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Highlights

Current crude oil exports stand at 657,000 b/d

Asia-Pacific is target for its crude exports with VLCCs

NuStar has potential to add 1 million barrels of crude storage capacity in 2018

The Port of Corpus Christi Commission has revised its recent forecast of crude exports for 2020, adding another 704,000 b/d, even as major constraints remain before it can become a leading US energy port, Chief Operating Officer Sean Strawbridge said.

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In late September, the commission had forecast crude exports reaching 1.088 million b/d by 2020, compared with 424,000 b/d in the current year.

That was revised considerably last week, with the commission now expecting to end 2017 with total crude exports of 657,000 b/d and rising to 1.792 million b/d by 2020, Strawbridge said in an interview in Corpus Christi on Thursday.

Strawbridge, who is due to take over as the chief executive officer of the port commission on January 1, said it is the port's close location to the Permian and Eagle Ford basins and changes in the decades-old export law that could make Corpus Christi a leading export outlet.

"Our close location ranging from 300 miles to 600 miles from the two basins, and growing production there, made us realize those barrels will seek options to get to tidewater," he said, noting growth in the forecast will be more from the Permian Basin than the Eagle Ford.

Platts Analytics' Bentek Energy is forecasting crude oil production in the Permian Basin to reach 4.54 million b/d by 2019, compared with 2.52 million b/d this year.

HEADWINDS TO DEVELOPMENT

With the existing Plains Cactus I line and other planned pipelines from EPIC, Magellan, Buckeye, and, more recently, a partnership of Phillips 66 and Enbridge, as well as an expansion of the Cactus lines, the commission's effort will be to prepare the infrastructure for exports, he said.

"We see a growing need for those barrels to reach far away destinations, and our role will be to make it a success," Strawbridge said.

Since December 31, 2015 -- when the first export shipment was made following the lifting of the 1970s ban on crude exports to international markets -- Corpus Christi has seen crude volumes rising to 72% in October this year, compared with 12% in January 2016, with that figure set to rise further post-2020 as the port commission breaks ground in early 2018 on its Channel Improvement Project in a partnership with the US Army Corps of Engineers, he said.

"We have a written a $37 million check to the USACE and the kickoff for dredging is due in the spring," Strawbridge said.

Under an overall $327 million program, the aim is to dredge the main ship channel to a depth of 52 feet from the current 45 feet and expand the width of the channel entrance to the crude storage and loading facilities at Ingleside and Corpus Christi to 539 feet from 500 feet and 400 feet, respectively, he said.

The commission is also pursuing the construction of a new access bridge at a cost of $800 million, allowing vertical clearance of 205 feet, from 138 feet now.

"All their efforts are directed towards making the port capable of handling VLCCs that can export up to 2 million b/d of crude from the port," Chris Vratil, director of operations for NuStar's Central West South Region, said last week in a separate interview at Corpus Christi.

NuStar is the owner and operator of a 3.2 million-barrel crude storage facility at the North Beach Terminal, and it has three docks capable of loading Suezmax (of capacity 1 million barrels), Panamax (500,000 barrels), and inland barges (30,000 barrels).

"Crude exports out of our port are now going out on a regular basis and reaching China, South Korea, Japan, Midcontinental Europe, Venezuela and Mexico," Strawbridge said. "With the channel improvement project to be completed in the coming four years or even earlier, our target of being a leading supplier from the US to Asia-Pacific will be accomplished as cargoes will be loaded regularly on VLCCs."

A majority of the crude exports now are on Aframax (750,000 barrels) and Suez-class vessels, and so far for 2017 an average of 15 vessels/month have been exported, said Tara Perry, a financial analyst with the Corpus Christi port.

PORT LACKS STORAGE CAPACITY

Strawbridge and his team will be actively lobbying in 2018 in Washington for inclusion of federal government funding for the channel improvement project, but concerns remain about the need for more crude storage capacity to make Corpus Christi a leading port.

"We are working in DC through a congressional delegation to get an allocation of $225 million in the president's budget," he said.

Of the total price tag of $327 million for the channel improvement project, the share of the federal government is $225 million, with the remaining $102 million from the Port of Corpus Christi Commission.

"At the same time, we are also aware that we are under-tanked in crude storage capacity. Our total crude storage capacity is about 10 million barrels for a total of 12 export docks for vessels (Aframax, Panamax and Suezmax) and six for barges, and we need another about 5 million barrels to handle our growth [by 2020]," Strawbridge said.

As a private-public partnership, the port commission is seeing increasing investments from port users including midstream players and crude trading firms that have committed investments, Strawbridge said.

Work is underway to expand at NuStar's crude storage facility that could potentially add 1 million barrels Vratil said.

"We have plotted the expansion and done the engineering works and a final investment decision is awaited," he said. "The construction time for the expansion could take six months, and we also have a fourth dock under construction that will be ready in June and will take larger vessels, including VLCCs."

Fellow midstream player Magellan Partners is adding 500,000 barrels of new storage at Corpus Christi by 2019, spokesman Bruce Heine said in an email.

The company already has crude storage of 1.35 million barrels at that facility, Heine said.

Last week, a partnership of Vitol and Harvest Pipeline Co. said it was studying the construction of a crude storage and export facility at Corpus Christi.

No comments were immediately available this week, but Occidental Petroleum said in September it was awaiting board approval to increase its crude storage facility at Ingleside to 7.5 million barrels from the current 2.1 million barrels.

Investments in crude export infrastructure are expected to pick up momentum to accommodate increased output of light barrels that will seek export outlets.

"We estimate there are currently 19 active export terminals across the four main regions of the US Gulf Coast -- Corpus Christi/Brownsville, Houston, Beaumont/Nederland and Louisiana, with export capacity totaling at least 2.9 million b/d," said Jenna Delaney, an analyst with PIRA Energy Group, a unit of S&P Global Platts.

PIRA forecasts total US crude exports to be 2.25 million b/d by 2020, a quadrupling of 2016 levels.

The US Energy Information Administration data showed crude exports increasing consistently in 2017, with the total volumes averaging 1.473 million b/d in September, compared with 722,000 b/d in the previous month.