What It’s Worth

What It’s Worth

Corpus Christi – America’s Growing Energy Hub

Author: Michelle Parish
Published Date: 6/29/2018

If it’s true what they say, that geography is destiny, then it certainly applies to Corpus Christi as a gateway for international commerce. Home to the fourth largest U.S. port by tonnage, the city’s strategic proximity to the country’s two largest shale oil and gas fields—the Permian Basin in West Texas and the Eagle Ford Shale in South Texas—has made it the nation’s leading energy hub. That stream of energy, made possible when Congress lifted the 40-year ban on oil exports in 2015, is expected to satisfy 80 percent of global oil supply growth in the next decade, positioning Corpus Christi and the U.S. as world leaders in energy exports.

Last week, Corpus Christi port officials demonstrated just how important that is, approving the decision to shoulder more than $200 million in debt to finance the costs of deepening and widening the 36-mile ship channel by 2021—the target date when half a dozen new oil and gas pipelines funneling into the port are expected to come online. The Texas Department of Transportation’s new, taller harbor bridge is also scheduled for completion by then, enabling very large international tankers to access the port. Corpus Christi’s success in expanding the ship channel has direct implications on the regional and national economy, as well as being vital to the growth of the industry in the face of growing global demand. Frank Hastings, PlainsCapital Bank Corpus Christi market president, says the $217 million bond initiative was a necessary step to finally moving the port expansion project forward after years of stalled government funding.

“The port expansion will position Corpus Christi as the main energy exporting hub on the Gulf Coast,” said Hastings. “With the increased global demand for oil and petroleum-based products, it’s vital that Corpus Christi have the necessary infrastructure in place to keep pace with escalating production. Otherwise, the bottleneck would hamper our role in the global energy market.”

As one of the leading commercial banks in the state, PlainsCapital recognizes the economic significance of the Texas Gulf Coast as a dominant force not just in domestic oil exports, but also natural gas and petrochemicals, the demand for which is being driven by expanding markets in Asia and Europe. According to Hastings, there is currently more domestic and foreign industrial investment occurring along the Coastal Bend than anywhere else in the country. Corpus Christi is experiencing a surge in construction and development to the tune of $50 billion—from liquid natural gas processing facilities to large-scale petrochemical plants producing ethylene and other natural gas feedstocks used in the production of high-performance plastics, building materials, beauty products and more. In fact, experts predict that petrochemicals will account for a quarter of the growth in global oil demand within the next five years.

Noted economist Ray Perryman of The Perryman Group acknowledges the growing international market for petrochemicals as a prominent economic driver for the region.

“Although energy is certainly a factor in volumes through the port, it is less about oil and gas drilling at present—although that will likely change over time with increasing crude exports and liquid natural gas facilities—than it is about production and refining,” said Perryman, as reported in Bond Buyermagazine. “The area’s large and growing base of petrochemical facilities generates exports and imports even when drilling activity is sluggish. In addition, a variety of non-energy goods make their way through the port.” He added that the volume of cargo through the port has been increasing, and that there is reason to believe that will continue.

Hastings echoes Perryman’s sentiments about the economic strength and composition of the region. “Corpus Christi has always been a strong center for aerospace, tourism, marine research, and maritime shipping, and now we can add industrial manufacturing to the list.”

Along with the $50 billion in capital investments currently flowing into the area, Corpus Christi is expected to see an additional $36 billion a year in export revenue from the port expansion.  Frustration to date has been over government red tape that has curtailed funding for the dredging project for nearly 30 years. Things finally started moving forward last year when the port pledged to cover nearly a third—$102 million—of the now $327 million project cost in an effort to accelerate the funding process. Thus far, the government has committed $36 million of the $225 million to which it agreed.

An encouraging start, though looming concerns over the rate at which future federal funding might be allocated—potentially pushing out the completion date for the channel expansion by as much as ten years—prompted port officials to pursue a parallel plan. By taking steps to finance a majority of the project cost, the port ensures that the dredging and widening of the ship channel stays on course within the needed timeframe.  Considering the project’s national strategic and economic significance, as well as the expected return on investment, Hastings hopes the port can ultimately be reimbursed for the added debt load.  

“These are exciting times for everyone involved with the Port of Corpus Christi,” said Hastings. “I can’t think of a better example of a rising tide lifting all boats than the Coastal Bend’s largest economic driver being positioned as the energy port of the Americas.”

Tags: Commercial Banking