September 2014 Port Bureau News

Port Bureau September 2014

Greater Houston Port Bureau Special Report: Forecast of Vessel Arrivals For the Houston-Galveston Captain of the Port Zone

News

How Do You Like Your Coffee?

Specialty coffee consumption is on the rise, but what makes it so special?

The 85th Annual Maritime Dinner Recap and Photos

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Port Bureau

News

Fig. 1: Vessel Arrivals 12 - COTP Zone

6

Forecast Case Comparison

34

14K 13K 13K 12K

12K 11K 11K 10K

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

3 Captain’s Corner

Forecast: Back to the Future

4 Port Watch

Just One Word, Benjamin‌ Plastics!

6 How Do You Like Your Coffee?

Base Case Economic Spurt Case

12 Forecast of Vessel Arrivals

For the Houston-Galveston Captain of the Port Zone

22 Panama

Canal Celebrates Centennial

Specialty coffee consumption is on the rise Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Christine Schlenker Copy Editors Emily Mitchell Judith Schultz Art Director Christine Schlenker For information about the Port Bureau:

Phone: (713) 678-4300 Email: info@txgulf.org

24 United Kalavryta

Legal Battle Fuels up Kurdish Crude Oil Feud 30 Mexico Oil Reform

34 The 85th Annual

Maritime Dinner Recap and Photos

Writers Dave Cooley Matt Logan Emily Mitchell Christine Schlenker Judith Schultz Patrick Seeba Front Cover Photo courtesy of Lou Vest

Photographers Christine Schlenker Patrick Seeba For information about the Port Bureau News stories or advertising:

Port Bureau Staff Jeannie Angeli Al Cusick Megan Essenmacher Cristina Gomez Janette Molina

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2 | September 2014

Crude Oil Export Case Weighted Average Case

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A Publication of the Greater Houston Port Bureau The Port Bureau News magazine is a monthly publication of the Greater Houston Port Bureau, a member-driven nonprofit dedicated to promoting the maritime community, providing vessel movement information and offering members premier networking and advertising opportunities to drive business.

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Captain's Corner Forecast: Back to the Future A

s Y2K loomed in 1999, I was asked as Captain of the Port in Duluth, Minnesota, to write a prediction for the next century for the Port’s magazine. I took the assignment half-heartedly and wrote a preface stating the Hall of Fame for Predictors was currently empty. Then I rambled off my prediction: ships wouldn’t exist anymore and, instead, we would just bundle cargo (like containers) into the shape of a ship, slap a flux capacitor (à la “Back to the Future” style) to the stern, and away it would go. It would be crewless in the current sense of the word, but overseen by two mates sitting in a computer room with a dog. The dog would be there to bite them if they touched anything.

Déjà vu: Last fall our Captain of the Port CAPT Brian Penoyer and the Lone Star Harbor Safety Committee asked for a prediction on what effect the current oil and natural gas boom was going to have on the port. They were only interested in five years out, rather than one hundred, so my above prediction wouldn’t do. I retreated back to the office to discuss the possibilities of such a forecast with our amazing Port Bureau staff. Dave Cooley, with over 30 years of oil trading experience, agreed to take the lead on the task.

From the Port Bureau’s Port Capital Investment Survey completed in 2012, we knew companies were investing heavily in expanding their capacity. But if we were to poll them on what they thought the increase in vessel calls to their docks would be, each would probably give a 10% number. That becomes a big number when the 130 facilities expand. However, just because capacity is doubled, it doesn’t necessarily mean sales are doubled, too. It is the same logic with the Panama Canal: the expansion is great, but market forces will ultimately drive vessels and cargo through the locks.

Dave’s approach was to focus on syncing up vessel movements with national and global energy as well as GDP growth demand forecasts. For months, Dave studied ten years of cargo tonnage and vessel movement data, looking for a corollary between the two. Once he was able to link the two with a model, the forecast

started to fall into place—almost.

It actually fell into three places: a current trend, a robust expansion, and an oil export forecast. Dave CAPT Bill Diehl, briefed and polled many of our USCG (Ret.) members to get their input and polish the results. It is quite interesting, so please read Dave’s prediction on page 12.

As soon as we started discussing this forecast, the questions began flying as to what it means.

Simply put, we see more, and larger, ships coming to Houston and more exports of LPGs and chemicals.

Hurray! But wait—might this mean congestion, too?

The answer to that question is yes, unless we get more efficient.

There are myriad challenges ahead, starting with channel infrastructure that is dependent on funding from our stagnant federal government. I can predict with some confidence that there will be neither a large deepening nor a widening project for the main channel in the next few years. Therefore, in order to move more cargo and do it more efficiently, we are going to need everyone – and that means shippers, carriers, facilities, pilots, etc. – to work shoulder-to-shoulder to deliver predictable and timely services.

The Lone Star Harbor Safety Committee, under the leadership of Captain John Peterlin (Chair), Captain George Pontikos, and many others, is exploring possible solutions to keep our channel efficient. They are in the early stages of examining the causes for congestion as well as what and who is impacted by it so they can engage the appropriate stakeholders. I am confident in their leadership and that our maritime community can continue to work together.

I predict a bright maritime future—with or without flux capacitors. ò

Greater Houston Port Bureau | 3

© Christine Schlenker

PORT WATCH

Just One Word, Benjamin…Plastics!

Tom Marian, Buffalo Marine Service

I

n that 1967 classic movie, The Graduate, the young investments in the U.S. chemical industry. Not so in the Benjamin Braddock is offered a profound piece of ad- Gulf Coast as $100 billion in projects has unfolded and vice by a family friend who reveals, “There’s a great future in another $100 billion is being pursued. It is a building boom plastics. Think about it. Will you think about it?” As it turns that shows no signs of slackening and is bolstering maritime out, Benjamin had other things on his mind, but by the late trade throughout the state of Texas.

‘60s the plastic revolution was ramping up across the United Hence, the July trade picture was not just good but very States. However, if one were to ask a consumer 50 years ago good indeed - in no small part due to the strong demand about plastic cars, for petrochemiplastic bottles, plastic Texas Ports Deepdraft Vessel Arrivals cal exports and the packaging, and the July 2014 Year-to-Date Percent Change continued flow of millions of other BROWNSVILLE, -12.4% imports to support uses for this ubiquitous subCORPUS CHRISTI, 17.3% extensive construction stance, one would have most FREEPORT, 19.8% activity. In terms of likely been scoffed at. Interestingly GALVESTON, 14.8% raw numbers, it was enough, after the dominance of HOUSTON, 0.5% the best July in nearly plastic and its chemical precurPORT LAVACA, 6.9% a decade and rivaled April’s torrid vessel arrival sors was established in the U.S. SABINE, 1.9% numbers. July was even more impressive vis-à-vis manufacturing arena, experts were TEXAS CITY, -7.4% tow movements with the highest monthly total for convinced that the cost of energy GRAND TOTAL, 3.6% the year – a 3% monthly increase for the Houston would end major infrastructure Ship Channel region. Indeed, the Port of Houston 4 | September 2014

www.txgulf.org

port watch

Port of Houston Deepdraft Vessel Arrivals

state’s remaining ports. Freeport did suffer a significant monthly decline of 19% but con2,000 tinues to outpace last year’s performance by 20%. Brownsville’s July matched that of June; 1,500 July 2014 YTD (Total: 4,801) however, its year-to-date arrivals lag by 12%.

Texas City registered one of its best months of 1,000 July 2013 YTD (Total: 4,776) the year with a 15% gain. Nonetheless, it is still playing catch-up with 2013 which remains 7% 500 above 2014. Sabine had a similar monthly result with nearly 18% more arrivals. This was enough to keep the port above 2013’s arrivals totals by just shy of 2%. Corpus Christi posted its largest vessel arrival number for the year by eclipsing June’s previous high mark – albeit by just over 1% - reflecting the continued dominance of the was one of the month’s top performers percentage-wise with Eagle Ford shale play. Finally, despite the nadir of the cruise a 13% jump, pushing it into positive territory on a year-toship season, the Port of Galveston managed to eke out a date basis. Only two of the nine major vessel types experi3% monthly rise. Like most of its port brethren, the Port enced a decline in July – car carriers and ocean-going tugs of Galveston is benefiting from an active year of maritime and barges by 20% (2 fewer) and 24% (8 fewer), respectively. commerce as evidenced by a 15% year-to-date improvement.

Granted, both vessel types are off for the year. So too are Overall, 2014’s trade picture throughout the Texas coast chemical carriers with a 21% year-to-date decline; however, remains bright as a solid foundation continues to firm. Thus, this category had the most precipitous monthly jump: to robust growth in and about the state’s major population wit, over 34%! LPG arrivals also climbed 29% and remain centers driven by the hundreds of billions of dollars in inin positive territory for the year by nearly 4%. Tankers – Houston’s most prolific vessel type – continue to outpace last vestments and the thousands of high-paying jobs generated by such an influx of capital fuels the future. Eventually, even year’s performance by 6%, aided by a monthly increase of Benjamin turned his attention to those things that really 8%. mattered. Thus, as he drove off with Elaine, he left behind On the non-energy side of the Port of Houston vesselthat which was ephemeral for a future filled with plastics arrival numbers, one could not have asked for much more. and chemicals, all made possible by…shale gas. ò General cargo arrivals saw its third consecutive rise with 3% more vessel calls, yet it remains 6% off of 2013’s numbers. Bulk carrier arrivals hit triple-digits for the first time in 2014 with a 28% monthly bounce and an unprecedented 32% year-to-date jump. Both performances are tied to the large influx of project and break bulk cargos driven by the unrelenting building booms which are also being fed by the influx of containers transported by the additional 8 containers ships that arrived in the port.

July 2014 vs. July 2013

Undoubtedly, the rising tide of Texas economic growth which bore significant fruit for Houston’s port also resulted in much the same for the bulk of the Greater Houston Port Bureau | 5

© Chris Hilbert

coffee special report

How Do You Like Your Coffee?

Specialty coffee consumption is on the rise, but what makes it so special?

Matt Logan, GHPB

S

tarbucks started selling its famous Pumpkin Spice Latte on August 25th this year, a whole three months before Thanksgiving and earlier than ever before. This means the traditionally fall drink will actually be available in the summer. The drink even has its own Twitter handle, @TheRealPSL.

The early release of the Pumpkin Spice Latte mirrors the growing trend for specialty coffee in the United States. Coffee is now a $30 billion industry, and while specialty coffee makes up roughly 35% of coffee volume, it accounts for nearly 50% of retail sales.

History

Coffee originated in Ethiopia sometime between 500 and 900 AD. As the story goes, a goat herder noticed his goats jumping energetically and frolicking after eating some red berries off a tree. Intrigued, the goat herder went over and tried some of the berries himself.

He soon found himself noticeably less tired and with a little more pep in his step. After experimenting, the seeds from the berries were eventually crushed and made into a drink, a process which has endured 6 | September 2014

through the years. Mohammed once claimed he could “unhorse forty men” after drinking coffee.

Coffee consumption per capita is highest in the Netherlands, followed by Finland, Sweden, Denmark, Germany, Slovakia, Serbia, the Czech Republic, Poland, and Norway. However, the coffee plant is a tropical tree which only grows between 25 degrees north and 30 degrees south latitude, so the countries that drink the most coffee are not able to grow it and, therefore, must import it. The United States ranks 16th globally in coffee consumption per capita, but first in volume of coffee imported. Rounding out the top five coffee-importing countries are Germany, Italy, France, and Japan. The world’s largest coffee producers are Brazil, Vietnam, Colombia, Indonesia, and Ethiopia.

The Plant

Coffee grows on a tree, and there are two main types: Robusta and Arabica. The Robusta tree is much more hardy and grown at low altitudes, while Arabica only grows at high altitudes and is generally considered specialty coffee with a sweeter taste and higher price.

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Greater Houston Port Bureau | 7

coffee special report Robusta trees are much larger and range from 10 to 15 feet, while Arabica trees are generally in the 5 to 8 foot range. Both trees produce berries, known as cherries,

which contain two coffee seeds. These cherries change from green to red as they ripen, giving them their name. It generally takes a tree two to three years to start producing cherries, and the tree must be pruned annually in order to maximize its production the next year.

Processing

Picking the cherries actually requires a great deal of skill because the cherries turn different shades of red during the ripening process. The cherry can go from green to pink to bright red and then to a dark red over the course of a week. Bright red is the ideal shade for picking the coffee cherry, but different cherries in the same cluster will mature at different times. As a result, years of experience are required to correctly pick the coffee cherries. Because the cherries ripen at different times, a coffee farmer must pick the cherries off the coffee trees every day for at least a month, and sometimes for up to three months.

8 | September 2014

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The main challenge for the coffee farmer is how to best and most efficiently get the coffee seeds out of the cherry and prepared for roasting. Inside the cherry is not only the two coffee seeds, but a gel-like pulp and a thin layer of film called pergamino. Two methods are available for separating out the coffee seeds: wet processing

coffee special report and dry processing. Dry processing works just like it sounds. The cherries are laid out in the sun until they are completely dried out and shriveled. The time required for the cherry to dry varies widely, especially due to the fact that the coffee harvest often corresponds with the rainy season in the tropical climates in which they grow. Special attention must be paid to ensure the drying coffee cherries do not grow mold, and that curious and hungry animals or insects do not get into the drying lot of cherries. After they are dried, the cherry skin and dried pergamino shell are stripped away from the coffee seed. This can either be done by a machine or by hand-milling, where the dried excesses are manually pounded away from the hard coffee seed.

Dry processing is actually the cheapest and least labor intensive,method of preparing the coffee seeds.

Wet processing requires more labor and attention to detail, but is the preferred method for processing specialty coffee. Wet processing uses naturally occurring enzymes, like yeast, in the pulp of the coffee

Wet processing machine in Panama. Wet processing is the preferred method for processing specialty coffee.

Photo by Matt Logan.

Greater Houston Port Bureau | 9

coffee special report cherry to separate out the seed. In order for this to occur, the cherry skin must be peeled away from the coffee seeds and their pergamino covering. This is almost always done by a machine due to its labor-intensive nature. The machine then spits out the coffee seeds and their pergamino covering into buckets or a large tank. The coffee seeds are left there for a day or so and the yeast in the pulp surrounding the seeds reacts with other enzymes to strip all the pulp from the coffee seed and pergamino. After fermenting, the excess can simply be washed away with water. Once the coffee seeds are sufficiently sprayed and cleaned with water, they are set out to dry. Here the drying process occurs much faster since the excess pulp is stripped away, and the coffee seed is soon left with its thin and dried out pergamino shell. A milling machine is then used to strip away the pergamino shell. Along with being more labor intensive, wet processing is much more expensive than dry processing. However, the quality controls that come along with the wet processing method make it ideal for processing specialty coffee.

Most coffee seeds are sold in the “green” form before they are roasted, allowing retailers to roast their coffee themselves and market it however they want.

There are hundreds of different methods of roasting coffee, but all involve holding processed coffee seeds over a heat source until they are roasted to the desired level. As the coffee seeds are roasted over the heat, they begin to darken, and the longer the seeds are roasted the more caffeine is lost. For example, espresso is roasted until the seed is a caramel color, retaining a high level of caffeine, while a dark black coffee would be roasted to an almost black color and a lower caffeine level. As the coffee seeds are roasted, they make a popping sound up to two times, signifying the level to which they have been roasted.

processing, as well as imperfect growing conditions.

Recent variations of Arabica coffee like mocha and geisha have only amplified the specialty coffee market.

The 2007 movie “The Bucket List” made Kopi Luwak coffee famous, and it has since been reported to be sold for as high as $500 per pound. This coffee is famous because part of its processing is done by the palm civet, an Asian jungle cat. The palm civet eats coffee cherries and defecates out the processed coffee seeds, which are collected by farmers and sold. If this doesn’t sound appetizing to you, not to worry: Kopi Luwak is clearly labeled, and most specialty coffee retailers in the U.S. buy their coffee seeds from hand-picked farmers who grow and process their own coffee. The most expensive coffees are sold at open auction after a cupping competition. Just this year, one lot of coffee from the El Injerto farm in Guatemala sold for $321.51 per pound, and in 2013 a lot from the Hacienda La Esmeralda farm in Panama sold for a whopping $350.25 per pound.

Get to Know Good Coffee in Houston

The Port of Houston was approved as an entry location for green coffee in 2003. Today, Houston imports over 1 million bags of coffee every year. The Greater Houston Coffee Association is having its annual luncheon October 9, 2014, at 11:30 am at Brady’s Landing, 8505 Cypress St., Houston, TX 77012. Recent global and regional coffee trends will be discussed. It is also a great way to meet other local coffee connoisseurs. For information on the upcoming GHCA luncheon, visit www.greaterhoustoncoffeeassociation.org or call the Port Bureau office at 713-678-4300. ò

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The Specialty Coffee Market

Specialty coffee sales are growing at an astounding 20% per year, and 50% of Americans drink some form of specialty coffee on a daily basis, according to a 2014 study by E-Imports. The quality of specialty Arabica coffee is scored at events known as cuppings. Here, coffee connoisseurs blindly sip different cups of a particular lot of coffee. Sippers can pick up on any imperfections in the coffee, especially mold and impurities from 10 | September 2014

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coffee special report

Young Arabica Trees in Boquete, Panama. Photo by Matt Logan.

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vessel forecast

Forecast of Vessel Arrivals

Houston-Galveston Captain of the Port Zone Including the Ports of Houston, Texas City, Galveston, and Freeport Forecast Data from 2014-2020 with Historical Information for 2011-2013

At the November 2013 meeting of the Lone Star Harbor Safety Committee, the Captain of the Port CAPT Brian Penoyer requested guidance as to the level of future waterborne activity currently envisioned by the local maritime community. This insight would assist various federal agencies in determining the appropriate level of maritime-related services necessary to meet the future needs of the Port community.

Dave Cooley, GHPB

Executive Summary

T

his forecast of vessel arrivals is prepared in response to the Captain of the Port’s request and is composed of three scenarios: a Base Case, which is the continuation of what is known “today” with a 30% probability of occurrence (red line); a Crude Oil

Export Case, which depicts relaxation or repeal of the prohibition on exporting domestic crude oil with a 50% probability of occurrence (green line); and a Spurt of Economic Growth Case with a 20% probability of occurrence (purple line). The composite weighted average of the three scenarios (blue dashed line), is the consensus forecast. See Figure 1.

Fig. 1: Vessel Arrivals - COTP Zone Forecast Case Comparison

14K 13K 13K 12K

12K 11K 11K 10K

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Base Case Economic Spurt Case

Crude Oil Export Case Weighted Average Case Source: Greater Houston Port Bureau

12 | September 2014

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vessel forecast The forecast results in the number of ships projected to arrive at the four ports comprising the Captain of the Port (COTP) Zone ranging from almost 12,000 ships in the Crude Oil Export Case to just below 13,000 ships in both the Base Case and the Economic Spurt Case, compared to just over 11,000 ships arriving in 2013. This equates to an increase of between 2 and 5 ships a day in 2020. This is about a 10% increase compared to actual vessel arrivals of around 31 ships a day during 2013. See Table 1.

Vessel Optimization The primary objective of any ship owner or operator is to minimize vessel operating costs by optimizing as many of the various shipping variables as possible. Several of these key variables relevant to the ports of the COTP Zone include: the tonnage carried, the vessel size utilized, the water depth at the various docks and berths, and the distance traveled between the load port(s) and discharge port(s) along the trade route. Optimizing as many of these variables as possible continuously reduces the cost of ship operation.

Table 1: Vessel Arrival Forecast by Scenario Scenario Weighted Average Case Base Case Crude Oil Export Case Economic Spurt Case

Vessel Arrivals 2013

Vessel Arrivals 2020

Percent Change

Increase Ships A Day

11,336

12,452

9.9%

3

11,336

12,945

14.2%

5

11,336

11,994

5.8%

2

11,336

12,859

13.5%

4

Source: Greater Houston Port Bureau

Fig. 2: Waterborne Foreign Trade and Vessel Arrivals COTP Zone Percentage Change from 2011 - Weighted Average Case Actual and Forecast - Tonnage and Ship Arrivals

15% 10% 5% 0% -5% -10%

2011

2012

Operators can accomplish this by substituting different sizes of ships into the route pattern to capture the most efficient combination of these variables. This forecast integrates different sizes of ships just-in-time to accommodate changes to these variables occurring at these ports, such as deeper draft available from dredging the channels leading to both the Bayport and Barbours Cut Terminals and integrating LPG and chemical activities at various oil terminals along the 45’

2013

2014

2015

COTP Total Trade - Tonnage

2016

2017

2018

2019

2020

COTP Vessel Arrivals

Source: Greater Houston Port Bureau

leg of both the Texas City and Houston Ship Channels.

Both of these activities would allow larger size ships.

The result of this ship optimization activity is that, during the forecast period, vessel arrivals increase at a decreasing rate when compared to the tonnage projected to pass through these four ports. This net benefit is the efficiency achieved by handling a greater tonnage per ship. See Figure 2 which displays these results for the Weighted Average Case.

Greater Houston Port Bureau | 13

vessel forecast

National Context

and rising exports is increased domestic oil production as a result of the successful application of hydraulic fracturing to underground shale and tight sand formations. This technique has boosted domestic oil production by over 3 million barrels a day (MBD), from a level of 5 MBD during 2006 to today’s level of over 8 MBD. As a result, U.S. imports of low sulfur crude oil have essentially been eliminated, while strategic quantities of high sulfur crude oil continue to be imported, albeit at somewhat reduced levels.

The total tonnage of U.S. waterborne foreign trade, the sum of the quantity of goods both imported and exported, generally follows the economy. During the period 2003 through 2011, the tonnage related to the total waterborne foreign trade reached a peak of 1,380 million metric tons (MMT) in 2006, a growth of 170 MMT since 2003. Tonnage then temporized for the next two years before dropping by 175 MMT during 2009 as a result of the Great Recession. During the subsequent two years, 2010 and 2011, tonnage of total waterborne foreign trade recovered somewhat, but was shy of the previous level.

Beginning in 2012 and following into 2013, the total tonnage of waterborne foreign trade disconnected from the level of economic activity and declined each year, dropping to a level of 1,260 MMT in 2013, as declining imports overpowered rising exports, a trend that began in 2005. In that year, the tonnage deficit of waterborne foreign trade, the difference between the quantities of goods imported and exported, peaked at just over 640 MMT. This deficit has steadily declined each year, falling to a level of 91 MMT in 2013.

The driving force behind this trend of falling imports

The Captain of the Port Zone

Increased domestic oil production has reduced the country’s overall waterborne foreign crude oil imports by 40%, or 184 MMT, since 2006. This equates to an average of 535,000 barrels a day from 2006 through the end of 2013.

Regarding the waterborne foreign exports of oil, oil producer discounts necessary to encourage the movement of this newly produced shale oil have resulted in refiners running at a rate in excess of that necessary to supply the needs of domestic consumption.

As a result, U.S. exports of petroleum products have increased 3 million barrels daily from just over 1 MBD in 2006 to currently just under 4 MBD. While this change is most pronounced on the Gulf Coast, it is evident throughout the country.

COTP Zone is quite similar to the national experience.

Specifically, imports are steadily declining and exports are steadily rising with total trade tapering off over 2012 and 2013. See Figure 3.

The combined total tonnage of waterborne foreign trade of the COTP Zone generally averages about 200 MMT a year over the eleven-year period from 2003 through 2013. This is about 15% or Fig. 3: Waterborne Foreign Trade - Imports + Exports one-seventh of total U.S. waterborne COTP Zone - Millions Metric Tons foreign trade. Since there are about 350 250 ports located throughout the country’s 12,000 miles of coastline, all of which 200 are actively involved in the waterborne foreign trade of the U.S., these four ports 150 make a very significant contribution 100 to the flow of goods moving in 50 international commerce.

When comparing imports and exports of foreign waterborne tonnage separately, the graphical representation of the 14 | September 2014

0

2003

2004

2005

2006

Total Trade

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2007

2008

Total Imports

2009

2010

2011

2012

2013

Total Exports

Source: U.S. Census Bureau, Dept. of Commerce

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vessel forecast Unsurprisingly, each of the four COTP Zone ports bears a strong resemblance to the regional and national picture. Examining the composition of the waterborne foreign trade at these four ports reflects the change occurring throughout the oil sector, viz., foreign oil imports are falling and exports of refined products, LPG, and chemicals are rising.

Not only is Houston the dominant port in the COTP Zone, it ranks first in the country in foreign waterborne tonnage market share of 11%. Within the COTP Zone, Houston’s market share has increased from 65% in 2003 to 77% in 2013. The total tonnage of waterborne foreign trade at Houston has ranged from 112 MMT in 2003 to as high as 152 MMT in 2011.

During both 2012 and 2013, total waterborne foreign trade fell slightly, by about 5 MMT, to approximately 147 MMT each year, following the national trend of declining oil imports which currently overpower the increase in refined products, LPG, and chemical exports. See Figure 4.

The number of ships arriving at these four ports of the COTP Zone totaled about 9,000 ships in 2004.

Comparing this value to the approximate number of ships arriving in 2013 of 11,200 ships, vessel arrivals increased by about 2,000 ships over the last ten years.

coupled with the change in the scope of the oil trade is changing this paradigm. As a result, the ship count of vessel arrivals varied less than 300 ships from a low of about 11,100 ships to a high of about 11,400 ships during the four years since the end of the Great Recession, 2010 through 2013, while tonnage dropped by about 20 MMT.

Also during this four-year period, dramatic changes occurred in the U.S. oil market, where the country transitioned from being a significant importer of foreign crude oil utilizing relatively large ships to being a significant exporter of petroleum products utilizing relatively small ships. To date, this transition is generally balanced in terms of the number of ships.

Under presently-known conditions, the quantity of foreign crude oil imported into the COTP Zone is expected to stabilize at a level of roughly 1 MBD probably sometime this year, resulting in a reduction in foreign crude oil imports of about 800,000 to 900,000 barrels a day over the last 4-5 years. In addition, the quantity of refined products, and especially LPG and chemicals, are expected to continue to grow into the future, leading to an increase in the number of vessel arrivals going forward.

Forecast Methodology

Generally, the trend in vessel arrivals follows the trend in economic activity. However, the slow but steady recovery from the Great Recession of 2009

The forecast methodology utilized was based on the underlying demand for shipping. This was achieved by translating the number of actual ship arrivals to actual tonnage, forecasting Fig. 4: Waterborne Foreign Total Trade by Port tonnage, and then translating the COTP Zone - Millions Metric Tons forecasted tonnage values back to the number of ships.

180

160 140 120

100 80

60 40 20

0

2003

2004

2005

Houston

2006

2007

2008

Texas City

2009

2010

Galveston

2011

2012

2013

Freeport

Source: U.S. Census Bureau, Dept. of Commerce 16 | September 2014

www.txgulf.org

The data available included a historical record of the number of vessels (by vessel type) arriving at each of the four ports as well as historical data with regard to the tonnage by commodity type handled at each of the ports. Since a record of ship capacity (deadweight) was not readily available, ship capacity was determined a priori.

vessel forecast

The Forecast Base Case

The Base Case, occuring at 30% probability, is a continuation of presently known economic conditions.

Specifically, this case reflects a continuation throughout the forecast period (2014-2020) of the slow economic growth the country has been experiencing in recent years. Oil imports of low sulfur crude 9,000 oil are non-existent and imports of high sulfur 8,000 crude oil stabilize at a strategic optimum level 7,000 and will remain at this level for the duration.

6,000 Exports of petroleum products continue to 5,000 grow, predominantly LPG and chemicals, 4,000 while refined products reach the maximum 3,000 level of local refining capability early in the 2,000 forecast period and stabilize at that level. The coastwise and limited export of domestic crude 1,000 0 oil also reaches a maximum early in the period.

Liner and tramp shipping activity continue to be optimized by substituting a larger ship for a smaller ship as dictated by the increasing

tonnage demand and changing logistics infrastructure at the ports. A step-change in vessel arrival activity is noted mid-decade as the dredging of the Bayport and Barbours Cut entrance channels are deepened to 45’.

See Figure 5.

Fig. 5: Vessel Arrivals - Base Case

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Tankships

Bulk/Break-Bulk/Containers

Passenger Ships

Source: Greater Houston Port Bureau

Crude Oil Export Case

The Crude Oil Export Case, occuring at 50% probability, reflects all of the components of the Base Case except that the export of crude oil 8,000 is allowed. While exporting domestic crude is currently not legal in most cases, this is expected 7,000 6,000 to change either through repeal of existing 5,000 legislation or through a Presidential Finding 4,000 in the 2015-2016 time period. As a result, 3,000 the export flow changes almost immediately 2,000 from exporting refined products to exporting 1,000 domestic crude oil. Therefore, vessel arrivals 0 initially drop as the relatively large number of smaller vessels utilized to export refined products is replaced by fewer larger vessels utilized to export crude oil. Over time, as domestic crude oil production is forecast to continue to increase, the number of ships devoted to this export trade also increases and vessel arrivals rise slightly each year toward the end of the decade. See Figure 6.

Fig. 6: Vessel Arrivals - Crude Oil Export Case

2011

2012

2013

Total Tankships

2014

2015

2016

2017

Bulk/Break-Bulk/Containers

2018

2019

2020

Passenger Ships

Source: Greater Houston Port Bureau

Greater Houston Port Bureau | 17

vessel forecast Spurt of Economic Growth Case

The Spurt of Economic Growth Case, occuring at 20% probability, reflects all of the components of the Base Case except that the economy experiences a quick spurt of economic growth. In this scenario, GDP rises by an additional 2% a year 8,000 over a two-year period from mid-2015 through 7,000 mid-2017. During this time period, the effects 6,000 of the spurt of economic growth manifest in the 5,000 4,000 liner and tramp shipping activity: the tonnage handled by the ports increase and vessel arrivals 3,000 2,000 increase commensurately.

Fig. 7: Vessel Arrivals - Economic Spurt Case

1,000

After the “spurt,� economic growth continues 0 for the remainder of the forecast period at 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 rates utilized in the Base Case, but from a Total Tankships Bulk/Break-Bulk/Containers Passenger Ships higher previous year base level. Local energy Source: Greater Houston Port Bureau consumption also increases during the two-year growth spurt period and, as a result, exports of refined products decrease, in turn causing slightly fewer tanker arrivals.

See Figure 7.

18 | September 2014

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vessel forecast

Key Events Influencing Waterborne Trade Unless a scenario specifically states otherwise, basic economic activity continues at the slow but steady growth experienced since the Great Recession.

Infrastructure events – landside:

Terminals will continue to modify existing infrastructure (tanks, docks, piers, and commodity handling equipment) to accommodate changes in the movement of oil. This includes the necessary pipeline connections to integrate domestic crude oil into the national and international waterborne trade.

Major expansion projects include:

• The addition of significant ethane cracking capacity throughout the COTP Zone. The vast majority of the ethylene will be processed into polyethylene pellets and exported containerized.

The surplus ethane and the remaining ethylene feedstock will be exported aboard gas carriers.

• Expansion of gas processing capability has not only been completed but also additional projects are planned for the future resulting in a significant output of a full stream of gas liquids that have already changed the U.S. from an importer to an exporter.

• Conversion of a gasification facility located in Freeport into a liquefaction facility is expected to be completed toward the end of the decade with the output being exported.

Infrastructure events – waterborne:

The Port of Houston Authority is dredging both the Bayport and Barbours Cut access channels to 45 feet, adding 5 feet to the water depth.

Other than maintaining current channel depths, no other major dredging projects are envisioned.

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Greater Houston Port Bureau | 19

vessel forecast

Key Trends The forecast of vessel arrivals suggests continued steady growth during the forecast period (2014-2020), which results in projected additional vessel arrivals of between 3 and 5 ships a day by the end of the period.

Based on current vessel arrivals of about 31 ships a day, the cumulative growth during the forecast period is between 10% and 15%. The key aspect of the forecast, however, is the change in the mix of ships that are forecast to call at these ports.

The most pronounced change is the number and the size of the gas carriers plying the West Gulf waterways.

From handling gas liquids imports at a level of about 200 ships a year in the 2003 to 2007 time period, these ports are currently handling about the same number of ships but in the opposite direction as exports. The forecast suggests that export activity will continue to rise through 2017 and reach a level of over 700 gas carriers transiting primarily the Houston Ship Channel and secondly the Texas City Ship Channel, and then generally stabilize thereafter.

In terms of liquid bulk, tankships present the most volatile category. Resolution of the dilemma regarding rising domestic crude oil production would be a significant event. Currently, three methods address the increasing quantity of domestic crude oil, but they all have one thing in common: the capacity of U.S. refiners to absorb this excess is limited, and that limit is quickly being reached.

• Oil producers are offering refiners a discount to ensure offtake (purchase) of recovered oil.

The subsidy to oil refiners remains as long as the export ban continues. As a result, the excess crude oil is being converted into refined products as a rate exceeding domestic consumption requirements, and the excess is exported.

crude oil under specific conditions, one of which is an exchange for refined products currently occurring with Canada. Again, these refiners are limited as to the quantity of high gravity low sulfur crude oil that can be processed and that limit is quickly being reached.

As U.S. domestic oil production continues to rise, clarification of this issue is paramount. Accordingly, and until the crude oil export issue is resolved, the only viable alternative is to refine the oil and sell the resulting oil products. While this is currently occurring, it has limited upside potential as the quantity reaches maximum refining capacity.

The impact on vessel arrivals, however, is significant since the carrying capacity of a crude oil tanker at 55,000 SDWT that is able to navigate fully laden on 45’ draft is about 40-55% greater than that of the average products carrier at 35,000-40,000 SDWT. An unresolved swing of this nature can have a significant effect on the maritime infrastructure.

In the area of dry bulk, containers, and break bulk activities, the liner and tramp shipping activities see a slow but steady growth. The significant changes occur as the operators transition to larger ships as warranted by increasing cargo volumes.

As a result, the mix of ships is a very important aspect to the maritime community as harbor pilots, tugs, line handlers, and various federal authorities, such as the U.S. Coast Guard and Customs and Border Protection, adapt and respond to changes occurring in the shipping world.

• Domestic oil production is moving by tanker and barge in coastwise trade, particularly from the Gulf Coast to the East Coast. These refiners are limited as to the quantity of high gravity low sulfur crude oil that can be processed and that limit is quickly being reached.

• Presidential Findings allow export of domestic 20 | September 2014

www.txgulf.org

vessel forecast

Conclusion The four ports of the Houston-Galveston COTP Zone (Houston, Texas City, Galveston, and Freeport) play a crucial role in the international waterborne foreign trade of the U.S. During 2013, these ports handled over 15% of the total tonnage of the country’s waterborne foreign trade. Some of the key cargos handled by these ports on behalf of the country include: • 64% of the organic and inorganic chemicals

• 55% of various miscellaneous chemicals and plastics

Furthermore, the Port of Houston has been the number one port handling the most waterborne foreign trade tonnage since at least 2003.

The members of the local maritime community are not only responsive but also very pro-active in recognizing and seizing opportunities that both support activity at the ports and grow the local economy. Based on this entrepreneurial spirit, these ports are wellpositioned to capture the changes that are currently afoot as well as poised to seek out, understand, and develop opportunities in the future. ò

• 41% of the iron and steel

• 20% of the oil and refined products

• 10% of the cereal grains moving into or out of the United States.

For more information, contact Dave Cooley at dcooley@txgulf.org or (713) 670-1268.

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Greater Houston Port Bureau | 21

panama canal Centennial

The S.S. Ancon making the first official transit of the Panama Canal as part of the opening ceremony on August 15, 1914. Photo Title: “ANCON” in Gatun locks. Source: Flickr Commons project, 2011.

Panama Canal Celebrates Centennial Emily Mitchell, GHPB

O

ne hundred years ago, on August 15, 1914, the SS Ancon became the first ship to officially traverse the length of the Panama Canal, marking the culmination of a U.S.-led construction effort that involved $375 million and tens of thousands of workers over the course of a decade. The completion of the canal launched a new era in trans-ocean shipping and permanently changed sea travel across the globe. The excavation of approximately 170 million cubic yards of rock and dirt to create the 48-mile canal reduced shipping routes by over 8,000 miles and prevented countless shipwrecks that otherwise would have occurred around the dangerous Cape Horn. Since 1914, more than 1 22 | September 2014

million vessels have passed through the Panama Canal, amounting to over 8 billion tons of cargo.

By 2007, with about 37% of the world’s ships too large to fit through the canal’s system of locks, the Panama Canal Authority (ACP) embarked on an expansion project that is expected to open up the canal to ships carrying up to 13,000 containers. However, the project has been hit with construction delays and cost overruns, as well as other hurdles. For example, not only has the Suez Canal announced an upgrade project of its own, it has already seen its share of traffic between the U.S. east coast and Asia rise to 42% in October 2013 from less than 30% four years ago. Additionally, since the ACP announced its expansion project, ships

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panama canal Centennial

Right: “Roosevelt and the Canal.” Courtesy of The New York Times photo archive. Licensed under Public domain via Wikimedia Commons.

have started sailing that can carry 18,000 containers, too large even for an expanded Panama Canal. Other potential obstacles include more ship traffic moving through the Arctic as polar ice caps melt and the possibility of a new canal through Nicaragua, with a 50year concession awarded to Hong Kong-based HKND Group.

In 1914, the construction of the Panama Canal was a technological marvel that forever changed the landscape of trans-ocean shipping. One hundred years later, the canal is faced with unique 21st century challenges as the industry continues to develop and move forward at an incredibly fast pace. ò

Greater Houston Port Bureau | 23

kurdish oil dispute

United Kalavryta Legal Battle Fuels Up Kurdish Crude Oil Feud Emily Mitchell, GHPB

A

fter being anchored off of Galveston for a month, the United Kalavryta, a tanker carrying $100 million of Kurdish crude oil, remains in suspense as to whether it will finally be able to unload its cargo.

Despite U.S. District Judge Gray Miller ruling in favor of the Kurdistan Regional Government (KRG) on August 25, 2014, and throwing out a previous order to seize the approximately 1 million barrels of disputed crude oil. However, while receiving a favorable ruling in this instance, the legal saga of the United Kalavryta, and Kurdish oil more broadly, is far from over.

the United Kalavryta will be delivered to a company in the U.S. The two known U.S. buyers of Kurdish oil, refiners Axeon Specialty Products and LyondellBasell, have both said publicly that they will no longer buy Kurdish crude oil until Baghdad and the KRG come to an agreement over which party has the right to sell the oil. The Iraqi government has also threatened to sue any company who purchases what it considers to be stolen

The tanker at the center of the court battle in Texas is carrying $100 million worth of crude oil that was produced in the Kurdish region of Iraq in December 2013 and then sent to the Ceyhan terminal in Turkey via a recently completed pipeline. The Iraqi government in Baghdad claims any export and sale of Kurdish oil, except through the central government, is an act of “smuggling,” and its lawyers asked a Houston federal magistrate in late July to block delivery of the United Kalavryta’s cargo. The magistrate ordered U.S. marshals to seize the crude oil until the dispute was resolved, an order that could not be fulfilled while the tanker remained outside U.S. waters. It was then thrown out by the court ruling on August 25 in which Judge Miller agreed with the KRG’s arguments that possession of the crude oil took place on Iraqi soil when it was produced and loaded onto a pipeline to Turkey. He did, however, leave open the possibility for further litigation.

Even though the August 25 order gives the go-ahead for the tanker to offload its cargo, it is increasingly unlikely that the crude oil carried by 24 | September 2014

www.txgulf.org

kurdish oil dispute property. Furthermore, while the U.S. does not officially ban purchases of Kurdish crude oil, administration officials do warn potential buyers that “buying this oil could expose them to serious legal risks and they should consult legal counsel,” effectively discouraging these transactions.

The United Kalavryta is not the only tanker to find itself mixed up in the legal morass surrounding Kurdish crude oil—not only have nearly $140 million in sales been blocked off the U.S. coast since July, a third tanker carrying $100 million of Kurdish crude oil was stuck off the coast of Morocco for more than two months as of August. Despite these recent events, at least five shipments of Kurdish crude oil have been successfully delivered in the U.S. so far this year, according to Reuters.

The dispute off the coast of Galveston is playing out amidst a much larger story in the Middle East that has spanned centuries. The Kurdistan region of Iraq is a semiautonomous area where the KRG has a large degree of self-rule over three northern Iraqi provinces (Erbil, Dohuk, and Sulaymaniyah). Iraqi Kurdistan is itself part of a larger region straddling portions of Iran, Iraq, Syria, and Turkey, where the Kurdish people make up a majority of the population and many of Greater Houston Port Bureau | 25

kurdish oil dispute whom have long fought for their own independent state.

While Iraqi Kurdistan has had de facto selfgovernment since the U.S. imposed a no-fly zone in northern Iraq in 1991, the Iraqi constitution passed in 2005 solidified the region’s special status in a federal system. Ever since, the KRG in Erbil and the central government in Baghdad have fought over the allocation of oil production and revenue, a quarrel that has become more acute in recent months due to the turmoil caused by the civil war in neighboring Syria and ISIL (also referred to as ISIS or Islamic State) militants taking over large portions of Iraqi territory. According to the constitution, the central government retains total control over existing oil fields but, while Baghdad maintains that it has sole control over new reserves as well, the KRG in Erbil claims the right to enter into independent contracts for new fields within its territory.

The U.S. attempted to settle the disagreement between the two parties, but they could not agree on a new hydrocarbon law. As a result, the KRG passed its own law in 2007 and began entering into oil and gas contracts directly with foreign companies, defying Baghdad’s claims of control.

In the eyes of the Kurds, they have no choice but to try to export and sell their oil independent of the central Iraqi government. While Iraqi revenue-sharing agreements require that 17% of oil revenue be given to the KRG based on population, the KRG claims that Baghdad has never handed over its full share and has completely cut the northern region out of the national budget since January of this year. Without this revenue stream, Kurdish officials argue that they must sell their oil in order to provide government resources for its people, arm its Peshmerga forces to protect the area from militants, and deal with a growing refugee

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kurdish oil dispute population. Therefore, despite Baghdad’s objections and threats, Kurdish oil is being pumped onto tankers in Turkey and sent around the world to find potential buyers.

Around 40 companies from Canada, China, Norway, Russia, and Asia, as well as major U.S. firms such as Chevron and ExxonMobil, and smaller companies like Marathon, have entered into agreements directly with Erbil to tap into the estimated 45 billion barrels of oil and 99 trillion cubic feet of gas in Iraqi Kurdistan.

Additionally, the Kurds recently built a new pipeline from the Taq Taq oil field to the border with Turkey, connecting it to the Ceyhan terminal and bypassing the already existing pipeline controlled by the government in Baghdad.

The KRG has promised to share 83% of its oil revenues with the government in Baghdad, in line with the existing revenue-sharing agreements; however, it also

says that it will first deduct $50 billion in debts that Kurdish officials claim they are owed.

Turkey has emerged as the main outlet for Kurdish oil to markets elsewhere, and the KRG began pumping large volumes of oil via pipeline to Turkey in early 2014.

As of August 18, seven tankers have loaded 6.5 million barrels of Kurdish crude oil at the Ceyhan terminal, according to Turkish Energy Minister Taner Yildiz. At least some of those vessels have successfully discharged their cargos notwithstanding the legal clashes between Baghdad and the KRG, indicating that there are willing buyers to be found. Iraqi Kurdistan plans for shipments to Ceyhan to reach 1 million barrels per day by the end of next year, and is looking into increasing storage capacity both in Turkey and offshore while it continues to fight Baghdad over the right to export and sell its oil.

In the meantime, the possibility for further litigation remains as both parties to the dispute continue to raise the stakes. While ruling in favor of the KRG on

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kurdish oil dispute August 25 regarding the United Kalavryta, Judge Miller also said that Baghdad may be able to file a claim under the Foreign Sovereign Immunities Act. Although the KRG is determined to sell the tanker’s cargo, the Iraqi government is threatening to sue any company that attempts to purchase Kurdish crude oil, meaning that the KRG will probably have to sell its oil at a steep discount if it does find a buyer.

On September 5, 2014, attorneys for the Iraqi government filed a new motion in federal court requesting the seizure of the United Kalavryta’s cargo and naming the KRG as a defendant. At press time, the tanker remains off the coast of Galveston and the KRG has neither confirmed nor denied whether it owns the crude oil, leading Baghdad’s attorneys to believe that an unnamed buyer may soon take possession. Thus, the legal battle over the United Kalavryta rages on amidst a greater war for crude oil dollars, with no end in sight. ò

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Greater Houston Port Bureau | 29

Mexico Oil Reform

Mexico Oil Reform Passes Emily Mitchell, GHPB

F

ollowing a constitutional amendment in late 2013, Mexico’s Congress passed secondary legislation in early August 2014 opening the nation’s oil and gas industry to private investment for the first time since its nationalization in 1938. President Enrique Peña Nieto signed the bill into law on August 11, with the hope that the reforms will attract $50 billion in investment over the next five years.

Specifically, the legislation introduces three new types of contracts to encourage foreign investment—profit-sharing contracts, productionsharing contracts, and licenses.

Only a few days after this signing, Peña Nieto’s government announced which oil and gas reserves will be awarded to Mexico’s state oil company, Petróleos Mexicanos (Pemex), and which will be opened up for bidding by foreign companies. Pemex will receive 83% of known and probable reserves, but only 21% of the nation’s future potential oil and gas reserves, leaving private firms open to bid on the remaining 79%. Pemex will still be allowed to compete with foreign companies in the bidding process for the remaining potential reserves, with bidding expected to commence by the end of this Mexico Shale Gas Basins. Photo courtesy of Advanced year and the first private contracts expected to be announced in early 2015, according to Forbes. Resources International, Inc. Despite its monopoly over oil and gas production, Pemex has proven itself incapable of fully exploiting Mexico’s oil and gas reserves, with production falling to 2.5 million barrels per day from 3.6 million in 2004. Not only does Mexico’s side of the Gulf of Mexico remain mostly unexplored with no oil production despite estimated reserves of 27 billion barrels, but Pemex has also failed to significantly open up shalegas production. Peña Nieto and his government hope the investment and expertise from private companies 30 | September 2014

will reverse the situation and increase production to 3 million barrels per day by 2018 and potentially 3.5 million by 2025. In a report on August 25, the Energy Information Administration revised its expectations for long-term growth, projecting that Mexico’s oil production could rise to 3.7 million barrels per day by 2040, about 75% higher than last year’s outlook.

The new landscape south of the border could translate to new jobs for the Houston area. According to

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Mexico Oil Reform some analysts, a great deal of the technical experience and expertise will come from Houston, including engineering, seismic analysis, construction, and safety services. There will also be increased prospects for business development, consulting, and legal services, especially for those firms that already operate in both the U.S. and Mexico. Additionally, due to infrastructure and security concerns within Mexico, offshore drilling is expected to increase before onshore drilling follows, and many of those experienced offshore workers hail from the U.S. Gulf Coast region.

Bottom line, this new era in Mexican oil and gas production will open up many opportunities for American companies of all sizes—not just the major players, but small and midsize firms, as well. As the energy capital of the world, Houston is ideally situated to take advantage. ò Ed. Note: Read about the first stage of Mexico’s energy reform in the June 2014 edition of the Port Bureau News.

32 | September 2014

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Greater Houston Port Bureau | 33

maritime dinner

Honoring Ned Holmes at the 85th Annual Maritime Dinner N

ed Holmes, Chairman Emeritus of the Port Commission, business leader, and philanthropist, was honored for his decades of service and leadership at the Greater Houston Port Bureau’s 85th Annual Maritime Dinner on August 16, 2014.

Clyde Fitzgerald echoed Kornegay’s thoughts as he remembered his own days of difficult negotiations with Holmes as plans for Bayport were hammered out. “Bayport was a tough issue but you stayed strong, and with your leadership, we got it done . . . He invited us to par“He was the quarterback of the Port,” said Pat Stud- ticipate with Bayport. From there, we became partners. dert, president of Buffalo Marine, as he presented Ned We started working together, and we developed within Holmes with a commemorative football. The City of our union the partnership for progress.”

Houston proclaimed it “Ned Holmes Day,” with a procJudge Ed Emmett recalled Holmes’ leadership in lamation read by East End Chamber of Commerce terms of the accomplishments it enabled others to purpresident, Frances Casteneda Dyess. A second procla- sue. “He makes really good decisions, but he makes the mation from the Port of Houston Authority Port Com- rest of us make really good decisions. I did not know you mission was presented by Chairman Janiece Longoria, until I became a county judge, but there is no one that I and a Resolution from the Harris County Commission- turn to with more confidence and more often than Ned ers Court was presented by Harris County Judge Ed Holmes.”

Emmett.

Holmes reciprocated the remarks of Kornegay, Holmes’ accomplishments were distinguished by longtime colleagues Tom Kornegay, former Executive Director, Port of Houston Authority; Clyde Fitzgerald, President, South Atlantic & Gulf Coast I.L.A. and Commissioner, Port of Houston Authority; and Judge Ed Emmett.

Fitzgerald, and Emmett, and added a few recollections of his own about the difficult days of funding improvements for Barbours Cut and bringing Bayport into fruition.

April Bailey, Senior Vice President, Amegy Bank, and Port Bureau Executive Committee Member and “Ned is by any definition a great leader. He abso- Dinner Committee Chairwoman, concluded the evelutely knew what the target objective was and how to ning’s honors by presenting Holmes with a replica get there. He worked with you to get it done,” remarked model of the USS Constitution. Holmes’ portrait will join Tom Kornegay, as he recalled his 25-year working rela- the Greater Houston Port Bureau’s pictorial display of tionship with Holmes. “Everyone wanted to help him Maritime Persons of the Year at their office located in accomplish. That, my friends, is a real leader.” the Port of Houston Authority Executive Building. ò

34 | September 2014

www.txgulf.org

Photography by Joe West, Gulf Winds Int’l.

maritime dinner

Top row: Judge Emmett and Ned Holmes; a signed Texans football at the silent auction; CAPT Diehl congratulates Holmes. Second row: attendees crowd around the silent auction; Commissioner Fitzgerald honors Holmes; Todd Stewart, Gulf Winds Int’l, and his wife Nikki. Third row: Chairman Longoria presents the PHA proclamation; a gorgeous cocktail purse and earring set at the silent auction; a glance at the popular Wine Pull before it sold out. Fourth row: April Bailey presents Holmes with his award; Kornegay gives his remarks; cheers to the honoree!

Greater Houston Port Bureau | 35

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Greater Houston Coffee Association Annual Luncheon October 9, 2014 Register online at: greaterhoustoncoffeeassociation.org