America’s largest oil exporting hub is poised to cut spending and potentially defer more than a third of its capital budget for 2020 amid the worst price performance in nearly three decades.
The Texan port of Corpus Christi, which recently surpassed Houston to become the country’s largest source of U.S. crude oil exports, is preparing for its customers to start cutting after the crater in global oil prices this week.
“You can be sure that exports will be severely affected,” said Sean Strawbridge, chief executive officer of the port. “We have reviewed our capital plan and will be making some adjustments and being disciplined when it comes to pulling out.”
While many of the port agreements are based on take-or-pay contracts – which means the port gets paid regardless of whether barrels are shipped or not – a prolonged downturn that stifles crude oil production could block future growth opportunities. Given the “sheer rapidity” of the market collapse, industry bankruptcies “will undoubtedly happen,” he said.
Early victims of the crash could include two pipelines under development – Phillips 66’s Liberty and Red Oak projects – that will connect the Rockies and Cushing, Okla., To the port. “I wouldn’t be surprised if these lines were delayed,” said Strawbridge.
Phillips 66 said in a statement that the timelines for the projects are unchanged.
The port was responsible for about 40% of total US oil exports, or about 1.38 million barrels a day, in January. The new pipelines should increase these volumes further.
Currently, Strawbridge has identified around $ 100 million from the port’s $ 275 million investment program, which can be postponed to next year if necessary, although decisions have not yet been made. He declined to indicate which projects could be cut or delayed.