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Max Midstream to start Texas crude exports in May

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Platts Global Alert - Oil

Max Midstream to start Texas crude exports in May

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First crude exports to Europe in first week of May

Focused on shipping Eagle Ford grades for now

Next expansion, Permian connections slated for April 2022

Houston — Startup Max Midstream plans to put a new Texas crude export hub on the map in early-May when it ships its first cargo that is bound for northwestern Europe, founder and President Todd Edwards said in an interview.

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Max will send a test shipment in late-April from its new crude export terminal at the Port of Calhoun to Port Arthur, Texas, and then exports of Eagle Ford-grade crude oil will begin in May, said Edwards.

The overall goal is establishing an export hub -- between Houston and Corpus Christi -- where there is little existing ship traffic and the Port of Calhoun can focus primarily on crude shipments to Europe, while larger competitors send most of their oil to Asia. Max recently opened a Geneva-based trading office.

"It's exciting," Edwards said. "We've accomplished a lot. We expect our first export to Northwest Europe in the first week of May."

A small cargo of Eagle Ford crude with an API of 45 degrees loading at Port Calhoun was heard offered at a 50 cents/b discount to WTI at the Magellan East Houston terminal. The offer was for up to 500,000 barrels and will load on Panamax-sized tanker due to draft restrictions, sources said.

The draft restrictions associated with the port put limits on the amount of crude that can be directly loaded onto a ship. The typical size of an Eagle Ford export shipment out of the US Gulf Coast is 700,000 barrels.

Edwards said cargoes of up to 8000,000 barrels or so are in the works as well soon, but they will require more reverse lightering offshore. A Panamax-sized shipment of condensate also is slated for shipment to Croatia in May.

Eagle Ford 45 USGC FOB loading 15 to 45 forward was last assessed April 5 at $59.34/b, or at a 50 cents/b discount to WTI Midland USGC FOB, according to S&P Global Platts data. The light sweet Eagle Ford crude is often sold at a discount to WTI Midland due to quality. The outright value for Eagle Ford 45 USGC FOB has averaged $59.18/b so far this year.

Starting small

Max Midstream is running a few months behind its initial plans for crude shipments, but Edwards said everything is going well despite some delays caused by pandemic, the historic Texas freeze in February, as well as more routine construction delays.

The new firm partnership with the Port of Calhoun is in the lightly populated Port Lavaca-Point Comfort area that is slated for the completion of dredging and widening work in 2023 to accommodate Suezmax-class tankers.

In the meantime, Max will focus on moving Eagle Ford crude and other products with a capacity of 4 million barrels per month. But Edwards acknowledged the port will not approach capacity until the fall at the earliest.

"People want to make sure there's no glitches and everything works," Edwards said, noting that most long-term contracts are finalized in October. "That gives us time to prove ourselves."

The plan essentially is to grow crude export capacity from just more than 100,000 b/d now to about 325,000 b/d next year when new pipelines and Permian Basin connections are completed, and then to 650,000 b/d in 2023 when the dredging project is finished.

For comparison, the larger Port of Corpus Christi hit a record high for crude exports of 1.9 million b/d in December.

The port project initially uses the 12-inch Seahawk Pipeline to connect to the Kinder Morgan Crude & Condensate Pipeline in the Eagle Ford and, by April 2022, it will have connections in place with the Victoria Express Pipeline out of the Eagle Ford and the new Gray Oak Pipeline from the Permian, Edwards said. Max also will have completed by then a 24-inch twin pipeline for the Seahawk system, he said.

With financial backing from the London-based Cola Group, Max took advantage of space made available at the Port of Calhoun after the Alcoa Corp. permanently closed its mothballed Point Comfort alumina refinery at the end of 2019.

As part of its agreement with the port authority, Max pledged to invest $360 million in the dredging and widening work. In the meantime, Max is building up crude storage space and planning to construct blending facilities.

Edwards said Max has 1.5 million barrels of storage at an Eagle Ford hub in Edna, Texas, as well as 600,000 barrels of storage at the port. By 2023, Max plans to have 9 million barrels of storage in Edna and 6 million barrels of capacity at the port, Edwards said.

And the expectation is that global crude demand will have fully rebounded by the time all the dredging and expansion work is complete.

"We're very bullish," he said.