7 minute read
Building for the future
Max Midstream CEO Todd Edwards tells Tank Storage Magazine about plans to turn the Port of Calhoun into a rival for Houston and Corpus Christi, and the sustainable focus
THE TEXAN ports of Corpus Christi and Houston are hugely important for the export of many US products, but they are increasingly congested. Both are in built-up areas, so expanding to deal with the shipping traffic is difficult at best and impossible in most cases. In 2015, the US Army Corps of Engineers and the Calhoun Port Authority realised that the port at Point Comfort needed to be expanded. In 2020, the plans were authorised by Congress and signed into law. By deepening the Matagorda Ship Channel at Point Comfort, more products can be imported and exported, including concrete, fertiliser, chemicals, bauxite (the world’s main source of aluminium) and oil and gas, among other products. This will in turn lead to economic growth throughout the region and more jobs for local Texans. The only problem was how to pay for such an expansion. That’s where Max Midstream entered the scene. The Houston-based energy company agreed to pay for the construction of the widening and deepening of the channel and thus speed up the process. Why would a US midstream company pay for a general port expansion? Tank Storage Magazine spoke to Max Midstream president Todd Edwards to find out about the company’s plans for oil at the port, which form part of the wider export plans. ‘The Port of Calhoun is located halfway between Houston and Corpus Christi,’ says Edwards. ‘So, when the Army Corps approached the Calhoun Port Authority with a plan to expand this port so that all products can be shipped from there, we offered to pay for it.’ The Port of Calhoun has been in operation for around 50 years, but after a major operator pulled out, it has only been running at 30% capacity, so there is no congestion. As well as close proximity to various oil pipelines, the Port of Calhoun has other advantages over its more established neighbours. It is located in a rural area, giving lots of space for expansion, and is closer to deepwater. Edwards linked up with a London-based investor, Azad Cola, who agreed with Edwards’ analysis of the situation and came onboard. Max Midstream and Cola purchased the Seahawk pipeline and terminal in the port from Northstar Midstream, owned by Oaktree Capital, and from there secured an option on all of the land around the port. In December 2020 the US Congress passed the Army Corps’ plan to widen and deepen the port. Within 18 months, Edwards says, the port capacity will be the same as Corpus Christi and Houston and will allow Max Midstream to export additional product, as it will be able to serve Aframax and Suezmax ships directly. The wider, deeper channels will of course also benefit the bulk carriers expected to be attracted to the port, which will be able to bring in much bigger freighters. Max Midstream has recently engaged Citibank as its advisor. ‘Citibank is probably the largest advisor in the world when it comes to this kind of work. Ports don’t just come along and to be able to take an existing port and transform it to an export terminal is exciting to everybody,’ says Edwards.
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EXISTING FACILITIES AND EXPANSION
Currently, the Seahawk terminal has 600,000 bbl of storage and four 12” loading arms. Max Midstream is currently building an additional dock specifically for barges, and plans to expand the storage capacity by 2 million bbl. In addition to the Seahawk terminal, Max Midstream owns a 1.5 million bbl terminal in Edna, Texas, which connects directly to the Permian Basin and Eagle Ford oil fields, and is also connected directly to Port of Calhoun by 12” pipeline. This terminal will also be expanded by around 2 million bbl and Edwards says the designs are complete for the new tanks and additional lines to the port. ‘We have a partnership with Cola and we have a design that we’re going to implement that will allow us to secure
10 unit trains a week at the port. A unit train is 100 cars and each car holds 750,000 bbl. What we have then will be the opportunity to bring in Canadian oil down to Texas and export it from there,’ says Edwards. Max Midstream, in collaboration with Cola, is developing a 100-year plan for the Port of Calhoun, which as previously mentioned, doesn’t just include crude oil, but a variety of other products, to create a global industrial port. The rail opportunities will be key to this. ‘We’re the only port that will have rail capacity on the US Gulf Coast. We’re looking at running four loops around our facility that would give us 35-40 unit trains a week, so we could move products like grains and cement as well as oil throughout various parts of the US. That is a real opportunity that nobody else has,’ says Edwards. Any energy product that will be exported will be offset by an aggressive environmental initiative the port is undertaking. ‘Calhoun will be a carbon-neutral port,’ Edwards says.
NOT JUST TERMINALLING
Max Midstream has expanded beyond terminal services, and is the only Texasbased company with offices in Europe, having opened offices in Rotterdam in the Netherlands and Geneva in Switzerland to trade Texas crude and condensate in Europe. Edwards describes the subsidiary as ‘first traders’, who work directly with buyers. As a separate company, the European arm can source crude through Max Midstream directly or through Houston or Corpus Christi, for example. ‘What that allows us to do is that it allows us to work with thousands of producers and we can put that oil directly in our pipeline and in our storage tanks and we can offer it for sale through traders, or we can work with third parties to put them in touch with the producers and let their buyers buy directly from the producers. We don’t compete with traders, but we’re here in Texas to work hand in hand with the traders and the majors to ensure that we are purely a third-party company to them and they can utilise our assets. We will never trade against the competition,’ says Edwards.
FUTURE-PROOF
ESG is on every company’s agenda at the moment, and Max Midstream is no exception. With Calhoun being a newly developed, and developing, port, it’s easy to consider all aspects of ESG from the start, rather than having to adapt. Edwards says that Max Midstream is audited on all three aspects to ensure the company is going in the right direction. The company wants to be the first ESGcompliant terminal on the US Gulf Coast. ‘There are major world banks heavily involved with us who are working with us on ESG, and they’re anxious to participate with us because we’re a new port and we can step right in with that. It’s a little expensive right now, there’s no question. As with anything else, when you talk about green, whether it’s building or anything associated with that, the costs are higher, but we want to be a part of it, and we want to be able to say that we are an ESG port,’ he says. Max Midstream is already able to offer carbon neutral oil barrels into the European market, through offsetting schemes such as tree-planting, and is investigating the handling of products for the energy transition, such as ammonia and hydrogen. The company will use renewable electricity from wind and solar to help power its facilities at the Port of Calhoun. And it’s not just the ‘E’ of ESG that Max Midstream is taking seriously. It is carefully examining its governance practices to ensure that it is accountable and will follow the best corporate procedures, and has committed to employ local people and give back to the community it is based in. ‘Does it happen overnight? It doesn’t. No matter what the world says, you can’t just turn a switch on and say this is ESG, but you can build for that future and you can plan for it,’ says Edwards. ‘When the world says it’s time to go that way, we’re there. We can start now. The market is going to dictate the direction and we’re going to be prepared for ESG when it becomes mandated, whether that’s in two years, or ten years, or 20 years.’
For more information:
www.maxmidstream.com