Oil producers in California are exploring plans to export locally produced heavy sour crude overseas starting in 2027, as regional refinery closures weigh on domestic demand and the state tries to expand oil production.
Discussions center on moving heavy sour San Joaquin Valley (SJV) crude along the 265-mile San Pablo pipeline system north to San Francisco and south to Los Angeles for loading onto waterborne tankers, according to traders and in-state producers. Draft restrictions at both ports would likely restrict loadings to partially-full Aframax or Panamax tankers, according to one trading source.
Producers are aiming to ship the first cargo in the first quarter of 2027, with potential destinations being Asia-Pacific and Washington state, if the Jones Act waiver is maintained, according to market sources. No California crude has been exported via ship since at least 2016, according to Vortexa data, when records began.
Crude production in California has been in a long term decline, with production more than halving from its 2016 average to about 245,000 b/d for the first half of 2026, according to the Energy Information Administration (EIA). Around 80pc of this crude is SJV grade produced in central California. SJV's gravity is around 14° API and has a Total Acid Number (TAN) of 3.63, according to consultancy Haverly Systems' assay library. This is heavier and over double the TAN of potential rival Canadian heavy crudes exported out of the 890,000 b/d Trans Mountain system.
California has lost about 17pc of its refining capacity since October 2025 following the closures of Phillips 66's 139,000 b/d Los Angeles refinery and Valero's 145,000 b/d Benicia complex. This has prompted other refiners, including PBF Energy and Marathon Petroleum, to increase runs of Californian crude, attracted by weaker differentials and improved economics.
State officials have tried to counter the refinery shutdowns by encouraging more local oil production. Earlier this year the state approved about 380 onshore oil drilling permits in Kern County, in a bid to stabilize fuel supply and prevent more refinery closures.
The new drilling permits have yet to lead to a rise in output, but if it does rise it will meet a weaker demand outlook in California due to the refinery closures and the long-held view that California is "not refiner friendly" according to industry sources. This long-term outlook is prompting the look at future export routes into Asia-Pacific.
The San Pablo Bay pipeline system was shut-down earlier this year due in part to the drop in refinery demand. But California Resources Corporation, the largest producer in the state, closed this month on the $63mn purchase of the pipeline system's operator, Crimson Midstream Holdings.
