Consequently, crude oil supply to Los Angeles (L.A.) Basin refineries from these two sources has been declining and is being replaced by increasing volumes of crude oil imports. During the 1997-2006 period, declines in supply of crude oil from California and Alaska resulted in a four-fold increase in crude oil imports into the L.A Basin, from 145 thousand barrels per day (MB/D) to 505 MB/D. Southern California, or more specifically the Los Angeles Basin area, has the largest aggregation of petroleum refineries on the West Coast. These refineries process approximately one million barrels per day of crude oil into gasoline, jet fuel and diesel fuel. As production from the main sources of crude oil for this region, namely California and Alaska, has declined, marine-delivered crude oil imports from overseas have increased dramatically over the past few years and currently represent more than 50 percent of the total crude oil refined in Southern California. Current crude oil imports are from a variety of worldwide sources, including the Middle East and Latin America. Both California and Alaska (namely, Alaskan North Slope or ANS) crude oil production are expected to continue to decline and, as a result, crude oil imports are expected to keep increasing. Figure 1 shows, by source, crude oil supplied into the L.A. Basin for the past 10 years (1997-2006) and projections of such supply for the next 34 years (2007-2040).

At our request, Baker O’Brien, Inc. has prepared a historical review (1997 through 2006) and a 34-year projection (2007 through 2040) of crude oil requirements for refineries on the West Coast, with an emphasis on those located in Southern California. In addition, for Southern California the crude oil supplied to meet these requirements was identified by production source, namely, California, Alaska or a specific foreign region.

The Baker O’Brien study showed that California and Alaska crude oil supply into the L.A. Basin is forecast to continue to drop as production from these sources declines. By 2014, crude oil imports into the L.A. Basin are projected to reach almost a million barrels per day, close to twice 2006 levels. By 2021, well over 90 percent of the crude oil supplied to L.A. Basin refineries is projected to be imported; this increases to over 97 percent by 2040.

Imported crude oil is delivered to the L.A. Basin via marine vessels from various regions of the world. Figure 2 shows, by region of origin, crude oil imported into the L.A. Basin for the past ten years (1997-2006) and projections of such imports for the next thirty-four years (2007-2040).

During most of the past ten years, approximately one-half of L.A. Basin crude oil imports have been from one of the most distant regions, namely the Middle East. Of the 505 MB/D crude oil imported into the L.A. Basin in 2006, 245 MB/D came from the Middle East. This trend is expected to continue into the foreseeable future, with L.A Basin imports from the Middle East forecast to reach about 500 MB/D by 2015. Given the long voyage distance from the Middle East, crude oil from that region is typically (and most economically) moved to California in large vessels, generally referred to as VLCCs (Very Large Crude Carriers). VLCCs currently offload into smaller tankers a few miles offshore in the Pacific Ocean because, at present, there are no crude oil terminals in California capable of berthing fully loaded vessels of this size. Pier 400, Berth 408 will be able to accommodate fully loaded VLCCs. As Middle East crude oil imports increase, ports in the L.A. Basin will require increasing capabilities for handling deliveries in VLCCs.

L.A. Basin crude oil imports from Latin America have also been increasing and are currently substantial. However, given reserves and quality limitations, future increases in imports from this region are projected to be relatively modest. Crude oil imports from West Africa, another distant region, are currently modest but are projected to increase, primarily to meet the crude quality requirements of L.A. Basin refineries. Crude oil imports from Canada, currently minimal, are projected to increase in the latter part of our forecast period, based on the assumption that substantial quantities of oilsands-based Alberta crude oil would be transported by pipeline to the West Coast of Canada. Finally, crude oil imports into the L.A Basin from the Pacific Rim have been minimal, at most, during the past decade and are forecast to remain at zero, where they have been for the past two years, into the foreseeable future.