CORPUS CHRIST – Ever since the leaders of this Gulf Coast city helped convince the Obama administration and Congress to lift the liquid fossil fuel export ban in 2015, Corpus Christi has been a steady spate of construction that Creates nearly 10,000 permanent jobs and raises $ 54 billion in capital investment.
However, the coronavirus pandemic, which has slowed economic activity across the country, threatens to halt investments in planned projects and give up thousands more new jobs.
The expansion of the port in the years before the crisis resulted in new pipelines and distribution facilities, export terminals, liquefied natural gas facilities, storage depots and refineries. Corpus Christi has developed into the largest energy exporter and third largest port in the United States in terms of tonnage. Last year 122.2 million tons of cargo were handled, 60% of which exported oil.
However, April proved to be a cruel month for the port’s fossil fuel-based business strategy. After the virus outbreak forced Americans into a lockdown, fuel demand fell 40% while massive production from Texas oil fields contributed to a global surplus. Oil prices, hit by the double tide of falling demand and overproduction, have fallen nearly 80% since the start of the year.
Natural gas prices are below $ 2 per thousand cubic feet per month, their lowest level since before World War II. The global demand for natural gas was stable: Corpus Christi still sends more than 25,000 tons of it per day. But the flow of oil through the port has started to slow down.
Sean Strawbridge, the port’s general manager, investigated the serious market disruptions from his home office and came to two conclusions.
Initially, the ongoing construction projects would be continued. Two of them account for almost half of the capital investment over the past four years.
Cheniere Energy, a Houston-based company, is building a third production line to liquefy and export natural gas from its LNG processing plant, which opened two years ago, and which cost $ 16 billion, according to Industrial Info Resources, a consulting firm that tracks plant engineering has all over the world. And Exxon and Sabic, its Saudi Arabian partner, began building 1,100 acres east of the port’s shipping canal last year for a $ 10 billion chemical plant to convert natural gas liquids into polyethylene, a feedstock for making plastics .
Second, Strawbridge, Texas said, oil rigs are being shut down, oil and gas production is submerging, and industrial developers are nervous. “It’s a different time,” he said. “We fully expect a slowdown in production. We have taken considerable austerity measures. “
OPEC members and other oil-producing countries have agreed to cut oil production in May and June, which is expected to give the market stability.
“It certainly brings more discipline to producers, including US shale producers who will organically save 3 to 4 million barrels a day on US production,” said Strawbridge. “That will have a dampening effect on our export volume for some time.”
Strawbridge and his colleagues were delighted with the $ 2.5 billion, 650-mile Red Oak Pipeline that Phillips 66 and Plains All American Pipeline announced last year to move 400,000 barrels of oil from Oklahoma to Corpus Christi. But Phillips stopped the project in March.
The Red Oak Project, the fifth and newest pipeline for transporting oil from production fields in Texas and the west, should help the port triple its oil export capacity to more than 5 million barrels per day by the mid-2020s.
A year ago, demand for oil export capacity in Corpus Christi is set to grow to 2.5 million barrels per day by mid-2021 and account for 56% of all US petroleum exports, according to Wood Mackenzie, a research and advisory firm. But in April Corpus Christi oil exports began to march in the opposite direction, falling from 1.8 million in January to 1.3 million barrels a day.
Delays, suspensions and project cancellations can be seen along the port’s canal. A plan to build a new oil export terminal on 55 hectares in the port collapsed. Two years ago the port signed a lease with Pin Oak Terminals, a private company, to build the facility. The company terminated its lease in March.
Permico Energia, a Houston-based company, announced its plan in 2018 to build a $ 700 million LNG production facility on 160 acres near the port. The company has apparently abandoned the proposal, Strawbridge said.
Permico executives did not immediately return requests for comments.
The Port of Corpus Christi itself decided to put a $ 40 million dock on hold in the middle of a 10-year $ 1 billion investment program and postponed another $ 84 million for construction projects until 2021. But a $ 25 million $ 65,000 square foot administration building is on track to be completed in September.
Across Texas, experts differ on the long-term consequences of the pandemic and low fossil fuel prices. Strawbridge said unsold oil is now being stored in 15 tankers anchored in the Gulf of Mexico.
Oil fields, refineries, pipelines and export infrastructure have suffered an economic blow, said Rusty Braziel, managing director of RBN Energy, a Houston-based consulting firm that analyzes energy markets. He added that his company saw no recovery in growth for another five years.
“The whole picture has changed,” he said. “Every company we deal with has already made decisions to call things back. Not temporarily. Permanent.”
Others, however, expect a shorter hiatus followed by a recovery in normal domestic and global oil demand.
Industrial companies in the energy and other sectors have announced plans to invest $ 200 billion in capital along the Houston Ship Channel over the next three years, said Vincent J. DiCosimo, director of the Greater Houston Port Bureau, a trade association working in the US operations The Houston Port Authority’s plan to deepen and expand the canal.
Energy companies involved in construction projects in Houston and at various stages of approval have not announced any changes to their plans or blueprints.
“This is a slip, not a long-term paradigm shift,” said DiCosimo.
There is evidence that other companies think the same way and are moving forward with their plans in Corpus Christi.
Buckeye Partners worked with Marathon Petroleum and Phillips 66 to build a $ 500 million depot for up to 7 million barrels of oil. The depot, which includes two deep-water docks, is about to open.
Indiana-based Steel Dynamics has begun construction of transportation facilities for a $ 1.9 billion facility on 2,500 acres in Sinton, a city north of Corpus Christi. The facility is scheduled to open next year.
The new facilities, Strawbridge said, join other major port projects under construction and are seen by port managers as a reassuring signal that development momentum is not lost in the pandemic caused by the collapse in energy prices and the pandemic will go.
For example, the Army Corps of Engineers is working with the port to expand and deepen the Corpus Christi Ship Channel, which is expected to be completed in 2022. The port pays a third of the $ 500 million cost, Strawbridge said.
The Texas Department of Transportation is building a $ 1 billion cable-stayed bridge over the ship canal to replace the 61-year-old harbor bridge.
The port is also working with Phillips 66 and Trafigura, a Swiss company, to build a $ 200 million underwater pipeline to the proposed Bluewater Texas Terminal oil export buoy 15 miles offshore in the Gulf of Mexico. Phillips 66 applied to the US Maritime Administration 11 months ago for approval to build the terminal, which is rated for 1.9 million barrels a day. It is one of four offshore golf terminals under scrutiny by the Maritime Administration.
However, some experts wonder if this project will move forward.
“It won’t look like it did the last five years,” said Braziel of RBN Energy. “We are in another world.”