Crude Tankers To Benefit from Latin American Oil Export Market


The Latin American crude oil market is expected to benefit the tanker market moving forward. In its latest weekly report, shipbroker Gibson said that “Latin America has historically been home to both a large population and large refining base. However, decades of underinvestment and economic turmoil, coupled with overseas competition has seen regional players struggle to service domestic demand. Recent efforts to boost the continent’s refining capacity have failed, with Limetree Bay refining in St Croix the latest casualty, whilst Petrobras has sought to divest some refining assets. Just one credible refining project exists, with Pemex developing a greenfield project in Dos Bocas. So, what does this mean for regional tanker trade over the medium term?”

Source: Gibson Shipbrokers

According to Gibson, “the lack of refining capacity expansion in the region is a double positive for tankers. Crude production in Brazil and Guyana is expanding, but with no increases in domestic crude processing capacity, any increase in production will have to be exported. Perhaps the only negative for tankers in the region comes from Mexico. With Pemex planning to launch the 340kbd Dos Bocas refinery in 2023, products imports from the US Gulf will see a significant drop from the 470kbd traded into Mexico’s Caribbean coast in 2019.This will cut off much of the trade going into Mexico’s East coast, however given the short haul nature, this is the least worst outcome for regional tanker trade, with longer haul exports down to South America and the West Coast remaining relatively unscathed”.

The shipbroker added that “in the region’s largest economy, little progress is likely to be made on the refining side. Although Petrobras has allocated $1bn to finish the second train at RNEST, the planned 145kbd expansion project will not come online until at least 2027, if it is completed at all. Other facilities which have recently been divested, such as the 333kbd RLAM refinery sold to Mubadala could be upgraded but are unlikely to see any major increases in total product output. Venezuela remains a key uncertainty in the long term. The country is home to 1.3 mbd of nameplate refining capacity and also has significant crude export potential. If sanctions are lifted, then crude and product exports across the region will see upside. However, even once eased, the lasting impact of crippling sanctions on export and refining facilities may prevent Venezuela from ever fully reaching its potential, with any increase in clean product production likely to remain within the country, ensuring the US remains Latin America’s main source of refined product supply for the foreseeable future”.

“However, the benefit for product tankers overall will be modest. Whilst refining capacity in Latin America is unlikely to expand in the medium term (aside from Mexico), sluggish demand growth projections limit the upside. Despite the region consisting mostly of developing nations, demand is forecast to expand by a tiny 300 kbd between 2019 and 2026, which is essentially offset by the new Dos Bocas refinery. That being said, from a tonne mile perspective demand will grow at a faster pace as exports to Mexico are redirected further south. Crude tankers on the other hand benefit to a greater extent, with Brazilian and Guyanese crude output expanding by 1.8mbd over the next 5 years, almost of all of which will be exported”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide





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