Building export capacity in the US

GULF IN CLASS

MIDSTREAM • MARKET TURMOIL AND THE HEALTH CRISIS WILL NOT STOP US TERMINAL OPERATORS DEVELOPING THE INFRASTRUCTURE THAT IS NEEDED

IN THE SPACE of little more than a decade, the US oil and gas industry has been completely transformed as a result of the intensive exploitation of tight reserves – shale oil and shale gas in particular. The turnaround from the position of the country as a major oil importer to one of the most significant exporters has been dramatic, helped in no small part by a light government touch and massive investment on the part of the midstream sector – often underpinned by fund managers with a keen eye on the prospects.

To start with, the immediate need was to install a country-wide network of oil and gas gathering and processing facilities, to collect the new output and get it to where it was needed. New oil and gas hubs sprang up as the country began to be criss-crossed by new pipeline networks, helping move production out of what were often new territories for the oil and gas industry.

Over the past two years, however, the focus has moved very much towards building export capacity, as domestic production is now outstripping local demand. And that focus has, by and large, returned to the oil patch’s old home on the Gulf Coast, and in particular the stretch from Corpus Christi, Texas to the Mississippi Delta in Louisiana. The high-profile developments have been in crude oil but there have also been interesting investments in the chemical sector and in downstream petrochemical gases.

OPEN UP TO CORPUS The new South Texas Gateway (STG) project in Corpus Christi, Texas is just the latest opening. Operator Buckeye Partners put the terminal into operation in mid-July this year, after the first deliveries of crude oil from the Permian basin via one of four pipelines that will serve the terminal. STG is located in Ingleside, near Buckeye’s existing terminal operations in the port, and is a joint venture between Buckeye, which owns 50 per cent, and affiliates of Phillips 66 and Marathon Petroleum, which each have a 25 per cent holding.

Once fully operational in the first quarter of 2021, STG will offer 8.6m bbl (1.37m m³) of tank storage, although there is the space to expand capacity to 10m bbl. Two docks will allow loading at up to 800,000 bbl per day and are capable of handling very large crude carriers (VLCCs).

“South Texas Gateway represents a significant investment in the Port of Corpus Christi and a long-term commitment to our customers,” says Khalid Muslih, executive vice-president of Buckeye GP and president of its Global Marine Terminals.

The opening of STG came three months after Moda Midstream put 10m bbl (1.59m m³) of crude oil export capacity into service at the Moda Ingleside Energy Center (MIEC) in Ingleside and its nearby smaller terminal in Taft, Texas. The two facilities now offer some 12.0m bbl of combined capacity. Construction of another 3.5m bbl at MIEC has begun, which is expected in service later this year, while Moda has permits for more storage at both sites and is in discussion with its customers. Again, the expansion has been enabled by the commissioning of new pipeline connections to bring crude oil from the Permian and Eagle Ford basins.

Also in Corpus Christ, EPIC Crude Holdings brought its IGC terminal into service at the end of 2019; this repurposed facility is designed to act as a crude oil export terminal

while the company is constructing a larger greenfield terminal nearby, capable of handling Suezmax tankers. Pin Oak terminals has also commissioned a new dock at the former Gravity Midstream terminal, which it acquired in early 2019, and is planning more tankage at both this site and its nearby Taft terminal. NuStar Energy is adding 600,000 bbl of new capacity at its North Beach site as part of a long-term agreement with Trafigura.

SHIPPING ON THE CHANNEL Houston does, though, remain as ever the heart of the US petroleum industry, and several tank terminal operators have been investing in new capacity to meet the demands of changing product flows, albeit some have curtailed investments in response to uncertainty both in the upstream sector, as a result of volatile oil and gas prices, and the downstream demand collapse brought about by the Covid-19 crisis.

Nevertheless, although there have been some delays in construction projects due to the necessity to comply with Covid-19 restrictions, there are several that have recently or are about to come to fruition. For example, Odfjell, which earlier this year identified Houston as a major focus of ongoing investment, announced in June that three tanks are being brought back into service and that it was to make a decision shortly on a second phase of development, involving the construction of up to 35,000 m³ of new tankage for specialty chemicals, due to enter into service in 2022. It is also looking at building out the terminal into an adjacent area known as The Point, which could accommodate up to 165,000 m³ of capacity, again for specialty chemicals.

Enterprise Products Partners has continued development of its hydrocarbon terminal on the Houston Ship Channel, adding refrigerated storage for propylene. A new ethylene storage tank is also under construction, due in service by the end of the year, as the company and its partner in the petrochemical gas export facility at Morgan’s Point, Navigator Holdings, look to improve throughput volumes and efficiency. Enterprise recently revealed that it had carried out two ‘co-loading’ operations at the site, one involving the simultaneous loading of propane and polymer-grade propylene on a very large gas carrier (VLGC) and the other involving ethane and ethylene loaded onto a Handysize gas carrier.

“This landmark accomplishment was made possible by our integrated midstream network, as well as the creativity and determination of our employees,” said AJ ‘Jim’ Teague, co-CEO of Enterprise’s general partner. “Loading ethylene and propylene on larger vessels from the US Gulf Coast substantially lowers freight costs and allows US Gulf Coast producers to supply distant markets, such as Asia, more competitively.”

FLOAT DOWNSTREAM More investment in chemical storage includes LBC’s new 100,000-m³ terminal in Freeport, dedicated to handling feedstocks and production from MEGlobal’s new monoethylene glycol plant. Vopak is also busy, currently adding 33,000 m³ of additional tankage at its Deer Park terminal in the Houston Ship Channel, and it has also started work on the nearby Vopak Moda Houston terminal, a new 50/50 joint venture with Moda Midstream. The first phase will include 46,000 m³ of gas tanks and a new jetty to handle chemical gases. It is due to enter into service in phases starting in late 2020 and running through to the second half of 2021, and has been fully committed under long-term contracts.

Vopak has also been selected to design, build and operate a new industrial terminal at Corpus Christi, where Gulf Coast Growth Ventures, a joint venture between Exxon Mobil and Sabic, is building a new 1.8 mta ethane cracker. The terminal will have a capacity of 130,000 m³ and is due onstream in 2022.

While some projects may not meet their original onstream date and several major operators have cut back on projected capital expenditure this year, there is plenty of work out there for engineers, designers and equipment suppliers and it looks like the good times are here to stay for a few more years yet.

CORPUS CHRISTI IS EMERGING AS A MAJOR EXPORT SITE,

TYPIFIED BY TERMINAL CONSTRUCTION BY BUCKEYE

(OPPOSITE) AND MODA MIDSTREAM (ABOVE) AT ITS