Port of Corpus Christi
The Port of Corpus Christi surpassed Houston late last year as the nation’s top crude exporter, and now the rapidly growing petroleum hub aims to take the next step by shipping out grades of Canadian crude and Bakken Shale oil.
There’s just one key, but obvious, holdup: a coronavirus pandemic that crippled global oil demand and triggered a wave of pipeline construction deferrals.
Thanks to a wave of long-haul crude pipelines connecting the Permian Basin to Corpus Christi that came online in 2019 and 2020 — Cactus II, EPIC and Gray Oak — the port is still shipping out an average of more than 1.5 million b/d in crude oil to the rest of the world in 2020, according to Port CEO Sean Strawbridge, speaking remotely on Aug. 19 at EnerCom’s The Oil & Gas Conference.
But, in order to keep growing, he said, Corpus Christi also needs access to crude grades from outside of Texas and New Mexico, especially those from North Dakota and Canada. And the only way to make that a reality is connecting Corpus to oil storage hubs in Cushing, Oklahoma and, to a lesser extent, nearby Houston, which Strawbridge described as somewhat congested.
“We do not have access to those crude slates today,” Strawbridge said, noting that the port may have to further defer expansion and capital spending plans if potential pipelines don’t become a reality.
The big one that the port was — and still is — counting on is the Red Oak Pipeline by Phillips 66 and Plains All American Pipeline that would move 400,000 b/d from Cushing to multiple Texas port hubs in Houston, Corpus Christi and Beaumont.
However, earlier this year, the pandemic triggered Phillips 66’s decision to indefinitely defer a decision on building Red Oak and two other pipeline projects until 2021, if not longer. Red Oak was originally planned to be built and in service in the first quarter of 2021.
On Aug. 19, Phillips 66 spokesman Dennis Nuss reiterated that Red Oak remains deferred, declining further comment.
Wait for it
During the Phillips 66 earnings call on July 31, Executive Vice President Tim Roberts discussed pipeline project deferrals as coronavirus cases continue to hold steady or rise in much of the country, although he didn’t specifically cite Red Oak.
“All those things have caused us to pause. And you’ve seen that through our actions like deferring a couple of our projects,” Roberts said. “We need more clarity. I think our producers need more clarity, shippers need more clarity. So, we need to get a view on that.”
Ultimately though, he said he still expects “good projects” to eventually move forward.
“We’re certainly going to be a little more cautious as we look at transmission lines,” Roberts said. “But that doesn’t mean we’re not going to do those. We’re going to make sure it makes sense.”
And US crude shipments are slowly rebounding during the pandemic. Most recently, in mid-July, Buckeye Partners started exporting crude from its brand-new South Texas Gateway terminal at the Port of Corpus Christi.
US crude exports averaged an all-time high of 3.71 million b/d in February, according to the US Energy Information Administration, before falling below 3 million b/d in May and June.
S&P Global Platts cFlow data estimates US crude exports rose back up to 3.71 million b/d for the week ending Aug. 14. However, in a sharp contrast, the EIA only reported 2.14 million b/d in crude exports for the same week, down from 3.14 million b/d the week prior.
The two crude export projections have increasingly diverged in their estimates since mid-June with cFlow consistently counting higher volumes. However, this week was by far the greatest difference yet. One factor could be the EIA not fully factoring in crude shipments that are still going into floating storage without set destinations.