Supersize Me: Moda Midstream has VLCC-sized plans for exports [Houston Chronicle]

Feb. 01—INGLESIDE — Bigger pipelines. Bigger storage tanks. Bigger ships. Bigger exports of crude oil.

Houston marine terminal operator Moda Midstream is transforming a former naval base and crude oil storage terminal in this small coastal city near Corpus Christi into a hub for supertankers. The move comes as pipelines from the Permian Basin and Eagle Ford Shale are nearing completion to move record amounts of crude oil and natural gas liquids to destinations along the Gulf Coast.

“We’re trying to start and write a new chapter of the book at Ingleside,” Moda Midstream CEO Bo McCall said at facility’s recent grand opening. “Once a base for projecting naval power, now it is a key energy hub in the Gulf Coast.”

Located near the confluence of the Corpus Christi and La Quinta ship channels, the 900-acre Ingleside facility was acquired by Moda from Houston oil company Occidental Petroleum for an undisclosed price in August. Moda has spent the last five months upgrading the docks, adding storage tanks and installing equipment to accommodate Very Large Crude Carriers, or VLCC tankers.

At A Glance

Ranked among the largest tankers in the world, VLCCs can hold up to 2 million barrels of crude oil, making them attractive to exporters because moving so much crude in one shipment lowers transportation costs. The Houston company plans to invest between $300 million and $500 million to develop its Ingleside export complex.

A Belgian-flagged tanker named the Aral arrived at Moda’s facility on Jan. 24, the fourth supertanker to receive a shipment of crude oil at the company’s docks. The Aral left Moda’s facility two days later and is expected to arrive at a refinery in The Netherlands in mid-February.

Moda’s export terminal is expected to receive three more VLCCs over the next month. Because a fully loaded VLCC can require up to 66 feet of water, the 45-foot depth of the Corpus Christi Ship Channel means Moda loads more than half the tanker at Ingleside docks and then uses a second tanker to load the rest in the deeper waters of the Gulf of Mexico.

Permian Basin to Gulf Coast

Moda aims to capitalize on the record production of crude oil and natural gas liquids in the Permian Basin of West Texas and the Eagle Ford Shale of South Texas. It already receives crude from the Cactus Pipeline, a project developed by Houston pipeline operator Plans All American Pipeline to move oil from the Permian Basin and Eagle Ford to the Port of Corpus Christi.

In addition to the Cactus Pipeline, several other projects to carry crude from West Texas to the Corpus Christi area are in the works. Plains All American is building the Cactus II Pipeline, which will have the capacity to move 670,000 barrels of crude oil a day. That pipeline is scheduled to be completed in the second quarter of 2020

The pipeline subsidiary of Houston refiner Phillips 66 is leading the development of the Gray Oak Pipeline, which will move up to 900,000 barrels of crude oil per day by the end of this year. The San Antonio pipeline company EPIC Midstream Holdings LP is developing the EPIC Crude Oil Pipeline, which will move 425,000 barrels of crude oil per day starting in January 2020.

In all, McCall expects oil producers to be moving some 3.5 million barrels of crude oil a day to the Coastal Bend by 2020. With about 1 million of those barrels heading to refineries and chemical plants, the remaining 2.5 million barrels is available to be shipped to foreign markets, positioning the Ingleside terminal to handle a large share of that crude, McCall said.

Moda is addding 19 storage tanks that, once complete, will give the company 12 million barrels of crude oil storage in Ingleside. An auxiliary site in the nearby town of Taft is being upgraded to store up to 1.5 million barrels by the end of the year.

Supersized Plans

Founded by McCall and three former executives with German crude oil shipping company Oiltanking in May 2015, Moda was initially financed with $750 million from the San Antonio venture capital firm based EnCap Flatrock Midstream. Moda secured more financing and a loan to enable the company to fund its ambitious plans.

Before it sold the facility to Moda, Occidental Petroleum tested a VLCC-sized tanker at the Ingleside terminal in May 2017. After the sale, Occidental Petroleum became one of the facility’s largest customers, selling its Permian Basin crude oil to international customers.

Pipelines from the Permian Basin and Eagle Ford have lower rates and a shorter distance to travel than those going to Cushing, Okla. or Houston, which Moda Midstream Chief Financial Officer Jon Ackerman said lowers the cost for Moda and its international customers.

“A barrel that leaves (West Texas) will travel on that pipeline directly to our facility,” Ackerman said. “It never has to hit another storage tank. It never has to go through a distribution system. They can get straight to the water.”

But Moda isn’t alone. Many many other companies operating along the Corpus Christi Ship Channel have upgraded their docks and terminals to accommodate supertanker traffic, Port of Corpus Christi CEO Sean Strawbridge said.

San Antonio pipeline and terminal operator NuStar Energy and refining companies such as Valero, Flint Hills Resources, and Citgo have all used their Corpus Christi docks for Suezmax tankers, which hold up to 1 million barrels of crude. Louisiana terminal operator Pin Oak Terminals is modifying one of its docks along the Corpus Christi Ship Channel to accommodate Suezmax and VLCC tankers, Strawbridge said.

Like VLCCs, Suezmax tankers can only be partially loaded in the Port of Corpus Christi and then topped off in the Gulf of Mexico. But once the work is done to deepen the channel to 54 feet and widen it to 520 feet, Strawbridge said Suezmax tankers will be able to fully load at the port.

“Nobody else in the gulf is going to have that capability, not Houston, not Beaumont and not Port Arthur,” Strawbridge said.

The channel improvement project is expected to be completed by 2022. Even then, the channel won’t be deep enough to fully load VLCCs.

Offshore Competition

But other companies aim to solve the channel depth problem by developing export terminals in the Gulf of Mexico.

Swiss trading firm Trafigura is seeking permission from federal regulators to build an offshore export terminal near Corpus Christi. Dallas-area pipeline and storage terminal company JupiterMLP announced plans to build an offshore export terminal near the Port of Brownsville, but has yet to file a permit application.

Houston exporter Enterprise Products Partners filed a permit application to build an offshore export terminal south of Brazoria County while a joint venture led by Canadian pipeline operator Enbridge filed a permit application to build another one south of Freeport.

Federal reviews for the offshore terminal projects are expected to take at least a year. During that time, Ackerman said, Moda will continue to build its customer base and export from Ingleside.

“What we are providing to customers are solutions right now,” Ackerman said.. “We’re loading VLCCs in a very efficient manner and getting them to global markets.”

sergio.chapa@chron.com

@SergioChapa on Twitter

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