U.S. oil export boom sparks a battle to
build Texas ports
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[January 10, 2019]
By Collin Eaton
CORPUS CHRISTI, TEXAS (Reuters) - Booming
U.S. oil exports have set off a scramble to build Gulf Coast ports to
handle more than 3 million barrels per day in new supplies expected over
the next five years.
Of seven proposed oil-export projects, nowhere is the opportunity
greater or the competition more fierce than in Corpus Christi, Texas,
where three firms are vying to open the state's first deepwater port.
Commodities trader Trafigura [TRAFGF.UL] has taken an early lead with a
planned offshore facility that has an easier path to regulatory approval
and faces fewer objections from environmentalists.
Its chief competitor - a partnership of investor Carlyle Group and the
Port of Corpus Christi to build an onshore port - has responded by
petitioning regulators to kill Trafigura's project. Port lobbyists have
cited past criminal allegations involving the firm in other countries
and potentially "catastrophic" environmental impacts.
Rising demand for new ports follows a 2015 decision by the U.S. Congress
to lift a 40-year ban on crude exports after advances in drilling
techniques sparked a rapid rise in domestic shale production -
especially in Texas. The United States had been the world's top oil
buyer for decades, and its port infrastructure was built to import
rather than export.
![](http://archives.lincolndailynews.com/2019/Jan/10/images/ads/current/humanesociety_sda022411.png)
Now, surging exports threaten to overwhelm existing ports as U.S.
production is projected to hit 12 million barrels per day (bpd) this
year, up from 9.35 million in 2017.(U.S. crude producers send more shale
oil to the world : https://tmsnrt.rs/2H48vJp )
"We've got a wave of oil headed toward the coast," said Jeremiah
Ashcroft III, chief executive of Lone Star Ports LLC, the Carlyle-backed
company formed to develop its Corpus Christi project.
Only one U.S. facility, the Louisiana Offshore Oil Port, can fully load
supertankers capable of carrying 2 million barrels. The Corpus Christi
port - the closest to the most prolific shale fields in Texas - exports
less than 1 million bpd, and its harbor is too shallow to fully load
supertankers.
The market ultimately may support more than one new deepwater port, but
the first firm to build near Corpus Christi will have the best shot at
cutting long-term deals with producers expected to ship an estimated 2.1
million bpd to the region through new pipelines set to open this year.
"Right now, there's only enough room for one project," Ashcroft said.
Carlyle plans a $1 billion port to handle 1.4 million bpd. Trafigura,
which has not disclosed its planned investment in the port, would handle
much less, at 500,000 bpd. But Trafigura's operation would siphon off
revenue from the Port of Corpus Christi and Carlyle's project because
Trafigura would serve shippers offshore, before they reach the harbor.
Carlyle declined to make an executive available for an interview and
referred questions to Lone Star. Trafigura said in a statement that its
port would leave room for other projects because it would handle only a
portion of the expected new oil flows.
A third competitor, pipeline operator Magellan Midstream Partners LP,
plans an export terminal on the Corpus Christi harbor, near Carlyle's
proposed site.
But Magellan faces a roadblock because port officials last year agreed
to work exclusively with Carlyle. Magellan said in a statement that it
has not decided whether to build the project.
Companies including Kinder Morgan Inc, JupiterMLP and Tallgrass Energy
have also proposed offshore ports along the Gulf Coast.
BRAZIL CHARGES
Carlyle said last October that it could open its facility by late 2020.
But that assumes its plan for dredging to accommodate supertankers will
not require a full environmental review, which is sought by opponents
and could take two years.
![](http://archives.lincolndailynews.com/2019/Jan/10/images/ads/current/ldn_medical_directory_small2.png)
As Carlyle and the Port have tried to navigate those obstacles, port
lobbyists have petitioned regulators to halt Trafigura's project. In an
August letter, the port's law firm called on the U.S. Coast Guard and
the Maritime Administration to reject Trafigura's application, citing a
"criminal history."
The letter from Baker Wotring LLP pointed to the trader's 2006 guilty
plea for selling a U.S. company oil from Iraq that Trafigura falsely
claimed had been authorized under a United Nations humanitarian aid
program. U.S. companies at the time were barred by government sanctions
from buying Iraqi oil except through the program.
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![](../images/011019PICS/news_e9.jpg)
The Harbor Island in Corpus Christi Bay where the Carlyle Group, one
of the world's top private equity firms, and its partner, the Port
of Corpus Christi, plan to build an onshore U.S. crude export
terminal capable of fully loading supertankers known as Very Large
Crude Carriers (VLCCs), is seen in Corpus Christi Bay, Texas, U.S.
December 19, 2018. Picture taken December 19, 2018. REUTERS/Collin
Eaton
![](../images/ads/current/fitzpatrick_lda_SPONSOR_2017.png)
After the regulators declined the port's request, its law firm in
December raised bribery allegations brought earlier that month by
Brazilian prosecutors against two former Trafigura executives. The
firm asked regulators to halt Trafigura's work until the allegations
were "fully investigated."
Trafigura said in a statement that its management had no knowledge
of any improper payments made to employees of Brazil's state-run oil
firm Petrobras. Trafigura did not comment on the port law firm
citing its guilty plea involving Iraq oil sales.
Last month, five Corpus Christi area lawmakers asked Texas Governor
Greg Abbott to veto Trafigura's application on environmental
grounds, citing a risk of "catastrophic crude oil spills" and
"excessive air emissions."
Federal rules require state governors to sign off on offshore ports.
Abbott has made no decision, a spokesman said.
Lone Star's Ashcroft said onshore terminals are safer than offshore
projects because oil spills are more easily cleaned up in harbors
than in open water. Trafigura said it chose to go offshore to ensure
supertankers can safely and efficiently load cargoes and that its
application will be reviewed by more than 30 government agencies.
BATTLE FATIGUE
Carlyle is essential to building the Port of Corpus Christi's crude
export business. Port officials started pursuing federal approval to
dredge its harbor 28 years ago, but Congress only recently approved
$59 million, a fraction of what's needed.
"We don't have 28 years; we have two," said Sean Strawbridge, chief
executive of the Port of Corpus Christi Authority, referring to its
timeline for readying the port for new oil flows.
Port officials last year sought to kickstart the dredging by issuing
$217 million in bonds. That money will allow it to start dredging to
a 54-foot draft - not deep enough for supertankers.
If Trafigura's port wins approval, it could take business from the
Port of Corpus Christi. Port revenues could fall by about 12
percent, estimated investment researcher Morningstar Inc., a loss
that could hurt its efforts to finance dredging not covered by the
government or Carlyle.
In October, Carlyle agreed to pay an undisclosed sum to cover the
dredging needed to get achieve a 75-foot draft in the outer harbor
to accommodate supertankers.
![](http://archives.lincolndailynews.com/2019/Jan/10/images/ads/current/christian_village_sda_031616.png)
'ENVIRONMENTAL DISASTER'
Environmentalists favor offshore ports over what they consider the
harmful impact of dredging harbors.
The newly formed Port Aransas Conservancy in south Texas has argued
Carlyle's plan would endanger sea turtle nesting areas, dump silt
onto nearby islands, and threaten shellfish that reach estuaries
through the ship channel.
Trafigura has countered environmental concerns about its offshore
operation by proposing to tunnel under sand dunes and wetlands to
install a pipeline instead of digging a trench through
environmentally sensitive areas.
"Sea turtles are always an issue with dredging" because it brings in
salt water, said Jayson Hudson, a regulatory supervisor at the U.S.
Army Corp of Engineers, which oversees permitting for Carlyle's
project. He called Trafigura's horizontal drilling plan a "good
option for avoiding permanent impacts."
Dredging the harbor, by contrast, would have wide-ranging impacts,
said John Donovan, president of the Port Aransas Conservancy.
"We're very much against what we consider to be an environmental
disaster that the Port's plans for Harbor Island would entail," he
said.
(Reporting by Collin Eaton in Corpus Christi, Texas; editing by Gary
McWilliams and Brian Thevenot)
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