Trains, Trucks and Two Tankers: Mercuria Devises U.S. Oil Dealby , , , and
Swiss trader exports 400,000 barrels from small U.S. producers
Firm uses ship-to-ship transfer to send shale oil to Africa
Mercuria Energy Group Ltd. has engineered perhaps the most logistically complex trade yet to export U.S. oil since a four-decade ban on sales was lifted.
Mercuria this month combined railways, barges, pipelines, trucks and a ship-to-ship transfer in the Caribbean to transport U.S. crude to Africa for storage, joining other oil traders finding increasingly innovative ways to export U.S. crude.
The trade is flourishing as price differences between U.S. oil markets and those in Europe, Asia and Africa, combined with low freight rates, spur the opening of new routes for American crude. The end of the export moratorium in December is also giving shale producers, struggling with lower prices, access to new markets.
Swiss trader Mercuria last week lifted about 400,000 barrels of crude, primarily shale oil from producers in North Dakota, Wyoming and Colorado, according to a person with knowledge of the matter. That was loaded onto the King Darius at the Magellan Galena Park terminal in Texas, before being transferred to the larger Suezmax-sized Cape Bonny near Aruba, according to Bloomberg ship tracking data.
That vessel, already carrying Colombian crude, is now headed for South Africa’s Saldanha Bay, one of the largest oil storage centers in the world, the data shows. From there, the U.S. crude is expected eventually to be sold to refineries in China, the person said, asking not to be identified because the plans are private.
Even with an expensive ship-to-ship transfer, plus transport and storage costs, the difference between crude prices in the U.S. and other international markets is expected to make the trade profitable for Mercuria. The shale oil lifted from Galena Park was moved by a combination of rail, pipeline, barge and truck to tank facilities near Houston, the person said.
“We are excited to bring volumes from our shale producer counterparties to the global market,” Dan House, Mercuria’s head of U.S. physical crude trading, said in an e-mailed statement. Mercuria “constantly looks for new ways to provide worldwide opportunities to enable local producers to scale their interests,” he said, without commenting further on the trade.
Mercuria purchased a supply and marketing business from Enterprise Crude Oil LLC in February, acquiring a marketing team and assets in Wyoming, North Dakota, Colorado and Montana, as part of the deal.
Geneva-based Mercuria joins other firms including Trafigura Group Pte, the trading arm of BP Plc and Vitol Group, the largest independent oil trader, in finding fresh ways to sell U.S. crude abroad. Vitol in December became the first trader to export U.S. crude, and was soon followed by Exxon Mobil Corp. and Gunvor Group, which struck similar deals to send oil to Europe in March.
Mercuria, the 12-year-old firm led by former Goldman Sachs Group Inc. traders Marco Dunand and Daniel Jaeggi, has trading offices in Geneva, Houston and Singapore and more than 1,000 employees worldwide. It bought the bulk of JPMorgan Chase & Co.’s physical commodity business for about $800 million in 2014.