Without a need to import significant amounts of light, sweet crude oil to the Gulf Coast, prices for grades such as Light Louisiana Sweet (LLS) have recently traded at record discounts to global benchmark Brent crude. When the Gulf Coast needed imports to balance demand for light, sweet crude, LLS traded at a premium to Brent to make it economic to ship barrels to the Gulf Coast. For the three-year period from August 2010 to July 2013, LLS traded at an average premium of $1 per barrel to Brent. However, since the beginning of August, LLS has priced at an average discount of over $3 to Brent, reaching a record discount of $11 per barrel on October 23.
In addition to reduced light-sweet crude oil imports into the Gulf Coast region, New Orleans and Houston are importing significantly less heavy crude. So far in 2013, imports of heavy crude are 405,000 bbl/d and 344,000 bbl/d lower than the 2008-10 average for New Orleans and Houston, respectively. The reversal of the Seaway pipeline (a joint venture of Enterprise and Enbridge) has contributed to the decline in imports. When Seaway started flowing oil south from the Cushing, Oklahoma, hub to the Houston area in May 2012, the pipeline had a capacity of 150,000 bbl/d. Additional pumping stations and other modifications came on line early this year, increasing flows to 400,000 bbl/d. Trade press reports that most of the crude oil now moving on the line is heavy, reducing the need for Houston-area refiners to import heavy crude. Imports of heavy crude into the Port Arthur area have remained relatively unchanged over the last five years, and even increased in 2013 versus 2012. The 2013 increase reflects the expansion of the Motiva refinery in Port Arthur, where an additional 325,000 bbl/d of crude distillation capacity became fully operational in early 2013.
Despite the downward trend in imports to the Gulf Coast region, it is unlikely that domestic crude oil will completely supplant imports. Several refineries in the area are either partially or wholly owned by national oil companies and are likely to continue importing crude from ownership countries. Since 1993, Shell's Deer Park, Texas, refinery (327,000 bbl/d) has operated as a joint venture between Shell and PMI Norteamerica SA, a subsidiary of Petroleos Mexicanos (Pemex), Mexico's national oil company. Petroleos de Venezuela S.A. (PDVSA), the national oil company of Venezuela, purchased Citgo Lake Charles, Louisiana (428,000 bbl/d), and two other U.S. refineries in 1990. And Motiva, a joint venture of Shell Oil Company and Saudi Refining Inc., a wholly owned subsidiary of Saudi Aramco, operates three refineries in the region: Port Arthur, Texas (600,000 bbl/d); Convent, Louisiana (235,000 bbl/d); and Norco, Louisiana (234,000 bbl/d). Together, these facilities import more than 1.1 million bbl/d of heavy crude oil that are unlikely to be replaced by U.S. domestic crude oil.