Oil and gas industry players staggered by recent harsh realities should also keep in mind other, less bitter constants, speakers on a webinar urged on May 13. Those include:

  • The pandemic will eventually ease;
  • Demand will return; and
  • Infrastructure will be needed to handle it.

“Infrastructure takes a long time to develop, oftentimes over multiple economic cycles,” Sean Strawbridge, CEO of the Port of Corpus Christi, told HartEnergy.com after the event. “We continue to make investment in those strategic areas like the improvement of the Corpus Christi Ship Channel that we know will continue to have value for the oil and gas space.”

At the moment, however, demand destruction and low prices have taken such a toll on the industry’s collective psyche that one panelist felt obliged to reassure attendees that “It’s not the end.”

The port, in particular, is in a relatively strong position, despite a sharp cut in revenue as a result of the falloff in crude oil exports, Strawbridge said.

“We’ve got nearly $350 million of cash right now,” he said. The Port Commission also had approved a $250 million capital investment program for 2020, about one-third of which was deferred and other $40 million canceled in response to tenants pulling back on growth plans. Strawbridge said he keeps in close contact with customers. If they move forward with their expansions, so does the port in terms of building docks and providing topside handling equipment. If they hold off on spending, so does the port.

“We’re just going to mirror the cadence of our customers,” he said. Fortunately, most of our customers are fairly large companies with excellent balance sheets.”

Allies in Washington

Where the port will not defer is its Corpus Christi Ship Channel Improvement Project, which Strawbridge terms a “generational project.” The port’s one-third portion of the $500 million project is fully funded and the federal government has already appropriated almost $300 million to dredge the channel, deepening it to 54 feet and widening it to 530 feet. The port enjoys bipartisan backing from the Texas congressional delegation, including Republican Sens. John Cornyn and Ted Cruz, and Rep. Michael Cloud; and Democratic Reps. Lizzie Fletcher and Henry Cuellar.

“Whatever the comeback story looks like, energy is going to be a huge part of it,” said Cloud, whose district encompasses the port.

Fletcher, who represents a Houston district with numerous struggling oilfield service companies, is the lead sponsor in the U.S. House of a measure to provide funds to purchase crude oil for the Strategic Petroleum Reserve. Funding did not make it into the first $2.2 trillion Coronavirus Aid, Relief and Economic Security Act. Fletcher, a member of the Transportation and Infrastructure Committee, noted that included in the act was a provision exempting the U.S. Army Corps of Engineers from spending caps on monies provided by the Harbor Maintenance Trust Fund.

“That’s critically important to have an immediate impact to the Port of Corpus Christi, for the Port of Houston and for all the ports along the Gulf Coast that are so critical to our energy infrastructure,” she said.

‘Exceptional and Far-Reaching’

The shale boom in the U.S. coincided with a demand plateau for crude oil, which led to a need to expand access to the water. Essentially, the boom moved down the value chain from upstream to midstream, with institutions like the Port of Corpus Christi developing into the largest crude exporting terminal in the U.S. That has meant more capacity, more investment and more jobs.

“Since we took over in Ingleside [Texas, near the Port of Corpus Christi], we have continued to add full-time employees,” Bo McCall, president, CEO and founder of Moda Midstream LLC, said during the webinar. “For the past three years, we’ve had as many as 750 contractors on our site.”

The breadth of expansion on the Gulf Coast made the sudden pumping of brakes all the more startling. “Absolutely we’re not going to be able to stop the momentum that we’ve been witnessing over the past decade,” said Khalid Muslih, executive vice president of Buckeye Partners LP’s general partner and president of global marine terminals. He added that he was struck by the tremendous investment dedicated to afford the industry the ability to extract natural resources, meet domestic demand and keep advancing.

“To be able to put that to global markets is exceptional and far-reaching,” he said.

Forward Looking

Sometimes politics interferes with access to global markets, such as the current trade tensions between the U.S. and China. Christopher Smith, senior vice president for policy, government and public affairs at Cheniere Energy Inc., stressed the importance of the long game for the infrastructure company, which is building Train 3 at its Corpus Christi Liquefaction LLC facility.

“Our business cycle extends beyond the political cycle,” Smith said. “Even in the most difficult moments, we continue to talk to suppliers and we continue to talk to buyers in China.”

And while Smith is bullish on long-term prospects, he admits to not being a fan of tariffs. What bolsters his long-term confidence is the product his company can offer on global markets.

“Not only are you buying the reliability of suppliers, you’re buying the reliability of the Cheniere infrastructure in Corpus Christi and Sabine Pass,” he said. “You’re buying the overall regulatory environment in the United States. The product you’re receiving is going to be managed in such a way that we’re taking all the steps to manage the upstream methane emissions, all the other things that determine that the product overall is going to be attractive. We’re a long-term player.”

So is the Port of Corpus Christi. Strawbridge plans to grow beyond crude and LNG. Liquids could be next.

“Interestingly, for a crude export terminal, we continue to see a significant amount of interest in natural gas liquids, fractionating and exporting of NGLs,” he said. “We fully believe that that will be our next leg up. NGLs are certainly a place where I think people are looking for an alternative to Mont Belvieu [Texas] and Houston. Corpus represents a great alternative for that, so we’ve been talking with a lot of the NGL producers and that’s an area where we’re going to lean in on.”

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