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Trafigura partners with Phillips 66 on competing Bluewater terminal offshore Corpus Christi

Highlights

Phillips 66, Trafigura form joint venture on Bluewater crude export terminal

Project could load nearly 2 million b/d of crude

Houston — Trafigura and Phillips 66 said Friday they will consolidate their competing efforts to build a deepwater terminal offshore Corpus Christi to export crude oil from the Texas Gulf Coast.

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Global energy trader Trafigura, which was the first to propose a deepwater crude exporting terminal in 2018, will instead team up with Phillips 66 on its larger Bluewater project, about 21 nautical miles east of the entrance to the Port of Corpus Christi.

Despite its initial first mover advantage, Trafigura's Texas Gulf Terminals proposal fell behind in the US Maritime Administration permitting process and the Port of Corpus Christi vocally sided with supporting the Phillips 66 terminal instead. Rather than see its project die and have it miss out completely, Trafigura is instead partnering with its competitor. Energy analysts have argued that there is demand to only serve one deepwater exporting hub in the Corpus region.

The Bluewater project would be built in deep enough waters to fully load VLCCs to transport crude oil around the world. For now, VLCCs can only partially load at onshore docks and then fill up the rest of the way offshore from other ships in a process called lightering.

The other two deepwater Texas terminals moving forward thus far are competing projects that would be constructed south of the Houston area - Enterprise Products Partners' Sea Port Oil Terminal, called SPOT, and Sentinel Midstream's Texas GulfLink. Both of those projects are tentatively slated to begin construction as soon as the third quarter if they receive their final permits from MARAD this summer. Other projects have been proposed, but they have not yet submitted MARAD applications.

Because only so many projects will move forward, the move by Phillips 66 and Trafigura follows the recent trend of projects merging. Pipeline giant Enbridge similarly dropped its competing project and joined forces with Enterprise on SPOT. Likewise, after considering various offshore terminal proposals, Magellan Midstream Partners has a tentative deal to work with Sentinel.

AWASH IN CRUDE

Because of the ongoing shale oil boom in the Permian Basin, and the subsequent construction of pipelines stretching from West Texas to the Gulf Coast, more crude oil is being exported from the US than ever before. The US is currently shipping out close to 3.5 million b/d of crude, with more volumes expected in the coming years. As of late 2019, Corpus Christi has overtaken the Houston Ship Channel as the nation's top crude-exporting hub.

The Bluewater project, as proposed, would be capable of loading almost 2 million b/d from its offshore position. A final investment decision is expected later this year, Phillips 66 said.

The Bluewater joint venture combines the unique market position that Trafigura has built in the US as a leading exporter and marketer of crude oil with Phillips 66's commercial expertise and existing infrastructure network on the US Gulf Coast, the companies said.

Other proposed deepwater projects that have not filed their applications include Texas terminals offshore of Brownsville and Nederland, Texas, as well as one in southeastern Louisiana. Energy Transfer CEO Kelcy Warren said earlier this week that it is moving forward with its project offshore of Nederland, but that a final investment decision won't come until later this year.

Thus far, only one Gulf of Mexico port, the Louisiana Offshore Oil Port, called LOOP, can fully load VLCCs currently without lightering from smaller ships.