Port of Corpus Christi finalizes lease, pipeline deals with Bluewater Texas crude export project

The Port of Corpus Christi and the Phillips 66-led Bluewater Texas project finalized leasing and pipeline easement agreements Dec. 16 for the planned deepwater, crude oil export terminal.

The proposed Bluewater terminal is one of four pending applications — and the only one off of Corpus Christi — to build offshore crude terminals that would allow VLCCs to fill up to capacity in deeper waters without the need for reverse lightering. While the race to build these offshore hubs has slowed from a sprint to a crawl during the ongoing coronavirus pandemic, some projects are still inching forward.

Bluewater is a 50-50 joint venture between Phillips 66 and Trafigura, which previously dropped plans for a competing project to instead team up on Bluewater. The new deals approved with the port commission grant Bluewater access to existing pipeline corridors and to 12 non-waterfront acres for an operations facility on Harbor Island.

Phillips 66 isn’t including Bluewater in its 2021 capital spending budget, but the Houston refiner said it still sees the project as a longer-term priority to ship Permian Basin and Eagle Ford Shale oil abroad.

Phillips 66 spokesman Bernardo Fallas called the port deal a key step in the project development on the way toward a final investment decision.

“The joint venture owners believe in the long-term value of this critical energy infrastructure project,” Fallas said in a statement. “While a specific date for a financial investment decision is still to be determined, we continue to pursue the early-stage milestones set out for the project’s success.”

The project, as proposed, would load nearly 2 million b/d of crude, essentially able to fill up one VLCC in as quickly as 24 hours. Accounting for ship traffic and logistics, Bluewater would be able to service 16 VLCCs per month.

The project still needs federal approvals from the US Maritime Administration and the US Coast Guard. But the same steps remain for Bluewater’s competitors.

Enterprise Products Partners and Enbridge are planning the Sea Port Oil Terminal, called SPOT, offshore of the Houston Ship Channel, while Sentinel Midstream’s Texas GulfLink also would be offshore of Houston. Farther east, Energy Transfer recently applied to build the Blue Marlin Offshore Port near its Nederland, Texas hub.

Thus far, only Texas GulfLink has received a draft environmental impact statement rom MARAD.

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

Corpus views

As more long-haul crude pipelines from the Permian have come online, Corpus Christi became the nation’s top crude oil exporter about a year ago.

However, crude exports everywhere have taken a hit during the pandemic.

Crude exports fell from an all-time high of 3.71 million b/d in February to a year-to-date, monthly low of 2.75 million b/d in June, US Energy Information Administration data shows. Despite a temporary rebound after June, in the last four weeks, crude exports have averaged just 2.69 million b/d, according to the EIA.

Pre-pandemic, US crude exports were projected to rise to at least 4.5 million b/d by the end of 2021, but future volumes are now expected to fall in 2021 and 2022 before rebounding above 2020 volumes in 2023 and growing from there, according to S&P Global Platts Analytics. Still, crude exports are expected to remain closer to 3.7 million b/d by 2025.

Because of the weaker demand for now, Port of Corpus Christi CEO Sean Strawbridge said it is “likely” Bluewater will be the only offshore port built in Texas, better positioning Corpus Christi as the nation’s leading energy exporting gateway.

“The message to our global allies and trading partners is simple — Texas is open for business,” Strawbridge said in a statement.

However, other energy analysts have pegged Enterprise’s SPOT as the best positioned to move forward, especially with an anchor customer commitment from Chevron.

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Source: Platts

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