The Port Arthur, Texas, area is preparing for the increased volumes of crude from the unconventional plays in the U.S. and Canada. The area is experiencing unprecedented growth with $12 billion in expansion currently underway.

GT OmniPort is a new facility that can handle crude oil from and to pipelines, truck, rail, barge and deepwater ships. GT Logistics (GTL), the owner of GT OmniPort, was formed about a year and a half ago by Timothy DeSpain and Steve Birdwell, both from Houston. The company was formed to be the developer of a 1,116-acre plot, which was a former chemical plant sited just outside of Port Arthur. The chemical plant that occupied roughly 300 acres was torn down about10 years ago. The plant was near the Union Pacific Main Line, adjacent to highway 73 and Taylor Bayou.

DeSpain and Birdwell were attracted by the property several years ago due to its proximity to some of the largest refineries in this part of the world, located within a few miles of the gate. The Motiva Refinery, owned by Motiva LLC, is nearby. Motiva LLC is owned equally by Shell Oil and Saudi Aramco.

The refinery's capacity will be increased to 600,000 barrels (bbl.) per day in 2012, making it the largest refinery in the U.S., and one of the top 10 in the world. Just down the street is the Valero Port Arthur Refinery with a capacity of 232,000 bbl. per day.

An ExxonMobile refinery with a capacity of 344,500 bbl. per day is just 20 miles away in Beaumont and is planning a $1.55 billion expansion.

And the nearby Total Refinery will have a capacity of almost 33,000 bbl. per day in 2012 with the completion of its $2.2 billion expansion.

“The Keystone XL pipeline coming out of Canada has been delayed and people are looking for other ways to get crude into this region. This has been turned into a natural receiving area. The crude can come in by ship, by rail, or by barge, then can feedstock into the local refineries.” — Timothy DeSpain, co-founder, GT OmniPort

Acquiring the property

GT Logistics secured the property about 18 months ago and started discussions with the Union Pacific Railroad Corp. about putting together a rail storage and transfer yard. The potential was created by the increased shale production and the lack of pipeline capacity to bring the product to market. This evolved into a terminal opportunity to unload crude that comes in by rail and pipe it to refineries, or load it onto barges or deepwater ships. There is a nearby storage facility for 4 million bbl. of petroleum products.

Phase One will include the construction of 24 stations to unload unit trains of 70 to 100 cars in a 24- hour period. Plans include expanding the rail storage capacity to over 1,000 cars by first-quarter 2013.

DeSpain says, "They will bring their power onto our property, then leave the trains in one contiguous set and we will have switchmen, conductors and engineers that will break the trains up and put them into the stations where we will conduct the unloading. Initially the crude will be going from the rail cars directly into barges and pipes. We are not developing any independent storage as we are just a trans-loading station. We are making property available if a company wants to contract with us to build storage units. There are other companies in the area that have excess capacity for storage, so we decided to not do that on a spec basis to start."

As the developer and operator of the entire scope of infrastructure, GT Logistics will be positioned to provide customers with increased transportation options, says Steven Birdwell, the company chairman.

"Customer service will be a key component of our success. Instead of product sitting for days at remote locations, we'll be able to transport to the industry in the region in a matter of hours. It's unprecedented one-stop logistics."

Currently, about 50 GT employees work with contractors to undertake the construction of the rail and barge dock improvements. The facility staff is expected to ramp up to about 100 within 18 months.

At present, a jack up rig is moored at the deep-water dock, so the company is not trans-loading any material across it. The dock was purchased last June from Signal International, a ship repair yard.

"The company that owns the rig is in the process of moving it out, so by the end of the year GT Logistics will be able to start bringing ships into the dock," says DeSpain.

The competition

"We will be competing with kinder Morgan's Bosco Terminal, but we have an advantage due to our location," explains DeSpain. "Shippers can ship crude there, or here, but we are closer to four large refineries. Every major pipeline runs within a half mile of our front gate, so interconnectivity is not going to be a problem."

A unique advantage to the company is its location in Port Arthur. "We are within the hurricane protection levy drainage District 7," he says. "A levy was completed in 1984 to provide protection from a hurricane surge up to 14 feet to the urbanized and industrial areas of Port Arthur, to include the city and the associated petrochemical complex. It is maintained by the Jefferson County Drainage District No. 7, and was last inspected by the Corps of Engineers in June of this year."

The past two hurricanes that hit were category four surges, but the property did not flood, he says. "Many people are looking here to put in a development on a long-term lease basis, or buying some land from us and doing their own development."

Another advantage is the barge dock on Taylor Bayou and the ability to take barges with a 15-foot draft. GT Logistics will be able to trans-load from wells to barges. It will also have the ability to unload barges, to move the product from barges to refineries, rail or trucks.

"We are now in the process of locating, permitting and gaining the rights-of-way so we have connectivity between the two docks," says DeSpain. "I think what's interesting about this, is that we are doing the infrastructure buildout for the rail, for the dock operations and for the deepwater dock. As far as controlling the entire 1,100 acres, we are making different parcels of property available for industry or suppliers to utilize. A supplier or an off-taker from these refineries can put in a packaging facility or a shipping facility of some sort to be centrally located."

GT OmniPort is a new facility that can handle crude oil from and to pipelines, truck, rail, barge and deepwater ships from a 1,116-acre plot, which was a former chemical plant sited just outside of Port Arthur. Source: OmniPort

Engineers on the job

Three sets of engineers work on the project. On the early stages, civil engineers worked on drainage for the site and putting in the infrastructure. They also worked on soil stabilization. The soil in the area is soft, and GT Logistics wants to develop the area, from a civil perspective, so that it will be a "first-class facility," says de Spain.

A mechanical engineering firm is working on all of the equipment for the trans-loading operations.

A third engineering firm is working on the deep-water dock to make sure it is designed to safely and efficiently trans-load equipment, dry goods, and liquids on and off the ship. Also, a safety engineer and a security engineer are looking at the project. DeSpain says, "Everything we are doing is designed to be a first rate and a completely safe environment—not only for our workers, but also for whoever is on our site, and also for our neighbors."

DeSpain has worked with his partner, Steve Birdwell for the last few of years. "His company does environmental remediation work in refineries in this area," he says. "We located this property just by driving by it every day, and we knew it would be a great location. That led us to buy it. Steve is an entrepreneur by trade and the visionary behind this project, and saw the opportunity to work with the local major oil and gas refineries. He is an environmental engineer, and also works in construction and hydraulics. I have a legal and financial background, so we make a good team to do this type of development."

Birdwell's family trust is the primary source of financial backing, and the team is also using traditional bank financing for part of the project. The company has no outside partners, so when negotiating a deal, the partners can "work something out" in much less time than it would take if other partners were involved, says DeSpain.

"In the first phase of the project, we will have just shy of $100 million invested. That includes the acquisition of the land, the subgrade, the flood control and other improvements like the rail, the barge dock and the deepwater dock. They will all be in included in the first phase of the development."

The future

It is hard to gage how large this project will become, says DeSpain. Much will depend on the size of the contracts and what sort of services will be requested. The company has been approached by a number of industries offering long-term contracts if the facility is built, owned and operated for them.

"They will pay us a monthly rate during the next 10 years," explains DeSpain. He feels that could drive the investment up to $1 billion.

The GT OmniPort is a brownfield redevelopment project, so from an environmental and safety perspective, the community has reportedly embraced it. In Port Arthur, recent job losses associated with completed refinery expansion projects have been felt community-wide, so new industry is welcome.

DeSpain says, "The Keystone XL pipeline coming out of Canada has been delayed and people are looking for other ways to get crude into this region. This has been turned into a natural receiving area. The crude can come in by ship, by rail, or by barge, then can feedstock into the local refineries. We think the Keystone project will be completed and it will have a positive impact, not only for this region, but for the state. We don't have any agreement when those bbl. will show up at our site, but it could happen in the future."