June 03, 2019 [Express News] – If you need anymore evidence that the shale revolution has turned the U.S. into one of the biggest oil exporters, look to the Port of Corpus Christi.
Last week, port officials, politicians and business leaders there celebrated a $400 million-plus harbor-dredging project that will allow large oil tankers to fully load millions of barrels of oil at local docks before embarking for Asia, Europe and other ports around the world. The work began in April.
The project will deepen and widen the 36-mile channel, which flows into the Gulf of Mexico.
“This is a momentous occasion for the Port of Corpus Christi as we will have the deepest draft channel in the entire U.S. Gulf,” Port of Corpus Christi CEO Sean Strawbridge told a crowd of 500. “That means more exports of Texas energy, American energy, to our allies and trading partners around the world.”
The dredging, first proposed 29-years ago when the port was a big importer of oil, will increase the depth of the ship channel to 54 feet from 47 feet and its width to 500 feet from 430 feet. The project will also allow for two-way oil tanker traffic.
The Port of Corpus Christi currently exports around 700,000 to 800,000 barrels of crude oil a day, vying with Houston for the title of top U.S. oil export port. When the dredging is complete at the end of 2022, Strawbridge said, the port expects more than 3 million barrels of oil to be exported daily.
The federal government banned oil exports to all countries, except Canada, from 1975 through late 2015. The oil shale boom in Texas and across the country eased the United States’ dependence on foreign oil and led to the break in trade policy.
As the U.S has expanded oil exports over the last four years, energy companies have grown more optimistic about the industry’s outlook. Experts predict that, despite the growing use of electric vehicles and the increasing reliance of wind and solar power, the world’s dependence of fossil fuels won’t be ending anytime soon.
Strawbridge said 19 capital projects at the port — including marine terminals, storage facilities and other projects to increase oil exports — are either under construction or in the planning stages. Port officials said that means 2,500 more jobs in a port that already employes 48,000 workers.
With billions of dollars from investors at stake, competing companies aiming to take advantage of the export boom — including several with San Antonio ties — have already begun to tout their competitive advantages.
Multiple oil storage and marine facility companies are building at the Corpus Christi port, and three pipeline companies are constructing pipelines from the booming Permian Basin in West Texas to the Corpus Christi area.
San Antonio-based EPIC Midstream Holdings LP, Plains All American, and a joint venture called Gray Oak Pipeline LLC, owned by Phillips 66 Partners and Andeavor, are all building pipelines.
While San Antonio’s NuStar Energy owns 9,800 miles of pipeline, it is staying out of the rush to build pipelines from West Texas to Corpus Christi. Instead, it is focusing on exporting the oil it receives from other pipeline companies.
NuStar is significantly expanding its storage and marine facilities in the North Beach section of the port.
“Our investment in the facility has given us a first-mover advantage,” said Danny Oliver, NuStar’s senior vice president of business and corporate development.
NuStar also bought out its next-door neighbor at the port, Martin Midstream Partners LP, in 2016 for $93 million.
Oliver said the purchase gave NuStar the ability to expand its oil storage tank farm and the rights to build a new dock, which is now open. Two of the company’s four docks at its facility can handle Suezmax tankers, which can transport up to a million barrels of oil. The NuStar complex, he added, is fully operational.
The problem for NuStar is that because of the port’s current 47-foot depth, it can only partially load the Suezmax tankers, to no more than 90 percent of its capacity. To completely fill the tankers, additional oil has to be loaded onto the vessels in deeper Gulf of Mexico waters.
Dredging the channel to 54 feet will solve the problem, which will mean additional revenue for NuStar. However, its North Beach facility is in the section of the dredging project that’ll be finished last. The dredging isn’t expected to be complete until the end of 2022.
Meanwhile, a competing company, Lone Star Ports — a joint venture between one of the world’s largest private equity firms, the Carlyle Group, and the Berry Group, a Corpus Christi construction company specializing in oil and gas projects — sees an opening.
The company is investing $1 billion in a storage and marine facility on Harbor Island at the Corpus Christi port, several miles from the Gulf Mexico. The project is funded largely by institutional investors such as public pension plans, foundations and endowments, primarily in the U.S.
That portion of the channel is scheduled to be dredged first, with completion expected as soon as early 2020.
Lone Star Ports has set an opening date for October 2020, at which point the Suezmax ships could be fully loaded from its two-dock facility — two years before NuStar Energy would have that capability.
“We will have a competitive advantage — it’s a big logistical win,” said Lone Star Ports CEO Jeremiah Ashcroft III. “We will be ready for the next wave of crude.”
Ashcroft said Lone Star Ports has also raised an additional $400 million to do its own port deepening after the initial dredging work is complete.
He said the company plans to deepen the channel to 75 feet, allowing for Very Large Crude Carriers — as they’re known in the industry — to dock at its facility, vessels that can handle twice as much oil as the Suezmax tankers.
Those ships can cut the per-barrel cost of transporting oil in half, Ashcroft said, making it more economical for oil shipments to Europe and Asia.
Lone Star Ports, however, would need approval from the Army Corps of Engineers to complete its project, an approval process that can be burdensome.
Another competitor to NuStar and Lone Star Ports, Moda Midstream, is based in Houston but backed by San Antonio-based private equity firm EnCap Flatrock Midstream.
EnCap has invested at least $750 million, most of it from institutional investors, in Moda.
Moda purchased its 900-acre Corpus Christi marine facility from Occidental petroleum in August 2018 and has been upgrading and renovating docks and adding storage tanks so it can partially load Very Large Crude Carriers.
Moda Midstream CEO Bo McCall said in a written statement that the facility is open and loading oil tankers.
He said the Corpus Christi’s port’s proximity to the Permian Basin and the Eagle Ford Shale in South Texas are advantages that Moda considered in deciding to open its export facility.