Panama Canal expansion accelerates Texan port export investments
The major expansion of the Panama Canal by 2016 will open up new opportunities for US producers to move plastics to Asia faster and more cheaply as the Port of Houston and other Gulf Coast ports ramp up exports of petrochemicals due to a massive wave of new ethylene and derivatives capacity to start up in 2018-2019.
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The Panama Canal expansion would allow for larger containerships to transit to the Port of Houston, which will lower the cost per container at PHA’s container terminal compared to major ports on the West Coast, the Port of Houston Authority (PHA) told Petrochemical Update.
The Port of Houston Authority expects that the bigger cost differential could allow some of the larger companies to divert some of their Asian cargo all-water to the Port of Houston, which is closer to growing consumer markets in Dallas, San Antonio, Houston and Austin. The expansion of the Panama Canal will also allow containerships to move faster between the Gulf Coast and the Asian markets.
"Some of the producers - Exxon Mobil, Chevron Phillips - do have contingency plans to move product via rail to Los Angeles/Long Beach or Southeast ports such as Charleston and Savannah. The impact of the expanded [Panama] Canal will be more about increased vessel traffic flow through the locks, thus creating a better transit time for all water versus intermodal rail via Los Angeles/Long Beach," said Stan Swigart, director, Marketing and External Communications at the Port of Houston Authority's Commerical Division.
Diverting more Asian incoming traffic from US West Coast ports to East and Gulf Coast ports would also mean that more containers would likely arrive from Asia to the Port of Houston, alleviating a consistent shortage of such containers and helping export larger volumes of resin.
POH's conservative estimates project at least 250,000 TEUs per year of additional plastics resin to begin moving via the Port of Houston terminals starting in 2017. By comparison, Port Authority facilities handled 1.95 million container TEUs in 2014, of which 244,812 TEUs were plastics and resin exports.
The Port of Houston (POH) would be one of the main beneficiaries of increased traffic as it already handles about two-thirds of the containers that move through the Gulf Coast.
The port dominates plastic resin exports, accounting for one-third of its loaded export containers, according to the PHA, which owns and operates eight public cargo-handling facilities and a cruise terminal (out of more than 150 public and private terminals at the Port of Houston), including POH’s only container terminal. The rest are private bulk and break-bulk facilities.
Expansions and upgrades
The PHA is in the midst of a $1 billion expansion and upgrade of its Bayport and Barbours Cut terminals to accommodate the larger vessels and increased cargo following the Canal expansion and the projected increase in resin exports.
The infrastructure upgrades, which are slated for completion by year’s end, will allow
POHA’s two terminals to handle double the yearly throughput of products and help relieve potential congestion of vessels, POHA said.
Some analysts have pointed out that that it could be a major challenge for the Port of Houston to meet the growing demand for services amid uncertainty over the exact pace of the growth of the petrochemical capacity in the coming years.
As part of the PHA terminal upgrades, dredging is under way alongside PHA’s Bayport and Barbours Cut terminals, to increase the operating depth of those channels by 5 feet and widen them to accommodate larger vessels.
Dredging at Barbours Cut is complete, and the channel at Bayport is expected to be completed later this year.
While the ports at Los Angeles and Long Beach will continue to receive the mega post-Panamax ships of up to 13,000 -14,000 TEUs and the bulk of Asian traffic, the Port of Houston expects ships of up to 10,000 TEUs.
PHA is also adding land infrastructure at Barbours Cut worth $700 million over the next decade, including eight SPP wharf cranes, three wharf rehabilitations, eight RTGs and electrical transmission/distribution and yard reconstruction.
The Bayport container terminal expansion, which is 50% complete, includes six SPP wharf cranes; wharves 2&6; CY 6, 7 and empty yard; and 15 RTGs.
Private projects
Moreover, since much of the tank capacity at the Port of Houston is privately owned or rented, private investments in break-bulk and manufacturing capacity along the Houston Ship Channel are also providing an indication of future export volumes out of Houston.
In 2014, for example, pipeline company Enterprise Product Partners signed a 30-year lease with the PHA to build the world's largest refrigerated ethane export facility at Barbours Cut in La Porte.
In April this year, Enterprise announced the completion of an expansion project at its liquefied petroleum gas (LPG) export terminal at the Houston Ship Channel, which will increase the facility’s capacity for loading fully refrigerated, low-ethane propane to 9 million barrels per month and will allow Enterprise to accommodate three more ships per month.
Enterprise is also building a new refrigeration train, slated for completion in Q4 2015, which will increase loading rates by another 11,000 BHP. Following the final expansion phase, Enterprise will be able to load up to 16 million barrels per month of LPG, which equates to 29 vessels.
Other recent announcements along the Houston Ship Channel include PHA lease agreements with Houston Fuel Oil Terminal Company, Oiltanking Partners – recently acquired by Enterprise Products – Texas Petroleum Group and LyondellBasell.
Trans-Global Solutions is also planning a major expansion of an industrial park it purchased in 2014 in the wake of multi-billion-dollar investments in petrochemical manufacturing facilities along the Gulf Coast.
To date, six major plastic resin projects have been announced near the Port of Houston, all coming online between the fourth quarter of 2016 and the fourth quarter of 2017.
Some of PHA’s customers have indicated they will double, possibly triple their exports within two to three years, and many of PHA’s other industry partners around the Houston area are also investing in infrastructure and increasing export volumes, John Moseley, PHA’s senior director of Trade Development, said at a conference in April 2015.
Chevron Phillips Chemical is building a new ethane cracker in Baytown and polyethylene production facilities in Old Ocean with a capacity of 1 million metric tons per year.
ExxonMobil Chemical is also ploughing ahead with a multi-billion dollar expansion of its Baytown complex to boost its capacity for manufacturing petrochemical products, including resins, for export.
The facility is already the largest integrated refining complex in the country and after expansion it will represent ExxonMobil’s largest polyethylene supply point in the world.
ExxonMobil has stated that the new Baytown facility has been “designed as an export machine.”