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Corpus Christi, other USGC hubs competing for crude export barrels in 2021

The Port of Corpus Christi broke volume records at the end of 2020 as it took more than a 55% market share of all US crude exports, but those barrels are expected to dip a bit in 2021 as rival ports rebound and global oil demand remains relatively weak.

Port of Corpus Christi CEO Sean Strawbridge said in an interview with S&P Global Platts he is confident the burgeoning port hub will remain the nation’s crude-exporting artery and he is keenly bullish on more eventual growth. The big question he does not have the answer for is whether a stronger uptick will come in 2022 or in 2023 as the US shale industry eventually bounces back from the coronavirus pandemic.

“How quickly are we going to come out of this COVID cocoon?” Strawbridge said. “We can only anticipate more volumes coming to the Port of Corpus Christi.

“Crude oil is like water. It’s going to find the path of least resistance, and the Port of Corpus Christi is that path of least resistance for the crude volumes.”

Corpus crude exports grew from just about 500,000 b/d in early 2019 into the nation’s leader by year’s end at more than 1.3 million b/d as new, long-haul Permian Basin pipeline connections came online. After dipping from a high of 1.5 million b/d in February 2020, the pandemic knocked volumes down to 1.2 million b/d in April before surging to a new record high of more than 1.9 million b/d in December.

“Our resiliency has really come at the expense of other gateways that are just not as efficient,” Strawbridge said, noting that Corpus was just a “sleepy little port for decades” until now.

For the entirety of 2020, Corpus averaged about 48% of all US crude exports, according to the US Energy Information Administration.

Export competition

But with the lingering pandemic and Permian producers maintaining capital discipline despite rising crude prices, the Port of Corpus Christi sees its crude export volumes falling below 1.5 million b/d in 2021 to as low as a yearly average of 1.3 million b/d.

That comes with increasing competition from the rival Houston Ship Channel that had led the US in crude exports until late 2019, as well as from the Louisiana Offshore Oil Port, which remains the only hub that can fully load VLCCs without requiring reverse lightering services offshore.

This year, the Port of Houston is set to benefit from the completion of the ExxonMobil-led, 1.5 million b/d Wink-to-Webster crude pipeline, which is the last major Permian pipeline yet to come fully online. And LOOP will benefit from the Capline Reversal pipeline project, which will send crude volumes back southbound to Louisiana.

On the other hand, Phillips 66 canceled the Red Oak Pipeline project that the Port of Corpus Christi was counting on to finally connect South Texas to the benchmark Cushing, Oklahoma, crude storage hub. Strawbridge said he remains hopeful a similar project eventually will get built. For now, Corpus remains dependent on the Permian and Eagle Ford Shale volumes.

“Corpus Christi isn’t really going to pick up the incremental growth that comes in the near term,” said Kendrick Rhea, energy analyst at East Daley Capital. “That growth is going to start shifting back over to Houston.”

Much of what is in Houston’s favor is the two largest Permian players, ExxonMobil and Chevron, are tied to the Houston region. ExxonMobil will have Wink-to-Webster, while both big oil players have their big refining and petrochemical hubs in the Houston area. Likewise, Chevron is contracted as the anchor customer for Enterprise Products Partners’ Sea Port Oil Terminal project, called SPOT, to export crude from offshore of Houston.

While SPOT is indefinitely delayed during the pandemic and potentially facing stricter regulatory oversight under the Biden administration, Rhea still pegs SPOT as the only pending offshore crude-exporting project with a greater than 50% chance of being completed.

The Corpus Christi port’s top customers historically are the local oil refineries, but now crude exporters Moda Midstream and NuStar Energy have moved into the top two spots. Corpus Christi has benefited from the recent completions of the EPIC, Cactus II and Gray Oak long-haul Permian pipelines, as well as terminal expansions and new facilities, such as Buckeye Partners’ new South Texas Gateway terminal.

“We’re still seeing COVID pressures globally,” Strawbridge said. But, longer term, “the shale producers are always going to have a place on the international markets.”

Dutch connection

One new advantage Strawbridge now holds is a new memorandum of understanding announced Feb. 25 between the ports of Corpus Christi and Rotterdam, as Northwestern Europe has leaned more on US imports as its own oil production has declined.

The deal with Europe’s largest port allows the two global crude hubs to align and collaboratively improve their global maritime operations, including working on reducing their carbon footprints through technology and logistics enhancements.

Strawbridge hopes the port benefits by creating more business and efficiency for their shared customers, but first and foremost the deal is about an information and idea exchange.

“The Netherlands is the California of the EU in its focus on environmental sustainability,” Strawbridge said.

While the Port of Corpus Christi emphasizes how it relies on renewable energy to power its operations, Strawbridge said he envisions them working together on new carbon capture, hydrogen and emissions-reduction projects.

Other things like working on technologies to improve nighttime and foggy-condition tanker navigation, he said, will help move more barrels more quickly as well.
Source: Platts

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2021-03-14 15:00:31

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