Changes in US import patterns throw super oil port for a LOOP

April 19, 1983

Today's oil market has made the $700 million Louisiana Offshore Oil Port (LOOP) almost superfluous. Because LOOP is not price competitive in today's market, officials and shareholders have asked US Rep. John B. Breaux (D) of Louisiana to press for legislation to remove much of the federal control over the facility, according to LOOP president William Read.

Consequently Mr. Breaux has introduced legislation in Congress to amend the Deep Water Ports Act of 1974 - of which he was a leading author - to allow the heavily regulated LOOP freedom to set tariffs independently of the Federal Energy Regulatory Commission (FERC). The new legislation would also suspend a 2 -cents-per-barrel contribution to an oil-spill cleanup fund.

''We can't compete with lightering [ship-to-ship transfers], transshipments, and direct shipments under these circumstances,'' Mr. Read said. Other crude transporters can change charges daily, he added, while it takes LOOP months to get FERC approval.

LOOP is the only US port required to collect the 2 cents per barrel for the oil-spill fund, says Jerry N. Sparks, LOOP vice-president of business development. This is not only unfair but expensive, he argues.

LOOP, which has been in operation since May 1981, desperately needs more business. It can't break even unless it runs at half of capacity - some 700,000 barrels per day. But in fact over the past couple of months the port has received under 200,000 barrels per day. There appears to be little chance of substantial improvement over the next year or two, according to Mr. Read.

LOOP shareholders - Marathon Oil, Shell Oil, Texaco, Ashland Oil, and Murphy Oil - have been forced to make cash contributions to cover LOOP's debt financing.

There has been a dramatic shift in the amount and source of US crude imports. When LOOP was planned in the early 1970s it was generally believed that LOOP would be one of many oil superports located around the US, unloading vast quantities of mostly Middle Eastern and North African crude. The economies of scale of LOOP and similar projects was to be so great that Congress enacted the Deep Water Ports Act of 1974 to equalize somewhat the transportation cost advantages eventual LOOP shareholders would enjoy and to give easy access to the facility.

But LOOP's uniform fee schedule now works against it; it has not been able to compete in a market virtually no one foresaw in the mid-1970s. In those days crude oil supplies were largely coming from the Middle East and North Africa in jumbo tankers. But crude oil entering the US today is mostly coming from Mexico, the North Sea, and West Africa in moderate-sized tankers able to navigate transport corridors like the Mississippi River.