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Texas Port is Replumbed for Oil Exports

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The Daley Note: October 27, 2023

Max Midstream is repurposing pipelines and expanding infrastructure near the Port of Calhoun as the Texas port seeks to become a rival destination for crude oil exports.


Located between Houston and Corpus Christi, the Port of Calhoun is too shallow to accommodate most ocean-going oil tankers. Max’s Seaport terminal on the Calhoun port mainly barges Eagle Ford crude on Jones Act tankers to refiners east of Houston or on the East Coast. But Max stands to gain from a dredging and expansion project that would enable Aframax-sized tankers to reach its docks. The company is also working to attract clean-fuels manufacturers to the region to use the expanded facilities.


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The Matagorda Ship Channel Improvement Project (MSCIP), a public-private partnership funded in part by Max, will deepen and widen the 26-mile channel to allow oil tankers access to the Calhoun port. The project is awaiting an environmental permit by the Army Corp of Engineers to move forward.


In the meantime, Max is repurposing several natural gas pipelines to move more crude oil between its assets. In 2021 Max Midstream converted a 21-inch, 12-mile pipe connecting its Edna loading terminal in the Eagle Ford to Seahawk. The company is repurposing a second pipe, a 14-inch gas line, to ship Eagle Ford crude oil from Victoria Express Pipeline (VEX) to the Edna facility (see map).


Management told East Daley the VEX interconnect, which involves about 20 miles of pipe, should be operational by December 2023. A third project will convert a 16-inch gas pipe to move Permian and Eagle Ford crude oil from Gray Oak Pipeline to the Edna terminal. Max is targeting completion of that project in 1Q24.


The Edna terminal can receive small volumes of crude oil from Kinder Morgan’s (KMI) Crude and Condensate Pipeline, but otherwise takes loadings by truck. The new pipe projects will add more options to receive volumes at the terminal. In addition to the pipeline work, Max has expanded tank capacity and truck lease automatic custody transfers (LACTs) at Edna to handle more volume.


The investments will allow Max to move more crude oil between the Houston and Corpus Christi markets as the company waits for the dredging project to move forward. The Army Corps of Engineers initially permitted the MSCIP in 2020, but the agency then withdrew approval in December 2022 to allow for additional environmental testing. Opponents fear the dredging of Lavaca Bay, a designated Superfund site, could stir up mercury and contaminants from an old Alcoa aluminum plant.

The Army Corp has proposed a testing plan that would allow the dredging project to proceed. The agency is expected to release a new draft impact statement for MSCIP by 1Q24. If permitted, the ship channel expansion could be completed by 2027. – Kristine Oleszek and AJ O’Donnell Tickers: KMI.



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