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A Texas seaport handling booming exports of U.S. crude oil has invoked a 12-year-old criminal case against the commodities trading house Trafigura as it seeks to slow its efforts to build an alternative site to load supertankers.
The Port of Corpus Christi has emerged as a high-volume conduit for oil exports since the U.S. legalized them in late 2015. The shipments have generated millions of dollars in revenue for the public agency that operates the port, according to Morningstar.
Trafigura is a big shipper at the port as one of the top exporters of U.S. crude, moving barrels through the Buckeye Partners LP (NYSE: BPL) terminal on the Corpus Christi docks.
But the Swiss company’s Texas Gulf Terminals subsidiary has now proposed building its own export terminal offshore in the Gulf of Mexico, bypassing the port. If completed, the port’s operating revenue could fall by 12%, according to Sandy Fielden, an analyst at Morningstar.
In letters submitted last month, a lawyer for the port asked federal officials to delay the Texas Gulf Terminals application, pending more information on its affiliation with Trafigura. It cited a 2006 U.S. criminal conviction in which Trafigura pleaded guilty to selling oil it falsely stated came from the former U.N. Oil-for-Food program.
“Because Texas Gulf Terminals has chosen to hide the identity or not provide required information for its other affiliates, there is no way to determine if they also have criminal convictions or have engaged in improper business practices,” wrote the lawyer, Debra Tsuchiyama Baker.
Neither the port nor Baker responded to a request for comment.
Trafigura said: “We have provided the information as required by regulation and requested by the applicable governmental authorities.”
A huge opportunity is at stake. U.S. crude oil exports have more than doubled in the past year to average 1.8 million barrels per day (bbl/d) in 2018, according to the Energy Information Administration. They are expected to reach 4.8 million bbl/d in 2022, Trafigura said.
The oil supplies are arriving by pipeline from fast-growing regions such as the Permian Basin of Texas and New Mexico. Corpus Christi has been investing to keep up with the boom.
In July it sold $216.2 million in bonds to dredge its ship channel to 54 ft deep to handle bigger tankers. Yet even that depth would not be enough to allow passage of a fully laden Very Large Crude Carrier (VLCC), the largest class of supertanker.
The terminal proposed by Texas Gulf Terminals would instead move crude to a so-called single-point mooring buoy system several miles offshore, allowing VLCCs to fully load in one session and set sail for Europe, Asia or other locations.
Fielden of Morningstar said Trafigura’s offshore terminal offered a quicker and cheaper way to load tankers and threatened to divert as much as 500,000 bbl/d of crude.
“If Trafigura is opening up a cut-price loading operation down the street, [shippers] aren’t going to want to bring more crude to Corpus Christi,” he said.
Trafigura said both facilities would be needed. “Texas Gulf Terminals will handle only about 10% of the expected growth in U.S. oil production. It will complement, not replace, exports from the Port of Corpus Christi,” it said.
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