Commodity trader Trafigura Group Pte Ltd. is proposing to build a deepwater port in South Texas near Corpus Christi to load oil supertankers, a piece of the puzzle so far missing in efforts to expand domestic exports.
The company, which has offices in Houston and invests in ports, terminals and logistics to enhance its physical trading activities, applied for a permit in July through Trafigura US Inc. subsidiary Texas Gulf Terminals Inc. To help trade flow, Trafigura often builds warehouses and storage facilities, and it operates trucks and barge fleets. It also buys ships and develops mines.
“The Texas Gulf Terminals Project will give U.S. crude oil producers, particularly Texas operators, safer, cleaner and more efficient access to very large crude carriers, ensuring that the economic and employment benefits of increasing domestic crude production can be fully realized right here at home,” said Texas Gulf Terminals Director Corey Prologo.
The U.S. natural gas and oil industry “is a critical part of the economy, contributing more than $1.3 trillion and supporting 10.3 million jobs in 2015,” management said this week in response to queries about the Texas Gulf Terminals project.
“As U.S. crude oil production surges, oil exports have also grown, with projections reaching 4.8 million barrels per day by 2022. Without new investment, today’s U.S. export infrastructure will be unable to accommodate this volume, which will restrict production and slow economic growth.”
The most economical and efficient way to transport crude overseas is via very large crude carriers, i.e. VLCCs, which can transport up to 2 million bbl per voyage. However, fully loading a VLCC requires multiple ship-to-ship transfers, aka STS, which are performed in lightering zones out to sea.
The U.S. Energy Information Administration (EIA) in May had noted that the surge in domestic oil exports had happened so quickly that the Gulf Coast’s onshore ports were struggling to ensure space for VLCCs.
“The inability to fully load larger and more cost-effective vessels has pricing implications for U.S. crude oil exports,” EIA said. “Using a number of smaller ships requires a wider price spread between U.S. crude oil and international crude oil prices to compensate for the lower economies of scale and costs associated with reverse lightering and partial loadings.”
The Louisiana Offshore Oil Port (LOOP) in the Gulf of Mexico is today the only domestic facility able to accommodate a fully loaded VLCC, according to EIA. The “most likely” place to site another VLCC port was considered to be in the Corpus Christi area.
The Port of Corpus Christi Authority has a feasibility study underway regarding VLCCs without reverse lightering, which now is done on Harbor Island at the end of the Corpus Christi Ship Channel. The junction at Redfish Bay and the Gulf of Mexico also could be developed to store 20 million bbl of oil and for blending.
Initial work has begun by the port authority to obtain a permit to dredge to a depth of 75 feet, which would allow VLCCs to be fully loaded. The Corpus Christi port also is interested in developing Harbor Island, where it owns 250 acres and has a right of way to build pipelines. If it were to receive permitting approval, Harbor Island could become the second port after the LOOP to be able to fully load VLCCs.
The feasibility study should be completed later this year, after which the port authority would seek a permit from the U.S. Army Corps of Engineers. Dredging and construction could begin in the second half of 2018, with VLCC mooring available by late 2020 or early 2021.
Meanwhile, Port Houston has several expansion projects underway to accommodate more cargoes. However, for now it is opting against additional dredging to accommodate VLCCs only as the costs would exceed $1 billion.
Also in the mix is Enterprise Product Partners LP, which in July said it was considering an oil export terminal to expand deliveries overseas that would be capable of loading VLCCs. Front-end engineering and design has begun, with initial work underway for permitting.
No details were provided by Enterprise about where the offshore project would be sited. However, in April Enterprise purchased a 65-acre waterfront site on the Houston Ship Channel to serve as the next phase of expansion at an existing terminal, which has two docks, dredging infrastructure and land to expand marine terminaling capabilities. Future plans include constructing at least two deepwater docks capable of accommodating Suezmax vessels, a term used for massive ships (including VLCCs) capable of transiting the Suez Canal.
The Texas Gulf Terminals project would “allow VLCCs and other tankers to load cargo safely, directly and fully via a single-point mooring buoy system (SPM),” Trafigura said. “Using SPMs eliminates unnecessary ship traffic in inland ports as well as the ‘double handling’ of the same crude oil, reducing the opportunity for spills and emissions each time the crude oil is transferred. Once constructed, this globally proven technology will ease infrastructure barriers to crude oil exports, grow the U.S. economy, and support jobs.”
The project is the latest in a series of long-term investments that Trafigura has made in communities across the United States, including a nearly $1 billion investment in Buckeye, a marine export terminal and condensate splitter in Corpus Christi, and the Burnside Bulk Storage Terminal in Darrow, LA, to facilitate international exports.
In June, Trafigura entered into a binding mid-term sales and purchase agreement (SPA) for 0.5 million metric tons/year (mmty) of liquefied natural gas (LNG) with Freeport LNG Marketing LLC, which has an export project underway on Quintana Island near Freeport, TX. The SPA is to begin July 1, 2020, soon after the third liquefaction train is completed.
“Trafigura puts the security of supply for its customers at the heart of our LNG strategy,” Freeport LNG CEO Michael S. Smith said at the time.
In January, Trafigura also entered into a SPA to purchase about 1 mmty from Cheniere Marketing LLC on a free on board basis for over 15 years beginning in 2019. The purchase price for the LNG is to be indexed to the monthly Henry Hub price, plus a fee.
Cheniere Energy Inc. CEO Jack Fusco called Trafigura "an important player in the global LNG market," and said the SPA would support expansion plans. Projects under development include a fourth train at its Sabine Pass LNG terminal in Louisiana, and an LNG export terminal in Corpus Christi.