HOUSTON -- The nation's busiest exporting port and the centerpiece of this city's economy is about to launch a major capital project that's directly tied to the oil and gas industry's boom.
The Port of Houston Authority says that any day now, possibly even today, the Army Corps of Engineers will issue the permits it needs to proceed with a $100 million dredging and widening project to deepen parts of the Houston Ship Channel and make more room for larger dry freighters and tankers. The work will be conducted at the Bayport and Barbours Cut Channels, deepening these sections to 45 feet.
In an interview, Roger Guenther, executive director of the Port of Houston Authority, said that all the money and assets needed to commence the work are ready to go, and that work will begin as soon as the Army Corps permits come in. The dredging of the two channels could be completed by the end of this year.
He said the expansions will benefit both importers and exporters of all products, dry or liquid.
"A lot of what we do at the Port Authority is related to oil and gas: the import of steel pipe for the oil field exploration and the shale play and all of that, and then the products, petrochemicals, manufactured resins," Guenther explained. "A lot of those investments that are being made now are cargoes that are made into plastic resins that are put into a container and exported; our container business is about 60 percent export, 40 percent import."
Guenther expressed a sense of urgency at the port, a desire for his team to get moving as quickly as possible. Not only could missed timing see the Port of Houston losing potentially millions of dollars, but a failure to act could also put in jeopardy billions of dollars' worth of investments coming into the greater Houston area.
Many see the Panama Canal expansion project as motivating the port's eagerness to grow, but Guenther said that's only one factor involved, and not necessarily the most important one. The port is already receiving huge cargoes from Asia. The biggest change coming is the expansion of petrochemical and plastics manufacturing that will likely be completed around the time the port finishes widening and deepening its channels.
A coast full of expansions
The project set to launch in Houston is the largest of Texas' port expansions and improvements projects, work that might run later run into problems with channel maintenance that is the Army Corps' responsibility.
Port channels and navigation lanes all along the Texas coastline require constant dredging to keep them deep enough for large ships to enter. That's the federal government's responsibility, one that many are concerned the government isn't living up to.
The port authorities at Houston, Corpus Christi, Freeport and Brownsville are all exuding confidence in the future. But privately, they are worried about the health of the Harbor Maintenance Trust Fund that the Army Corps uses to finance regular channel maintenance at all U.S. ports, and whether a fair amount from that fund is being earmarked for Texas' booming ports.
Expansion is underway at the ports in Brownsville and Corpus Christi. Companies plan to invest nearly $2 billion at or near the Port of Corpus Christi, and the increased traffic this growth will bring is expected to significantly improve the port's bottom line. Corpus Christi's port has struggled financially in the past during economic downturns, but the city as a whole is now enjoying the benefits from the oil drilling boom now underway in the Eagle Ford Shale region (EnergyWire, June 5, 2013).
In nearby Freeport, the port authority there and the Army Corps of Engineers have just completed an $11 million feasibility study looking at what will be needed there to facilitate the oil and gas industry's growth. Aside from becoming a likely export point for liquefied natural gas (LNG), Port Freeport needs to get ready for a major pipe manufacturing center nearby that's being built by Tenaris.
"We have already handled some pipe imports for Tenaris with additional project cargo due later in 2014 for the installation of machinery at the new mill's site," said Port Freeport Director Glenn Carlson in his most recent "State of the Port" report. "We expect to see continuing imports of pipe while the new facility is built and significant volumes of cargo will be handled at Port Freeport supporting the daily production in Bay City."
Port Freeport is now busy putting together a 20-year master plan to guide future major capital projects, especially terminal expansions. Carlson estimates that the region near his port could see some $25 billion in new investments that will affect ship traffic in and out of Freeport.
Staggering price tag
The volume of money directed at the vicinity of the Port of Houston will likely greatly exceed what Freeport and Corpus Christi are experiencing.
Last year, a survey commissioned by the Port of Houston Authority tried to nail down how much money the port's users were planning to spend on expansion projects from 2012 to 2015. Though about 40 percent of those queried responded, the sum they came up with was staggering: around $35 billion, Guenther said.
That figure is almost certainly an underestimation of the total value of planned capital projects to take advantage of the United States' newfound abundant and cheap natural gas reserves.
New polyethylene and other product manufacturing capacity underway by just two major companies, ExxonMobil Chemical and Chevron Phillips, could add up to about $10 billion when completed. Enterprise Products Partners is investing around $4 billion to beef up its petrochemical manufacturing output in nearby Mont Belvieu. The Baytown-West Chambers County Economic Development Foundation is currently tracking future oil and gas and refining industry investments along the Texas and Louisiana coast that may be valued at more than $110 billion if all projects were to be completed (EnergyWire, March 4).
So much work is being done all at once that Guenther said he's received calls from area petrochemical companies asking him directly whether the port was capable of handling the extra traffic that it will come, a first in his career at the Port of Houston Authority.
He's assuring them that the 50-mile-long Houston Ship Channel can accommodate the expansions. His greater concern is the Harbor Maintenance Trust Fund and whether Houston's port is getting its fair share from it.
On average, Guenther estimates, it costs about $50 million per year to properly maintain the ship channel. For this year, the Army Corps of Engineers has been budgeted about $20 million less than what the Port of Houston would like from the fund for maintenance work.
This is a national issue, but it's very significant in Houston because annually the cargo interests paid about $100 million into that trust fund, Guether said.
"This year, for an example, this channel received $31 million in return for maintenance and dredging," he added. "So Houston certainly is a donor port to this fund to the tune of $70 million per year, and we severely need to ensure that we get the proper funds to maintain this channel at its intended and designed and authorized width and depth."
Correction: An earlier version of this article stated that work on the Bayport Channel and Barbours Cut Channel would take about four years to complete. The actual period of time this work is expected to take is less than a year. Four years is the period of time for the entire project from planning and preparation to actual dredging and widening after Army Corps permits are issued.
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