Corpus Christi port at heart of booming U.S. oil exports

Late last month, an oil tanker measuring three football fields long and six stories high moved slowly through the port of Corpus Christi, Texas, to test the waters of America’s booming crudeexport industry.

After navigating Aransas Pass around 7 a.m. on May 26, the vessel, Euronav NV’s Anne, didn’t pick up any oil, but its arrival in the humid air of South Texas marked the first time a tanker of that size had called on a U.S. terminal in the Gulf of Mexico.

The Anne docked at Occidental Petroleum Corp.’s terminal to determine if some

of the world’s biggest carriers could start ferrying oil from Texas to foreign buyers. The shipping upgrade is necessary after a surge in production from U.S. shale fields like the Permian Basin brought more oil than Gulf Coast refiners could handle. Corpus Christi is vying to become America’s main export hub.

“Corpus Christi was the No. 1 port for U.S. crude exports last year, and this trend is continuing,” said John LaRue, the port’s executive director.

Shipping oil overseas is something new in the U.S., a country that spent most of the past century refining almost every drop of domestic output. For decades, tankers laden with crude from around the world arrived at Gulf Coast refineries to be made into fuel for American cars and trucks. Dependence on imports grew as domestic output fell.

But in recent years, low-cost drilling methods unlocked vast U.S. deposits. Domestic production has almost doubled and may reach 10 million barrels a day next year for the first time since 1970.

While the U.S. still consumes more than it produces,

supplies from the new Permian and Eagle Ford fields are primarily light, low-sulfur oil. Many of the refineries along the Gulf Coast are designed to process heavy, high-sulfur crude, so it’s more economical to ship the new Texas oil abroad. As a result, America now exports more than OPEC members Qatar, Libya, Ecuador or Gabon.

U.S. shipments surpassed 1 million barrels a day in February, a little more than a year after Congress lifted a longtime ban on most foreign sales.

To keep the exports flowing, domestic crude will need to remain a cheaper alternative to supplies from traditional producers in the North Sea, West Africa and elsewhere. Prices for West Texas Intermediate, the U.S. benchmark pumped from the Permian Basin, have dropped 19 percent this year. On average, it’s been 87 cents a barrel less this year than the standard grade used in Asia, compared with a $2.43 premium in 2016.

Corpus Christi is betting the shipping boom will last. The port, where three major pipelines unload crude from southern Texas and from fields hundreds of miles away in the far western reaches of the state, has received preliminary approval from Congress for a

$350 million dredging project that would deepen its channel to 52 feet, from 45 feet. That would allow more millionbarrel supertankers to load.

“This area has advantages as an export hub since it’s less congested” than the shipping channel in Houston, the other major Gulf port about 200 miles away, Andrew Shepard, a refining and oil-product markets analyst at Wood Mackenzie Ltd., said by telephone from Houston.

Last quarter, ships carrying about 22 million barrels destined for foreign countries left Corpus Christi, government data show. That was almost 30 percent of the country’s total exports.

Daily export capacity could grow to 2.8 million barrels from 960,000 now, according to port officials. Houston, the second-biggest crude exporting hub, can ship 1.7 million barrels a day, said New Yorkbased Timm Schneider, senior managing director for financial consultant Evercore ISI.

Right now, most of the ships handling crude in the port are aframax carriers that hold about 600,000 barrels of crude. Once the dredging project is complete, Corpus Christi would be able to handle Suezmax tankers that load about 1 million barrels.