All that crude and all those petroleum products have to go somewhere, now that the U.S. is a key exporter. But they need a way to get there, and Texas’ Port of Corpus Christi (PCC) is undergoing change and appears to be the next heralded spot for oil, product and NGL exports.
And by the end of 2018 it could have a new role in the LNG business.
As excitement has only grown since the country lifted the crude export ban, it could be said that as a matter of course, widening the Port of Corpus Christi’s ship channel is a project that is a natural outgrowth of the original late-2015 policy change by President Obama.
Jarl Pedersen, chief commercial officer of the Port of Corpus Christi, has advocated in recent months for the ship channel’s expansion. According to the PCC, it was in early October 2017 that the Port of Corpus Christi Authority and the U.S. Army Corps of Engineers (USACE) first agreed to deepen and widen the Corpus Christi Ship Channel, signing a project partnership agreement, with the port providing $32 million as accelerated funds to the USACE for the first phase.
Put together the area’s existing infrastructure and multiple improvements, and Corpus Christi Bay begins to rival the bustling Houston Ship Channel up and around Texas’ Coastal Bend.
Deep and wide
Through it, the ship channel will be widened to 530 feet (ft) and additional barge shelves will be placed outside the ship channel, allowing for two-way vessel traffic. The ship channel will be deepened to 54 ft, making it safer for modern, world-class deep draft vessels—including the very large crude carriers (VLCCs) that are a standard for the international oil trade.
The work also will require replacement of the landmark Corpus Christi Harbor Bridge that carries U.S. 181 over the channel leading to the port’s docks and the city’s sprawling refining and storage complex. PCC is pursuing construction of a new bridge that will cost $800 million and will allow for vertical clearance of 205 ft, compared with the current bridge’s 138-ft clearance above the water.
Occidental Petroleum made a successful test run loading of the VLCC Anne at its Ingleside, Texas, terminal on the north side of Corpus Christi Bay last year. The French-flagged tanker was light-loaded to allow it navigate the existing Corpus Christi Ship Channel, then topped off at sea.
Oxy has spurred further development of a permanent VLCC dock at the facility and by year-end it aims to complete installation of multiple loading arms to allow for loading of VLCC vessels on a regular basis.
The only other U.S. facility that has the capability to load VLCC vessels is the Louisiana Offshore Oil Port (LOOP), which recently added bidirectional pumps to allow LOOP to both unload crude imports and load exports.
PCC handled the loading of its first, smaller Suezmax tanker in April following modifications to the Buckeye Texas Hub dock, operated by Buckeye Partners LP, to allow berthing of vessels that size.
Suezmax and bigger
Suezmax tankers, which as the name indicates can maneuver through the Suez Canal, can measure up to 160,000 deadweight tons (dwt) while still-larger VLCC vessels can weigh up to 300,000 dwt.
The terminal is operated and 80% owned by Buckeye and 20% owned by the international commodities trader Trafigura Trading LLC, with Trafigura holding exclusive throughput rights. It has about 7 million barrels (MMbbl) of storage capacity for petroleum products, including a refrigerated and compressed LPG storage complex. It has pipeline connectivity for receiving crude oil and condensate production from the Permian and Eagle Ford, five vessel berths, including three deepwater berths and the capability to accommodate Suezmax-class tankers, and two 25,000 barrel per day (Mbbl/d) condensate splitters. Trafigura noted in a recent announcement the terminal “allows Trafigura the maximum flexibility to market the full portfolio of crude and products to customers as near as the Caribbean and Latin America and as far afield as China.”
The Houston Chronicle reported in March that the project to deepen the channel was first proposed in 1990, and that present efforts to bring it to completion could take more than a decade. The newspaper also reported that in March, “the Port of Corpus Christi Authority asked U.S. lawmakers to approve the $225 million it needs to finish the project by 2021.”
The Chronicle reported that progress on expansion “has been slow, with the Trump administration’s fiscal 2019 budget” providing for “$13 million to dredge the [ship channel]” while the port authority requested “$60 million in federal funds for each of the next three fiscal years to complete the project in 2021.”
Regardless of when it will be completed, there is no denying the potential impact of the channel retrofitting.
Pedersen is adamant the expansion is a key step in the new oil export game. At Hart Energy’s November 2017 DUG Eagle Ford Conference in San Antonio, he told attendees that “I think we are just starting the energy renaissance in the U.S. and if you look at the amount of crude oil production that’s projected … or the growth in U.S. production over the next few years, there needs to be a way to get this crude oil to market.”
He added that the channel-deepening project would allow marketers to provide oil at competitive transportation costs to global markets, including growing markets in Asia. Marketers need those competitive costs as major U.S. shale plays including the Permian Basin, which is experiencing massive production, would benefit directly.
Pedersen told Midstream Business that because the Port of Corpus Christi is close to both the Eagle Ford Shale and the Permian Basin, five additional crude pipelines from the Permian to Corpus Christi have been proposed. The Cactus II Pipeline—from the Permian to the city—will increase to almost 1 MMbbl/d from 400 Mbbl/d currently being transported by the predecessor Cactus Pipeline, he said.
Construction on Cactus II has begun, he noted, adding that possibly two of the five proposed pipeline projects might begin construction in the next several months, which would increase the capacity from the Permian to terminals and export facilities at the Port of Corpus Christi to 2 MMbbl/d. Cactus II is a project of Plains All American Pipeline LP.
The Cactus II pipeline system will have Permian Basin origination points at Orla, Wink, Midland, Crane and McCamey, Texas, and will be capable of transporting multiple-quality segregations. The system includes a combination of capacity on existing pipelines and two new 26-inch pipelines. It will be expandable to about 670 Mbbl/d through the addition of incremental pumping capacity.
The first new pipeline will extend from Wink to McCamey and the second new pipe, which is expected to be owned within a joint venture, will extend from McCamey to the Corpus Christi/Ingleside area. It will have the flexibility to access multiple docks.
The capital cost of the two new pipelines is expected to total about $1.1 billion, with Plains’ portion at about $700 million to $750 million. Permitting, right-of-way and procurement activities are underway, and the pipeline system is targeted to be operational in the third quarter of 2019.
According to a recent report by RBN Energy LLC, “Permian production is rising fast, and … a significant share of the new pipelines being developed to accommodate Permian growth would flow to the South Texas coast. RBN’s growth scenario shows Permian crude oil production rising by about 300 Mbbl/d a year through the early 2020s—topping 3 MMbbl/d late this year, 4 MMbbl/d in late 2020 and pushing 5 MMbbl/d by 2023. Further, recent increases in oil prices could accelerate the pace of that growth, not just in the Permian but in the recently rebounding Eagle Ford, where production now averages more than 1.3 MMbbl/d.”
Jeff Dorrow, vice president of commercial NGL and crude with EPIC Pipeline Co. LLC, described to Midstream Business two major, upcoming Corpus Christi-area pipeline projects that will help balance the market and take advantage of the ship channel.
“EPIC believes that there will be a crude offtake capacity shortfall starting in [first-quarter 2018] and a significant need for new capacity mid-2019,” and also that a shortfall of NGL offtake is coming in second-quarter 2021.
The 700-mile EPIC Crude Pipeline could carry 590 Mbbl/d of capacity from the Permian and Eagle Ford to markets in and around Corpus Christi; and the company’s equal-length NGL Pipeline could carry at least 300 Mbbl/d of NGL from those basins to area refiners, petrochemical plants and export markets, according to the company.
“EPIC is also building an ethane pipeline between Corpus Christi and Markham, Texas,” Dorrow added, noting that the company is in talks with a partner to build a high-pressure natural gas line from the Permian’s Waha Hub to the South Texas Agua Dulce Hub, which has connections into the growing Mexican market.
Besides pipelines, the most important infrastructure tied into the Port of Corpus Christi’s upcoming heyday as an export hub would be refining and processing facilities. The city has been a long-established refining center with multiple plants operated by CITGO, Flint Hills and Valero northwest of downtown, strung along between Interstate 37 and the port’s main channel.
Now, it’s adding LNG.
Eben Burnham-Snyder, vice president of communications for Cheniere Energy Inc., told Midstream Business the company is busy constructing its second natural gas liquefaction and export facility at its Corpus Christi LNG terminal, located at Ingleside. The project is “in stages for up to three trains” with estimated combined capacity of 13.5 million tonnes per annum (mtpa). The terminal will also have three LNG storage tanks that can handle about 10.1 Bcfe, and two marine berths for vessels.
The Corpus Christi plant’s Train 1 could start up by the end of 2018, according a company executive. Douglas Wharton, director-origination with Cheniere Marketing in Singapore, told a recent LNG industry conference in the Asian city that “We will hopefully start producing first LNG by this year.”
He added that company executives “made significant progress on Train 3 which ... we are hoping to take a final investment decision (FID) on soon.” Work continues on the plant’s Train 2.
There will be no direct link between the liquefaction plant and the PCC; however, “Cheniere’s properties and facilities are located on the La Quinta Channel, which is a major lateral off the Corpus Christi Ship Channel,” Burnham-Snyder said, adding that current capacity of both channels should adequately handle “the planned LNG carrier transits associated with Cheniere’s facilities in a safe and timely manner.”
Overall, Cheniere views the issue of LNG exports as favorable.
Burnham-Snyder added that LNG will play a significantly larger role in meeting global gas demand “as countries focus on reducing their carbon footprints, improving air quality and supplying affordable and dependable energy to growing populations.” The growth of gas “in the primary energy mix to 2040 will be second only to that of renewables … becoming the second-largest fuel in the global mix after oil.”
Additionally, “By 2040, it is estimated that LNG will have increased its market share to 15% of total natural gas consumed, with overall natural gas consumption having increased nearly 50% by that time,” he added.
Cheniere’s goal is to rise to the challenge by developing and constructing more LNG capacity as part of global growth. Cheniere sees LNG trade as close to 480 million tonnes by 2030, up from about 290 million tonnes in 2017. “Cheniere estimates that an additional 140 mtpa of LNG will be needed by 2030 to meet the expected growth in demand, suggesting that close to 40 additional production trains will need to be put into production by this date.”
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