ANS export precedes Asia dry docking

OREANDA-NEWS. May 23, 2016. The Jones Act tanker bound for Japan with a cargo of Alaskan North Slope (ANS) crude is scheduled for dry-docking afterward, making it the second of three ANS exports in the last three years to precede vessel maintenance.

BP Jones Act tanker Alaskan Legend is expected to arrive at the 145,000 b/d JX Nippon Oil and Energy refinery in Sendai, Japan, on 2 June with a load of ANS. It will then begin a scheduled dry dock in late June, according to Alaska Tanker Company. Alaskan Jones Act tankers typically dry dock at Sembawang Shipyard in Singapore.

A ConocoPhillips tanker that delivered ANS to Asia in May 2015 also went to drydock afterwards, while the third shipment, in October 2014, occured when ANS reached the deepest discount to CMA Ice Brent since at least October 2012.

ANS (31.4 API, 0.96pc sulphur) would compete with Russian ESPO Blend (35.74 API, 0.49pc sulphur) in Asia.

The estimated differential to May CMA Ice Brent for ESPO Blend delivered from Kozmino, Russia, to Yeosu, South Korea, by 100,000t vessel remained between a discount of \\$1/bl and a premium of \\$1.18/bl during May ESPO trade, which took place from 17 March through 8 April. Argus does not assess the cost of freight from Kozmino to Sendai.

ANS exports are relatively uncommon even though they have been permitted since 1996, long before the US lifted decades-old restrictions on crude exports in December. ConocoPhillips exported ANS to the 775,000 b/d GS Caltex refinery in Yeosu, South Korea, in 2014 and 2015, but before its 2014 export no ANS had been exported for at least a decade.

ConocoPhillips Jones Act tanker Polar Discovery exported ANS in October 2014, but it did not subsequently go to Singapore to dry dock. The ANS discount to CMA Ice Brent in October 2014 trade averaged \\$4.64/bl, the deepest average discount since at least October 2012.

ConocoPhillips Jones Act tanker Polar Endeavour exported ANS in early May 2015 before going to Singapore to dry dock. The ANS discount to CMA Ice Brent in April 2015 trade averaged \\$3.97/bl, the deepest discount of that year, and in May 2015 averaged \\$3.56/bl.

Polar Endeavour dry docked at Sembawang Shipyard from 9 June 2015 through 14 July 2015.

But the ANS discount to CMA Ice Brent was much narrower during May 2016 trade than it was in October 2014 or May 2015 trade. The ANS discount to May CMA Ice Brent remained between \\$1.48-\\$1.09/bl for a volume weighted average discount of \\$1.25/bl during May trade, which took place from 22 March through 6 April. That was the narrowest average discount since October 2015 trade.

BP, which regularly receives ANS crude at its 222,700 b/d refinery in Cherry Point, Washington, shut a coker unit late last week at the refinery, suggesting that its demand for ANS in May was lower than usual. The integrated company may have opted to export an ANS cargo it would have otherwise delivered to its own refinery.

Unlike Alaskan Legend, ConocoPhillips Jones Act tanker Polar Enterprise, which departed on 16 May from Port Angeles, Washington, for Singapore, is not carrying crude. Its current draft is 9.5m out of a maximum draft of 17.52m. It is expected to arrive in Singapore on 12 June to dry dock.

Looking ahead, ConocoPhillips tanker Polar Endeavour is due for dry docking by 5 July 2017, while Polar Adventure is due for dry docking by 11 November 2017.