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U.s. Oil Tankers Built On Spec Face Choppy Waters As Export Ban Eases

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http://uk.reuters.com/article/2014/07/01/uk-oil-shipping-jones-act-analysis-idUKKBN0F636H20140701

U.S. ship builders are making a $500 million (292 million pounds) bet on robust domestic demand for crude oil from newly-tapped shale fields by building new tankers without having lined up customers to lease them.

Philly Tankers AS, majority-owned by Aker Philadelphia Shipyard is building four ships on spec, and Seabulk Tankers Inc, an indirect wholly-owned subsidiary of SEACOR Holdings Inc, is building another two. The 330,000-barrel ships, which cost about $125 million each, conform to the 1920 Jones Act, which requires ships moving between U.S. ports to be U.S.-built, -crewed and -flagged, making them about three times more costly to build and operate than a comparable foreign-flagged ship.

The builders are betting that they'll recoup their investment by finding customers such as ExxonMobil or Marathon who will sign long-term contracts for rates between $70,000 and $80,000 a day to lease them for travel between U.S. ports. It’s a bet that looks likely to pay off, except for one consideration: that the flood of crude coming out of the U.S. will prompt lawmakers to relax rules prohibiting oil exports, cutting demand for Jones Act-conforming ships.

An expensive bet.

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It’s a bet that looks likely to pay off, except for one consideration: that the flood of crude coming out of the U.S. will prompt lawmakers to relax rules prohibiting oil exports, cutting demand for Jones Act-conforming ships.

What's the betting that the brown envelope syndrome has already cut that one off at the pass.

Edited by billybong

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