA, 2015). Unfortunately, the ports with
capacity for Suezmaxes and VLCCs are few, this is mainly due to the limits of the
depths of ports and their passages. The possible ports are main concentrated
around Texas, Louisiana and in the Delaware Bay area. However, possibilities
exist for utilizing a commonly used technique called lightering to get cargo on to
ships which are too large to reach ports. Lightering, or ship-to-ship, is when
several smaller ships load a cargo, travel to a much larger ship and then transfer
what they are carrying, or vice versa. This technique is would for example need to
be used for a VLCC cargo to load/discharge in Houston.
Investigating the economics of hiring a vessel for a voyage out of the U.S.
Gulf, we have chosen two routes based on our due diligence of the oil market,
trade patterns and our analysis. Both shipments have origin export port as
Houston through lightering, one route discharges in Rotterdam, Netherlands, and
one in Ningbo, China. The Rotterdam route is calculated for both a VLCC and a
Suezmax, while the Ningbo route is only on a VLCC. The reason we only use a
VLCC for the Ningbo route is because of the economies of scale for that vessel
size simply does not prove profitable enough. Furthermore, it should be noted that
the freight calculator used is a simplified version; the port costs, fuel burned per
day, laden/ballast speed and cargo size are all averages for these ports and vessel
sizes. Creating a fully detailed freight calculator would vary from vessel to vessel,
and might not necessarily represent an ‘average’ VLCC or Suezmax. The flat
rates are based on voyages published by the Worldscale Association (London)
Ltd., where a WS 100 would compute to a $12,000 TCE for a Panamax vessel.
These flat rates are industry standards for tankers trading the spot market. The WS
points predicted were deemed appropriate relative to similar and aggregated
voyages taken from this year’s market so far. (Clarkson 2015)
The first route is Houston  Rotterdam. After careful consideration of the
strategy of providing oil to some of America’s strongest allies, this deems to be
one of the most logical shipments that the USA and its oil companies would take.

30
The positioning after discharge places a vessel in a location with numerous
options for next cargo, whether it be an intra-Europe voyage, travelling down to
WAF or Middle East, or simply going ballast back to the States. Taking a look at
the end result TCEs, VLCC’s earn slightly more than what a Suezmax would
earn, but this is not surprising as they carry different cargo sizes.
The second route is Houston  Ningbo. This route was chosen for two reasons.
Firstly, voyages to Far East are of the most common routes for VLCCs. Secondly,
our research within crude oil demand increases suggest this is the most prominent
market to which a new exporter may ship this commodity to. At the WS
calculated, this voyage is projected to be the most profitable for a ship owner. The
TCE shows an exceptionally high earning. Although it does not exceed todays
Middle East-China earnings, it is still higher than our calculations for a Rotterdam
discharge.
6 Discussion, Recommendation and Conclusion
In order to assess the opportunities an uplifting of the ban provides, we will
discuss the outcomes of the analysis and portraying examples. A discussion with
examples will provide a clear picture of what opportunities lie in the future to the
crude oil market in the U.S. if the ban is uplifted, which we believe will happen.
Keep in mind again, all variables included are chosen in order to display the most
accurate and viable results.
6.1 Discussion and Recommendations
Our goal with writing this thesis was to see how crude oil shipowners
should reposition their fleet in the event of an uplifting of the crude oil ban in the
U.S., and our research and analysis has given a good indication to what should be
done and considered.
Before the oil can be exported the ban must be uplifted, something that
must be decided by the government, and the wheels have already begun rolling
slowly for this becoming a reality. Our thesis also depicts that there lies a
significant probability to the ban being repealed, given the examples of politicians
campaigning in its favor. The rate of crude production and refinery capacity also
speaks in the favor of the uplifting becoming a reality if an alternative solution is
not found. The producers of the American crude are also pushing for an uplifting
in order to be able to make their product more profitable, seeing that they are

31
forced to sell their oil at domestic prices rather than competing in the world
market.
Firstly, we have established that there lie opportunities in this emerging
market by regarding the supply and demand in Europe and found the Continent to
be a probable destination for the crude (See Figure 5). Pushing more supply of
crude into the market is positive for the maritime trade of the oil, and gives
shipowners considering entering new markets an arbitrage opportunity by
repositioning a percentage of their fleet to cover the supply and demand of crude
oil emerging from the U.S.
The thesis portrays an analysis of the supply and demand for crude,
followed by the world’s trade pattern to indicate which trade lanes shipowners can
take advantage of. One pattern that can be taken as an example and consideration
is the proposed triangulation between calling the U.S, Europe, and West Africa
and back to the U.S., creating a continuing supply of tonnage. An analysis and
example of probable routes has been displayed by creating a freight cost
calculator, a tool that shows the potential of earnings and profits from shipping
crude oil from the USA. Not only does the calculations show potential earnings,
but also what costs and other variables needed to be taken into consideration when
transporting crude from North American waters. The maritime trade includes a
vast amount of essential variables to consider and keep control of, making the
calculations we have done especially important. Our effort to keep this freight
calculator simple yet accurate was a challenging feat. The variables that can be
put in to this calculator are abundant, not all would apply to every vessel size,
port, or route, which is why we carefully selected the variables. A major barrier
we hit was finding the actual port costs of loading/discharging, these also have a
copious amount of factors, and are calculated differently based on wharf used,
seasonality, time of the day, day of the week, traffic, et al. With this in mind, we
chose to only base our calculations on an export from Houston through lightering.
And our two discharge ports base on our analysis of the various trade routes.
The PEST and SWOT analysis conducted are highly important for the
sake of pointing out the most important threats and opportunities a shipowner
must consider before making the decision of relocating their fleet. The biggest
strength the crude oil from the U.S. has, is the amount that can be made available
for the world market, in addition to its quality. The sweetness of the crude oil
makes it lucrative in the European market because of their refineries capabilities

32
of refining the oil quickly and cost effective. The process of refining sweet crude
oil is more productive than sour, which can also make certain U.S. crude desirable
by other countries/regions as well. Hence, the supply at hand in combination with
the quality, makes the American crude export a desirable opportunity for
shipowners. In addition, if crude export becomes a reality, it will in the long run
create an opportunity for shipowners with a substantial fleet to acquire profitable,
long-term contracts with oil producers. This relies of course on the production
levels being kept stable.
As portrayed in the SWOT analysis, there are threats and weaknesses to be
accounted for, firstly being the competition. The size of an owner’s fleet will
determine their position in the competition to gain a market share, and also
whether you should enter the market or not.
The infrastructure of the various ports in the U.S. can be a weakness for
the trade in the short run, as the capability of the ports to handle larger vessel sizes
are small, and some of their inabilities to perform export operations. This has to
be considered by shipowners, and upgrades of equipment and facilities will need
to be pushed as a priority if the ban is repealed. It is therefore recommended
before a repositioning of a fleet to make sure that the process of upgrading has
commenced and that temporary measures are set in place.
In addition, the emission control areas are a threat when it comes to the
costs of burning low sulphur bunkers and the costs of calling various ports. These
emission regulations can, and most presumably will be amended in the future,
which will entitle increased operating costs and port fees, something that can
weaken the attractiveness of the market for shipowners. However, owners with
newer and more environmentally friendly fleet can find this as an advantage
towards the competition.
Our recommendations for shipowners in the event of an uplifting are
therefore to take our analysis and findings thoroughly into consideration before
making a decision. However, further analysis and research on this emerging
market is also recommended, but we believe our thesis provides as a good starting
point in the process of evaluating the potential of U.S. crude oil export.
Supplementary, continuously monitoring the numerous variables and news
relevant to the market is required, and building on our findings. For shipowners
with larger fleets, the relocation of a percentage of their fleet should be considered
as the first step after an uplifting. Shipowners with a smaller size of fleet might

33
consider to reposition a large percentage, based on the utilization and their market
share elsewhere. The goal is to make profits, or at least breakeven, and it is
therefore necessary to compare our findings and calculations to the current
contracts and areas of operation one has, this in order evaluate the company’s
benefits of entering the market.
6.3 Conclusion
Based upon our research and analysis, one can assume that there will be an
uplifting of the crude oil export ban already in 2016 after the election, following a
new president. The arguments against the ban are, based upon numbers and facts,
too vague and cannot be supported. The American people are afraid of higher
gasoline prices if the ban is uplifted, but regarding the fact that import and export
of gasoline already is an open market and allowed proves that an increase in price
will not occur. The oil reserves are on the verge of reaching their capacity and oil
refineries do not have the capacity to refine all of the oil being produced, therefore
measures have to be taken. To allow the price difference between WTI and Brent
become too large, will however have consequences for American jobs, not the
export of crude oil. The price difference becoming too big is therefore one of the
most important argument for uplifting the ban, and will most likely be publically
accepted as well. There are people who believe that Obama does not want have
such a decision on his track record and that he does not want to be the nice guy to
“Big Oil”. Hence, the decision will have to be made by the next president.
The largest importer of the American crude will most likely juggle
between Europe and Asia. Arbitrage between opportunities between regions will
monthly or seasonally open and close, and the oil will flow to the region willing to
pay the most. Who will be willing to pay the most will depend on the product
market and the value of the American crude based on refinery value, in addition to
if it is demand for gasoline or diesel.
Based on our research and analysis, in addition to the preceding
paragraphs of this conclusion, one can predict that there lie opportunities in this
new emerging market for a shipowner. As depicted, it will depend on the supply
and demand and the opportunities and threats that the market faces you with.
Supply and demand is possible to calculate, but one cannot foresee all variables,
and we believe we have provided an analysis that can prepare shipowners for a
repositioning of their fleet.

34
7 Summary
Our Analysis and research has shown that there are opportunities for a shipowner
to reposition their fleet for U.S. loading options. The work presented can be seen
as valuable not only for vessel owners, but also for companies and researchers
interested in subject of a U.S. export ban repeal.
We have taken a close look at supply and demand, trade routes, freight
calculations, and opportunities and threats, all of which have been selected based
on our assessment in what is most valuable for a shipping company to take into
consideration in the event of an uplifting of the crude oil export ban. Our gathered
information can also be used in analyzing a scenario where exports are granted in
limited amounts to certain oil producers, terminals, and shipowners
The thesis and its findings is presented solely in the event of a complete
uplifting, and does not cover other scenarios. Furthermore, it also relies on the
continued growth in oil production from the United States, in addition to there
being little expansion in distillation refineries and the SPR.
As the oil market is heavily affected by the American currency and global
economy, geopolitical changes in the world could easily cause the uplifting of the
ban to either never take place, or to no longer be of benefit.

35
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39
9 Appendixes
9.1 Charts and Figures
Appendix II Inter Area Movements 2013 (BP, 2014)
Appendix I Imports and Exports 2013 (BP, 2014)

40
Appendix III Crude Trade Movements (BP, 2014)
Appendix IV Crude Oil Products (EIA, 2015)
Appendix V World Crude and Product Trade (EIA, 2013)

41
Appendix VI Crude Tanker Sizes (EIA, 2015)
Appendix VII U.S. Crude Production Monthly Average Per Day (EIA, 2015)

42
Appendix VIII Future Estimates for S&D and Brent Forward Price
Supply bil.bbl/d Demand bil.bbl/d Brent S-D diff.
Q1 2015 95,07 91,12 $ 53,98 3,95
Q1 2017 95,13 96,15 $ 68,79 -1,02
Change 0,06 5,03 $ 14,81
VESSEL VLCC
AGE 14
DWT 320,000 LOAD PORT HOUSTON DISH PORT NINGBO
LADEN DISTANCE 10629 BALLAST DISTANCE 10629
BUNKERS SINGAPORE LADEN SPEED 13 BALLAST SPEED 9
IFO 368.00$ LADEN DAYS 33.1 BALLAST DAYS 47.7
MDO 585.00$ LADEN DAYS SECA 1.0 BALLAST DAYS SECA 1.5
WEATHER DELAY 1.7 WEATHER DELAY 2.4
FLAT RATE 59.74$ LOAD PORT DAYS 2.0 DISCH PORT DAYS 2.0
CARGO SIZE 260,000 LOAD PORT COST 50,000.00$ DISCH PORT COST 255,000.00$
WS RATE 49.00 WEATHER VARIABLE 5%
TONS/DAY LADEN 75 BALLAST 30
LOAD 40 DISCH 140
COSTS LADEN 958,290.58$ BALLAST 553,035.00$
LOAD -$ DISCH 463,680.00$
1,975,005.58$
LOAD 40 DISCH 140
COSTS LADEN 43,875.00$ BALLAST -$
LOAD 46,800.00$ DISCH -$
90,675.00$
VOY REVENUE 7,610,876.00$
COMMISION 1.5%
NET VOY REVENUE 7,496,712.86$
TOTAL DAYS SPENT 91.3
TOTAL PORT COSTS 305,000.00$
TOTAL FUEL COSTS 2,065,680.58$
TOTAL VOY COSTS 2,370,680.58$
TOTAL VOY EARNINGS 5,126,032.28$
TCE 56,136.06$
ACTUAL HIRE 56,990.93$
TO FROM
VOYAGE INFO
IFO
MDO
SUM
SUM
VESSEL INFO
BUNKER PRICES
VOYAGE RATES
Appendix IXVIII Houston - Ningbo (DHT, Poten & Partners, 2015)

43
VESSEL SUEZMAX
AGE 14
DWT 160,000 LOAD PORT HOUSTON DISH PORT ROTTERDAM
BUNKERS HOUSTON LADEN SPEED 13 BALLAST SPEED 9
TONS/DAY LADEN 52.9 BALLAST 21.16
LOAD 40 DISCH 140
LOAD -$ DISCH -$
440,528.79$
TONS/DAY LADEN 52.9 BALLAST 21.6
LOAD 40 DISCH 140
LOAD 51,040.00$ DISCH 178,640.00$
284,101.40$
COMMISION 1.5%
TOTAL FUEL COSTS 724,630.19$
TOTAL VOY COSTS 980,630.19$
TCE 27,473.93$
IFO
SUM
MDO
SUM
VESSEL INFO
VOYAGE INFO
TO FROM
BUNKER PRICES
VOYAGE RATES
Appendix IX Houston - Rotterdam (Suezmax) (DHT, Poten & Partners, 2015)

44
VESSEL VLCC
AGE 14
DWT 320,000 LOAD PORT HOUSTON DISH PORT ROTTERDAM
BUNKERS HOUSTON LADEN SPEED 13 BALLAST SPEED 9
LOAD 40 DISCH 140
LOAD -$ DISCH -$
624,568.22$
LOAD 40 DISCH 140
LOAD 51,040.00$ DISCH 178,640.00$
306,240.00$
COMMISION 1.5%
TOTAL FUEL COSTS 930,808.22$
TOTAL VOY COSTS 1,280,808.22$
TCE 30,567.25$
SUM
VOYAGE INFO
TO FROM
BUNKER PRICES
IFO
MDO
SUM
VESSEL INFO
VOYAGE RATES
Appendix X Houston - Rotterdam (DHT, Poten & Partners, 2015)
Appendix XI Houston - Rotterdam (DHT, Poten & Partners, 2015)

45
Appendix XII Baltic Exchange Dirty Tanker Index 19 February 2015

46
Appendix XIII U.S. Supply glut and Refinery Possessing

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