Despite COVID-19 and weather-related interruptions, there’s an “arms race” going on among petrochemical ports along the U.S. Gulf Coast.
(Article originally published in Mar/Apr 2021 edition.)
Old Man Winter added insult to injury when a blast of icy weather hit Texas and the Gulf Coast in February resulting in the shutdown, either controlled or forced, of several refineries and petrochemical plants that operate near many Gulf ports. That unexpected interruption, combined with the continuing pandemic, made for challenging times.
Although there has been recovery from the cold, the petrochemical industry is still dealing with the impacts of COVID-19.
“Like any other industry in the U.S. and probably around the globe, we were heavily impacted by COVID-19, and I think the big story is trying to return to normal,” says Rob Benedict, Vice President Petrochemicals and Midstream, at American Fuel & Petrochemical Manufacturers. “Our membership represents both refineries and petrochemical manufacturers, and both of these industries had a shock to their systems. But we see positive signs that we’re making a return to normalcy.”
On the petrochemical side, Benedict says certain sectors of the industry fared better than others: “Materials that would go into frontline products like personal protective equipment, masks, gowns, hand sanitizers and food packaging, they actually did fairly well during the pandemic. Materials going into things like construction or autos, those took a little bit of a hit on the demand side, which obviously impacted our members.”
Ethylene, a key ingredient in plastics and other applications, did very well as the U.S. has an abundance of feedstocks (oil and natural gas) and lots of new refining capacity. “So we had lower-cost feedstocks and also saw an increase in some terminal capacity, particularly at the Port of Houston,” Benedict adds, where Enterprise Products Partners and Navigator Holdings began exporting ethylene from their new terminal at Morgan’s Point in the Houston Ship Channel.
Overall, Benedict suggests 2020 was a flat year for petrochemicals with some gains and some losses but anticipates a better trade balance in 2021 and certainly by 2022.
Although there’s been some petrochemical facility development in the Northeast with the Shell Pennsylvania Petrochemicals Complex, an ethylene cracker, under construction near Pittsburgh, it’s nowhere near the level of growth in the Gulf Coast region, which provides easy access to the rest of the world for all the petrochemical infrastructure there.
As for the port scenario in the Gulf, Benedict says it’s “almost an arms race” with the various ports wanting to be wider, deeper and bigger and straddling both the petrochemical and crude oil markets. He pointed to expansions at the Port of Corpus Christi with its offshore loading terminals that can handle deeper-draft ships and to expansions along Louisiana’s Gulf coast.
The geographic region of the Gulf of Mexico, known as the Coastal Bend, is seeing huge developments from large petrochemical manufacturers such as ExxonMobil/SABIC and CC Polymers, says Eddie Martinez, Trade Development Manager at the Port of Corpus Christi. CC Polymers is backed by three of the world’s leading PET (polyethylene terephthalate, a commercial polyester polymer) and PTA (purified terephthalic acid, used in polyester fibers) companies – Alpek SAB De CV, Indorama Ventures Holding LP and Far Eastern Investment (Holding) Ltd.
CC Polymers is currently constructing its largest terminal along the Northside docks of the Inner Harbor at the Port of Corpus Christi and plans to produce PTA/PET to load directly onto rail cars. In coordination with the Corpus Christi Port Authority, CC Polymers is developing rail yards for managing its finished products.
“The Port of Corpus Christi is served by three major Class 1 railroads – UP (Union Pacific), BNSF (Burlington Northern Santa Fe) and KCS (Kansas City Southern) – with capabilities of switching rail cars in and out of our Nueces Rail Yard to support the over rail logistics,” says Martinez. “Further, the joint venture between ExxonMobil and SABIC (Saudi Basic Industries Corporation), called Gulf Coast Growth Ventures (GCGV), is building a huge chemical complex in San Patricio County, Texas, which plans to load finished products directly onto rail cars and also to export MEG (mono-ethylene glycol, used in polyester fibers) on vessels from the port’s La Quinta Terminal. Anticipated startup is 2022. Both projects will provide new commodities for the Port of Corpus Christi, further rendering the Coastal Bend a logistics hub for highway, rail and deep sea transportation.”
With nearly $55 billion in private industrial investments in the Coastal Bend region over the past five years, additional government investments in infrastructure include the Corpus Christi Ship Channel Improvement Project, which – when completed in late 2023 – will be the deepest and widest ship channel along the entire U.S. Gulf. The channel project received an additional $100 million in federal appropriations last December.
As a side note, the Port of Corpus Christi, the U.S.’s largest crude oil export gateway, and the Port of Rotterdam, Europe’s leading industrial deep sea port, recently entered into a Memorandum of Understanding that will allow the two global giants to collaboratively improve their maritime operations. Among the shared objectives are co-developing trade and commercial opportunities, fostering an exchange of information and advancing the development and deployment of innovative technologies specifically related to navigational safety and environmental protection.
The Port of South Louisiana, which stretches 54 miles along the Mississippi River from Baton Rouge to New Orleans, took a hit in its petrochemical tonnage in 2020 with a decrease of 13 percent from 2019. Nonetheless, petrochemicals accounted for nearly 20 percent of the port’s overall tonnage.
Public Information Officer Alexandra Hernandez says the port actually suffered a decrease in overall cargo tonnage due to high water levels on the Mississippi River that slowed vessel movements early in 2020. However, she notes that “The port hasn’t been significantly affected by COVID-19 primarily due to the nature of the commodities that move through its jurisdiction like agricultural products, crude oil and ores. Our employees and partners on the river have shown resiliency as they continued to feed, heat and clothe the world. We’re thankful to have such a strong workforce.”
Like Corpus Christi, the port will benefit from a major dredging project underway that will deepen the Mississippi River from its mouth in the south north to Baton Rouge. The U.S. Army Corps of Engineers began the $250 million project last September with dredging beginning at the mouth of the river. Phase 1 is over 50 percent complete, and the next three phases will continue to deepen upriver until reaching the northern limit at Baton Rouge.
“Dredging of the Mississippi from its mouth to Baton Rouge would allow passage of cargo vessels with a draft of up to 50 feet as opposed to the current maximum of 45 feet,” says Hernandez. “The difference in depth sounds minimal, but every additional foot of draft equals at least $1 million in cargo volume.
In addition, construction of the port’s new administration building at the Globalplex Intermodal Terminal is currently underway and slated for completion by the first quarter of 2022. Hernandez says infrastructure upgrades at Globalplex will improve efficiency in cargo handling and thereby increase throughput.
Overall, the economic enormity of the U.S. petrochemicals industry is quite staggering. A report by Lisa Bridges, Director of Market Research for Colliers, says Texas is the largest chemical-producing state and Houston is a global leader in petrochemicals production with the Houston Ship Channel recognized as the largest petrochemicals complex in the U.S. Annual revenue from the Texas petrochemicals industry is over $170 billion annually.
The 50-plus mile Houston Ship Channel is one of the most vital waterways in the country, and it’s also scheduled for a major widening and deepening project. The Port of Houston is working with the Corps of Engineers as well as private industry on a plan to widen the channel by 170 feet along its Galveston Bay reach – from 530 feet to 700 feet. Upstream segments will be deepened to 45 feet. Work is expected to get under way this year.
The Port of Houston Authority manages the eight public terminals and the lands around them. The approximately 200 other terminals at the port are privately owned and operated. The private sector has ongoing investments of up to $50 billion to expand the petrochemical capabilities in the channel area. Arms race indeed!
Tom Peters is the magazine’s ports columnist.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.