U.S. fuel supply response slowed by mothballed oil tankers

Octave Specialty

13/05/2021 11:00

(Repeats story originally published on May 12, no changes)
    By Jonathan Saul, Devika Krishna Kumar and Laura Sanicola
    LONDON/NEW YORK, May 12 (Reuters) - Efforts to get fuel
supplies to areas in the United States facing shortages have
been slowed because shipowners have mothballed U.S.-flagged oil
tankers that can make coastal voyages, shipping sources said on
Wednesday.
    The shutdown of the Colonial Pipeline network to thwart a
cyber attack has disrupted nearly half the East Coast's fuel
supply and left parts of the southeast facing a severe shortage
of gasoline and diesel. Colonial said it began to restart on
Wednesday but warned it would take several days for fuel supply
chain to return to normal.  urn:newsml:reuters.com:*:nL1N2MZ39C
    Pump prices have risen to a seven-year high as motorists
rush to fill their tanks.
    One way to alleviate the shortage would be to transport fuel
via ship from the refineries on the Gulf coast that make the
fuel that typically goes through the pipeline. The ships could
carry the fuel to the cities and states on the East Coast that
need it. 
    Only U.S.-flagged tankers are permitted to make voyages
carrying U.S. goods along the coastline of the United States,
under legislation known as the Jones Act. 
    Several of the roughly 60 vessels in the U.S.-flagged tanker
fleet, which mostly include tankers and barges, have been taken
out of service because of slow demand before the Colonial
Pipeline shutdown, according to company executives and market
sources.
    Idled tankers would take a minimum of 10 days to be
restarted, said a spokesperson for Jones Act shipping company
Overseas Shipholding Group Inc  OSG.N .
    "We certainly could reactivate some tankers fairly quickly
if the pipeline is down for an extended period," she told
Reuters. OSG idled six Jones Act tankers during the first
quarter, the company told investors late last week.
    Some shipowners, however, have been asking would-be
charterers seeking a Jones Act vessel to sign up for long-term
contracts, making a quick response to the crisis difficult, two
sources familiar with the matter said.
    "In order to reactivate them, owners have been asking for
more than just 1 voyage- for a couple of months employment,"
said one shipping source. 
    Owners are also seeking a rate that would make it worthwhile
for them bringing a ship out of its laid-up anchorage.
    It is possible to deploy large idled barges relatively
quickly, one source said, as they can be towed and do not have
engines or require much paperwork. 
    The U.S. government is considering waiving the Jones Act
restrictions under emergency measures so that more ships can
make the journey.
    Refiners and wholesalers have provisionally secured at least
three foreign flagged vessels in the event a Jones Act waiver is
issued by the U.S. government, according to three sources
familiar with the matter. "Nothing is moving yet it's all just
in case," said one shipbroker.
    Even with a Jones Act waiver and finding international ships
to charter, only a few ports in the worst affected regions in
the U.S. Southeast, such as in Florida and Savannah, Georgia,
are able to receive large tankers, experts said. 
    Once cargoes arrive, a fleet of trucks would be required to
transport fuel from the port to the demand centers inland.
    Suppliers are also aiming to bring ships into New York
harbor from Europe, although those will take time to arrive, and
from there it will take time to move the fuel to where it is
needed. 
    "The best place for large cargoes to be delivered is New
York Harbor because that's where the large cargoes for Europe
come across. Some of the others won't necessarily have the
infrastructure," Alan Gelder, vice president of refining,
chemicals and oil markets at Wood Mackenzie.

 (Reporting by Devika Krishna Kumar and Laura Sanicola in New
York, Jonathan Saul in London; additional reporting by Stephanie
Kelly and Ron Bousso; Editing by Simon Webb and David Gregorio)
 ((devika.kumar@thomsonreuters.com; +1 646 223 6059; Reuters
Messaging: devika.kumar.thomsonreuters.com@reuters.net))