The project involves deepening the shipping channel from 45 to 54 feet, as well as widening it from 500 feet to 530 feet in the lower bay reach of the channel and from 400 feet to 530 feet plus “barge shelves” (areas alongside the channel that are not dredged to the full 54 feet, but deep enough for barges to travel) in the upper bay.
The total cost of the project is estimated to be $327 million, with $225 million to come from the federal government and $102 million from the PCCA.
“Our customers tell us that larger, deeper draft cargo ships could save them 50 to 75 cents per barrel, a major global competitive advantage," PCCA CEO Sean Strawbridge told the U.S. House of Representatives Subcommittee on the Interior, Energy and Environment of the Committee on Oversight and Government Reform earlier this month. “At over 600 million barrels a year of energy exports in Corpus Christi alone, these transportation cost savings are in excess of $300 million per year for our port customers.”
Strawbridge likes to joke that he is a “recovering container professional,” having spent 20 years working for organizations such as the Port of Long Beach, terminal operator Ports America, and container carrier Sea-Land.
He joined PCCA as deputy executive director in 2015 and succeeded John LaRue as CEO of the South Texas port on Jan. 1. LaRue led the port for 23 years and will serve as a senior advisor through June 2019.
It has been “pretty neat to spread my wings and be able to experience the energy renaissance and really be at the apex of that with Corpus Christi,” said Strawbridge.
Just last week, Strawbridge was in Washington, speaking with members of the administration, Office of Management and Budget, Army Corps of Engineers and Congress in an attempt to obtain additional funding for the project.
Although Trump’s fiscal 2019 budget included $13.25 million for the deepening of the Corpus Christi ship channel - $13 million for construction and $250,000 for investigation - it was far less than the $60 million Corpus Christi had been seeking.
“We’re pretty excited about us being included in the program’s fiscal year 2019,” Strawbridge said.
The port was part of a fairly exclusive group that was granted funds in the 2019 budget for channel deepening, along with Savannah and Boston.
However, it was hoping to get additional funds this year from the omnibus spending bill because the 2019 budget allocates much less than the $60 million it was seeking.
Strawbridge said $32 million of the port authority’s $102 million share has been accelerated so the Corps can issue the first contract for the project.
According to the American Association of Port Authorities, the bill includes $6.83 billion for the U.S. Army Corps of Engineers, an increase of $789 million from fiscal 2017.
The Corps’ navigation program is funded at $3 billion, with nearly $2.1 billion for construction.
Corpus Christi hopes to snag some of the increased funds. Strawbridge said that with unconstrained funding, the deepening and widening of the channel could be completed in four years.
America's Energy Port. Strawbridge also said the Port of Corpus Christi is “the largest export port of U.S. produced energy, not by a little, but by a lot.” Last year, the port exported about 19 million tons of crude oil and 30 million tons of petroleum.
Back in December 2015, the United States lifted the 40-year ban on most crude oil exports as shale oil production has soared. The ban had been introduced back in 1975 after Arab states embargoed oil shipments in 1973 in retaliation for U.S. support of Israel after the Yom Kippur War.
Strawbridge said that energy companies are investing tens of billions of dollars on new projects, and that the port has a high degree of certainty of the volume of oil and natural gas coming to the port in the future because of pipelines that are being built.
Just as West Coast ports, including his former employer, the Port of Long Beach, are natural gateways for containerized cargo because of their proximity to Asia, he said Corpus Christi is a natural gateway for exports of the shale gas and petroleum produced in two of the country’s largest shale “plays”- Eagle Ford in South Texas and the Permian Basin in West Texas.
“Over $5 billion in new pipelines from the Permian Basin to Corpus Christi alone are underway,” he said earlier this month during his testimony to the Subcommittee on the Interior, Energy and Environment.
On Wednesday, Paris-based International Energy Association (IEA) noted the U.S. "is on pace to becoming the world’s top oil producer by 2023," with crude oil produced from the Permian basin and Eagle Ford expected to double.
IEA added, "One port stands out, Corpus Christi, which is being targeted for upgrades thanks to its deeper channel and potential to accommodate larger tankers. It also has less refining capacity and doesn’t face as much competition from other oil products as Houston does, meaning it could operate as a dedicated crude-export terminal."
Strawbridge said, “Unlike containers, which are fungible, the products that come to Corpus Christi are in pipelines, which are not as fungible, but much more difficult to reroute than trucks or trains with containers."
He said that in February, the U.S. Energy Information Administration projected that the U.S. “will become a net energy exporter in 2022,” noting that has not happened since 1952.
“So this is something epic, this is something most of us have never seen in our lifetime,” Strawbridge explained. “That’s why it’s so critical. Congress authorized this project in 2007 and actually mandated the feasibility study to commence in 1990. It’s been a long time coming.
“It’s time for us to get by policy and process and get to really executing on this project,” he added, arguing how not completing the project as quickly as possible would increase its cost, and hurt the American taxpayer.
When the channel deepening was first authorized in 2007, the cost was estimated at $188 million compared with today’s estimate of $327 million.
At a similar inflation rate, in another decade, the cost of the project could climb to $525 million, he said. The project could help the country “reach energy resiliency and create more infrastructure, and balance the trade deficit. Because this is all about exports,” Strawbridge said.
He explained how if oil sells for $60 a barrel, exports could create about $39 billion of incremental “goods value exports,” or about 10 percent of the current trade deficit with China. “That’s a pretty good return on investment,” he said.
Continued Expansion. Occidental Petroleum operates a 1,000-acre crude oil and export terminal facility called the Oxy Ingleside Energy Center on a former Navy base that began exporting crude oil in 2016. Last year, it received the largest very large crude carrier (VLCC) to ever call a Gulf of Mexico port.
However, the port is not deep enough for VLCCs to be fully laden, so ships are topped-off in the Gulf of Mexico.
In addition to crude oil, businesses in Corpus Christi expect to be shipping large amounts of liquefied natural gas (LNG).
In February, Cheniere Energy announced it had entered into two agreements to sell LNG to China National Petroleum Corp. beginning later this year. The company's first liquefaction plant, or “train,” in Corpus Christi will come on stream later this year and the second train will start operating next year.
It has also given Bechtel a “limited notice to proceed” on an engineering, procurement and construction contract for a third train.
Strawbridge said that even while Corpus Christi does not handle containers, it is “hitting on a few different cylinders” in addition to crude oil and natural gas.
“We are seeing a resurgence in American manufacturing and Corpus Christi is a microcosm of that because of our abundance of cheap steady supply of energy,” he said.
For example, Exxon is in a joint venture with Saudi Arabia Basic Industries Corp. to build a $12 billion ethylene cracker.
He also pointed to a $740 million plant built by Austria’s Voestalpine that will use Texas natural gas to make hot briquetted iron, or “sponge iron,” from imported Swedish and Brazilian iron ore, which is exported and used to make steel in Europe and Mexico.
Corpus Christi, he said, is an omniport used for the export of grains, import of wind turbines and breakbulk, and for military cargo.
With a deeper channel, a ready supply of labor and the fact that Corpus Christi is still in “attainment status” for air pollutants, the region is in a better position to attract business than some other ports.
Even businesses whose ships don’t need deep water may benefit from the project since it will also widen the shipping channel. With 8,000 ship and barge moves a year, the wider channel will allow for safe and uninterrupted two-way vessel traffic.