How Super Are Superports? : Despite the Interior Secretary’s support for the offshore oil-unloading facilities, others say they are impractical.

In the wake of recent oil spills and the continuing distaste for offshore oil drilling, Bush Administration officials have argued that the real hazards are tankers in harbors. In fact, Interior Secretary Manuel Lujan Jr. said last month that he was considering directing tankers away from harbors to offshore superports where oil could be unloaded at sea.

Easier said than done, according to industry analysts. If the experience of the nation’s only existing superport is any guide, building new superports would be a nightmare of expense, delays and bureaucracy, and it seems unlikely that any new superport could be put in operation before the turn of the century.

“The secretary’s intentions are good, but we see the solution as being impractical and unnecessary,” said David Powell, manager of ports and navigation for Chevron Shipping Co. “To build the facility he’s talking about means tearing down all existing facilities.”

Louisiana Port Different

Under current industry practice, tankers in harbors unload oil at any of a number of terminals operated by individual oil companies. Oil is placed in holding tanks or piped directly to refineries.

The nation’s only superport, the Louisiana Offshore Oil Port, or LOOP, operates differently. Built by five oil companies operating as LOOP Inc., the port sits in the Gulf of Mexico 18 miles off the coast of Louisiana in about 115 feet of water.

It resembles an offshore drilling platform from which radiate three buoys. Tankers pull up to the buoys, connect their hoses and pump oil directly into a pipe. The oil makes its way through undersea pipelines to vast onshore storage bunkers in underground salt domes capable of holding 40 million barrels of oil. From there, it makes its way by pipeline to refineries.

Changing from the current harbor system to a deep-water superport would be analogous to closing all the small, medium and large airports in the Los Angeles area, building a mega-airport far out in the desert and constructing the roads and other infrastructure necessary to connect that airport with the city, Chevron’s Powell said.

The attraction of LOOP is its environmental record, which has been relatively clean in eight years of operation, company and Coast Guard officials said.

In 1987, there was only one spill recorded from the platform--of three gallons, said Richard Lyons, a program analyst with the Coast Guard in Washington. In 1988, the largest spill dumped about 84 gallons of oil into the ocean from LOOP’s platform, said Lyons.

In all of 1988, there were a total of 14 spills resulting in the loss of 327 gallons of oil. As of May, there were two spills totaling six gallons of oil in 1989.

“Although the facility may not have been very successful in generating profits for its owners, it has been highly successful in minimizing the number of spills and quantity of oil released into the environment,” said LOOP President Robert C. Thompson in testimony before a U.S. Senate subcommittee in May.

But there’s not much more to recommend the superport idea, at least not yet, industry analysts said. Financially, LOOP has been a mess, as Thompson suggested. Finished in 1981 at a cost of $700 million to $800 million, the project breaks even only some months.

Profit Motives in 1970s

Studies have estimated that it would cost well over $1 billion to build similar ports.

Any proposed deep-water port could also run afoul of federal, state and local bureaucracies since its operations would cross several jurisdictions. “The LOOP process took more than 10 years to permit and build--and that was with a federal override,” said Chevron’s Powell, whose company was not a partner in LOOP. “Today, I can’t imagine such a facility being built in 10 years.”

When the idea for superports first came up in the 1970s, environmental concerns gave way to profit motives. Conceived as a way to accommodate supertankers from the Persian Gulf--most U.S. ports are too shallow for the big ships--superports were viewed as a way to reduce transportation costs while taking advantage of supertankers’ economies of scale.

Without them, supertankers had to transfer their loads to smaller vessels to be brought into port, adding costs.

Several projects were proposed. LOOP was first planned in 1972.

That’s when the problems started. Restrictions by federal agencies and endless wrangling over the port’s licensing led the original 16 shareholders to dwindle to the current five: Marathon Oil Co. (with a 32.1% interest); Texaco Inc. (26.6%); Shell Oil Co. (19.5%); Ashland Oil Inc. (18.6%), and Murphy Oil Corp. (3.2%).

Fears of similar government restrictions, looming costs and the pullout of shareholders led the other projects to be shelved.

The license was finally signed in 1977 and work began in 1978. Construction delays and cost overruns delayed completion until 1981.

The problems did not end there. By the time the port was finished, the economics of the oil industry had changed. Imports fell in the early 1980s, meaning that less oil was coming in by supertanker from the Persian Gulf. Shipping rates also fell, making other modes of transportation competitive with LOOP, which was forced to slash its rates.

“Crude flow patterns were such that there was not the demand to import the amount of crude initially envisioned,” said Powell. “Shipping rates at the time were probably low, and so the value of the ship to turn around in a hurry . . . there was not that much economic incentive.”

Tanker Rates Higher

As a result, in the early 1980s LOOP was moving far less than its maximum capacity of up to 1.4 million barrels of oil a day and was losing money. At the same time, tankers were taking too much time to unload oil, tying up the port’s three buoys.

Things have improved since those early days. Imports have risen and tanker rates have crept upward. LOOP’s charges have remained competitive, and the port has altered its operations to accept oil from Alaska. A new tariff structure penalizes tankers that take too long to unload.

As a result, LOOP has moved an average of 750,000 barrels a day over the past two years, according to testimony by Thompson.

But the port still operates below capacity and still loses money some months, said Clinton J. Blanchard, a vice president with Texaco Pipeline Inc. and former LOOP chairman.

To build a superport economically today, shipping rates would have to climb quite a bit higher and shipping capacity would have to shrink further, making it less attractive to transfer oil from big ships to small ships and spurring quicker turnaround.

“The economic viability of a deep-water port is dependent on tanker rates,” said William Jennings, LOOP’s vice president of operations. “That’s the key.”

Now, there are enough economically competitive alternatives to deep-water ports, including offshore “lightering”--ship-to-ship transferring of crude--as well as transshipping terminals in the Bahamas, the Cayman Islands and other Caribbean ports.

Much Competition

“Certainly if restrictions were placed on the number of vessels (in harbors) or other limitations that would reduce the current capacity of these inland ports, that would certainly make it more attractive to build an offshore facility,” said LOOP board member Blanchard.

“But to start today and build one; well, LOOP certainly has a lot of competition,” he added. “I can’t say that you can invest the funds necessary to go out there and sink a new deep-water port today and think that you’d fill that thing up overnight.”

Economics aside, “if there was a requirement in this country to build them, probably one of the biggest problems would be the massive disruptions in the oil distribution system,” said Sean Connaughton, a spokesman for the American Petroleum Institute.

“Now, you go to a specific facility . . . and once the oil gets there, it is either refined or stored and pumped, pipelined or trucked to wherever the consumer is. If you can imagine trying to tie in all these different facilities into one single port offshore in a single region, you’d have to lay pipelines everywhere. And LOOP only handles crude oil, and a good number of the coastwise movements in the U.S. are of (finished) product,” he added.

Atlantic Richfield Co.’s tanker traffic comes mainly from Alaska, said Jerry Aspland, president of Arco Marine Inc., the oil company’s shipping subsidiary. Consequently, the company has little need for a superport off this coast.

“I think you need to look at where we’re going to be in the year 2000 and where our crude oil will be coming from,” he said. “There are projections that as much as 70% of our oil will come from offshore in bigger ships . . . In that case, because of the shallow water (in most U.S. harbors), they would certainly be an option available to everyone.”

Environmentalists Worried

Despite LOOP’s relatively clean environmental record, environmentalists worry about the miles of pipelines connecting the platform to the shore and beyond. “(Outer continental shelf) pipelines do rupture periodically and result in major spills,” said Lisa Speer, a senior staff scientist with the Natural Resources Defense Council in New York. “Anchors drag over them, they corrode and spring leaks.”

Tankers far offshore are still subject to collision hazards, she added. Moreover, “when constructing something of this magnitude, there are significant impacts on the offshore environment, particularly in places where there are kelp beds or other significant resources,” she said.

She argued for less expensive means of reducing spill hazards, such as building double-hulled tankers or improving traffic control in major ports.

HOW A SUPERPORT WORKS Schematic is based on the Lousiana Offshore Oil Port (LOOP), which has been in operation for eight years. It sits in about 115 feet of water in the Gulf of Mexico 18 miles off the Louisiana coast.

Source: New Orleans Times-Picayune