Despite COVID and now the war in Ukraine, America’s petchem ports continue to expand and prosper.
(Article originally published in Mar/Apr 2022 edition.)
As if the global pandemic and climate change weren’t enough, now an unwanted war between Russia and Ukraine has captured serious attention, leaving international leaders to wonder how it will all play out. And while the world’s powers scramble to deal with those issues, the global economy is being impacted as well, leaving industries in some cases to chart new courses.
One such industry is oil, the basic feedstock for a wide variety of petrochemicals. In the Gulf of Mexico region, the production of petrochemicals provides considerable business for numerous ports, so issues like the pandemic and the war are always on the radar and could be factors going forward.
A report from S&P Global Platts said, “Global petrochemical players will continue to face challenges in the first half of 2022 after the emergence of the new omicron variant of coronavirus again hit the global economy. The petrochemical industry will need to adjust to a so-called ‘new normal’ business environment of patchy demand recovery mixed with continued COVID-19 headwinds.”
Filling the Void
Sean Strawbridge, CEO at the Port of Corpus Christi, which hosts seven refineries that produce petrochemicals, said he expects some of the Russian crude that moved over the Corpus Christi port and is now banned by the U.S. government will be supplanted by other producers.
“U.S. producers will try to produce more to fill the void,” he noted. “Our concern is when you take another large supplier off the market (the U.S. also has sanctions against Iran and Venezuela), then there is not enough crude to meet demand. But I think what that might do is expedite the R&D, the commercialization and increased production of some of the alternative clean energy solutions like hydrogen.”
Recent developments in the Corpus Christi area are seen as pluses for the port’s petrochemical business. ExxonMobil and Saudi Basic Industries Corporation (SABIC) recently commissioned a new $10 billion plant, the world’s largest ethane steam cracker, which has the capacity to produce 1.8 million metric tons of ethylene and has a monoethylene unit and two polyethylene units.
“That is probably the biggest needle mover for us in the petchem space,” commented Strawbridge.
Recently the Corpus Christi Port Authority signed an agreement with Talos Energy Inc. (NYSE:TALO) and Howard Energy Partners (HEP) that could be a boost for port development including petrochemical production.
The agreement calls for the pursuit of commercial carbon (CO2) capture and sequestration (storage) – or CCS) – on port-owned lands. The project will be known as the Coastal Bend Carbon Management Partnership. With a diverse industrial footprint at the port, transportation infrastructure and expertise from HEP and subsurface and sequestration capabilities from Talos, the parties are positioned to offer a local, fully integrated CCS project to customers in the region.
The captured CO2 can be used in many products including synthetic fuels and the production of chemicals and materials used in polymers and plastics.
“Our vision as a port authority was to enable a carbon capturing sequestration process that would allow for existing emitters and potentially new industrial operations and continue to grow our economy and bring those large industrial firms to the Coastal Bend region,” noted Strawbridge. “Since most of these companies have made large decarbonization commitments for the next several decades, if there is already what I call a ‘plug in place’ solution then it’s another tool in our economic development toolbox.”
Growing Resin Demand
At the Port of Savannah, one of the top five waterborne resin export ports in the U.S., Cliff Pyron, Chief Commercial Officer at the Georgia Ports Authority (GPA), says European demand for resins is expected to increase over the coming months. Resins are a key component of plastics and other composites.
“Even before the war in Ukraine started, producers were advising that European demand for U.S. resin was strengthening,” said Pyron. “We’re also starting to see business pick up for producers of PVC (polyvinyl chloride), another commodity for which there is likely to be strong demand in Europe. Resins exported by way of Savannah are predominately going to Europe, the Mediterranean and West Africa although some customers are considering shipments to South and Central America.”
Pyron added, “GPA has seen a sharp increase in resin volumes with one major supplier quadrupling their monthly rail volume through Savannah starting in March. Savannah is well-positioned to take on the additional trade. Challenges at other ports such as vessel delays, ships at anchor, limited receiving windows and port terminal congestion are pushing more of the resin flow in Savannah’s direction.”
Savannah is optimistic it will benefit from a variety of new petrochemical infrastructure in the works. “Shell has a new plant in Pennsylvania coming online now and several more Gulf-based plants/crackers are coming online over the next year,” explained Pyron. “Additionally, there’s a new plant/cracker coming online in Canada. PTT Global Chemical just announced they’re moving forward with their new plant/cracker in Ohio, expected to be complete in two to three years. All of these producers are going to need export gateways, and Savannah is a prime target to move some of their cargo.”
As for the impact of COVID, GPA has instituted effective supply chain solutions such as expanding container space and rail infrastructure on terminal and establishing rail-served ‘pop-up’ container yards that provide the capacity to ensure the free flow of cargo.
The Port of Houston, made up of a 52-mile channel and home to the largest chemical complex in the U.S., has resins and plastics as its top export commodities. In 2021, according to port statistics, resins and plastics totaled just over 39 percent of the port’s total container exports while chemicals and minerals comprised nearly 20 percent.
Port Houston Executive Director Roger Guenther said in a release that, “Following a busy holiday season, Port Houston expected large numbers of containers to continue into 2022 as importers pushed orders at origin prior to the Lunar New Year when factories in Asia traditionally close down for the holiday period and Texas exports of petrochemical and other products ramped up production to meet demand overseas. We have therefore accelerated expansion projects at our container terminals to meet the fast growing demand.”
One of the port’s infrastructure projects and undoubtedly the most significant is the widening and deepening of the Houston Ship Channel at a cost of over $1 billion. The project involves widening the channel to 700 feet from 530 feet for its first 26 miles. It also involves deepening the channel to 46.5 feet from its current 45 feet, allowing for larger ships that carry liquid bulk and refined products.
Guenther said the Houston Ship Channel expansion recently received $142,515,000 from the U.S. Army Corps of Engineers as part of the Infrastructure Investments and Jobs Act: “That funding will be utilized to complete the expansion into energy terminals and the two container terminals to accommodate 15,000-TEU neo-Panamax vessels.”
Asked if Port Houston has any concerns about potential impact from the war in Ukraine, Guenther said, “The Houston Ship Channel is home to more than 200 private and eight public terminals and facilities. Port Houston can only address business and operations related to the eight public terminals and has no jurisdiction or authority over the 200 private facilities. Port Houston's eight public facilities, which include two container terminals, historically have had very little to no trade or business with Russia and would abide by any federal or local directives given.”
An increase in petrochemical production could be on the agenda at the nearby Port of Beaumont.
The port’s private partner, Jefferson Energy Companies, a subsidiary of Fortress Transportation and Infrastructure Investors LLC (NYSE: FTAI), recently entered into a contract to expand terminal services to ExxonMobil. As part of the agreement, Jefferson is in the process of constructing 10 tanks to support refinery expansion efforts, which equates to 1.9 million barrels of new storage capacity at the Jefferson Energy Terminal, and five connecting pipelines between the ExxonMobil Beaumont Refinery and Jefferson Energy Terminal.
In addition to this partnership, work on the Jefferson Energy Terminal Master Plan Buildout recently commenced, which will increase total storage to approximately 6.2 million barrels. “The expansion of liquid bulk facilities will increase capacity considerably, which opens up new business opportunities for our private partner,” said Sade Chick, the port’s Director of Corporate Affairs.
“Overall, liquid bulk volumes are up by 160 percent year to date,” she added, “with minimal impacts from COVID and no operational delays to date. We’re seeing minor issues on the supply chain side with longer than normal lead times, but we’ve been able to mitigate the effects on operations by taking a proactive approach to procurement.”
Halifax-based Tom Peters is the magazine’s ports columnist.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.