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Interview: Corpus Christi aims to rival Houston with 4 million b/d crude export capacity

Highlights

Port CEO wants Corpus to be 'Cushing of the coast'

Export market crowded with deepwater, onshore proposals

Corpus Christi studies 75-foot-deep shipping channel

Washington — The Port of Corpus Christi aims to become the "Cushing of the coast" by drawing more and more North American crude oil barrels with 4 million b/d of export capacity by 2022, a wider and deeper shipping channel and expanded pipeline access, port CEO Sean Strawbridge said in an interview with S&P Global Platts.

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Corpus Christi shipped the first US crude export cargo after Congress lifted export restrictions in December 2015, but Houston has edged ahead of it in export volumes due to a head start on pipeline, storage and terminal infrastructure.

"We've been in the shadow of Houston for a long time, but we now have the ability to master plan and develop based on what we see coming in the future with a high degree of certainty in crude, natural gas, NGLs, finished products and all the derivatives that go with that," Strawbridge said.

Corpus Christi currently has 1.2 million-1.5 million b/d of crude export capacity and is using about half of it at any given time, Strawbridge said.

A wave of crude export terminal expansions and new projects will increase that capacity starting later this year and continuing for about three years, he said.

The port has leased land to The Carlyle Group's Lone Star Ports joint venture for two 600,000 b/d docks capable of partially loading VLCCs at Harbor Island. A dredging project currently underway will give the docks access to 54 feet of shipping channel.

The port authority is studying dredging the Corpus Christi shipping channel to 75 feet someday, Strawbridge said, but the approval process could take years.

Strawbridge said the first Lone Star Ports dock will be ready as early as the fourth quarter of 2020, followed by the second in Q2 2021.

GROWING COMPETITION

Separately, Trafigura and Phillips 66 have each proposed deepwater single-point mooring systems capable of fully loading VLCCs offshore Corpus Christi.

The port authority has openly opposed Trafigura's deepwater proposal, intervening in its federal permit application earlier this year.

But the port is supporting Phillips 66's deepwater proposal for the Bluewater Texas Terminal, which filed its federal application in May. Strawbridge said he expects the project to receive permits in mid-2020, be under construction for about 18 months and start up at the end of 2021, if all goes as planned.

Trafigura has said its Texas Gulf Terminal proposal would "complement, not replace, exports from other facilities," when asked if Corpus Christi could support more than one deepwater oil port.

"Having multiple projects reflects and reinforces the need for the significant infrastructure that will be needed to allow the export of US crude oil," spokeswoman Victoria Dix said.

NOT JUST PERMIAN BARRELS

In addition to the buildout at the shore, Strawbridge said the US Midcontinent pipeline buildout will allow Corpus Christi to draw a range of North American crude grades, which will make its exports more attractive. He highlighted the Red Oak and Liberty pipeline proposals to move crude to Cushing, Oklahoma, and onto the coast.

"VLCC buyers in Asia don't want a full VLCC of Eagle Ford or a full VLCC of Permian," he said. "They want a VLCC that might be SCOOP/STACK or Niobrara and Bakken and Eagle Ford and Permian. They want to be able to have that menu of options."

VLCCs have separate holds to carry different grades of crude.

Still, Strawbridge said the Gulf Coast export story will not just be about VLCCs.

"VLCCs are the sexy, big vessel that everybody's talking about, but the workhorses are going to be primarily the Suezmax-class vessels," he said. "Most crude today globally is moved on the Suezmax."

While increased US exports have clearly been driven by rampant US production and the build out of export facilities, price is also a key driver.

S&P Global Platts calculations show US barrels like WTI Magellan East Houston and Mars regularly deliver into both Asian and European markets at a discount, both to local and Middle East grades. In fact, WTI Midland often sets the floor to the delivered markets.

For example, Platts CFR North Asia assessments show WTI MEH was cheaper than Murban, Forties and ESPO between this past October and March. Since then, Murban has begun to set the floor to the market, but only after the grade's discount to its official selling price was increased substantially.

In Europe, WTI Midland DAP (delivered at place) Rotterdam was assessed at a 45 cent/b premium to Dated Brent Thursday, a discount of $1.19 and $1.29/b, respectively, to Forties and Ekofisk.

-- Meghan Gordon, meghan.gordon@spglobal.com

-- James Bambino, james.bambino@spglobal.com

-- Edited by Jim Levesque, newsdesk@spglobal.com