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Texas City Takes on Trading Giant in Testy Fight for Oil Exports

Mike Schuler
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February 11, 2019

Oleksandr Kalinichenko / Shutterstock

By Stephen Cunningham (Bloomberg) — Trafigura Group Ltd., the world’s third-largest independent oil trader, is fine as a customer. But the Port of Corpus Christi doesn’t want to see it as a competitor with billions of dollars at stake.

Port officials are urging Trafigura to scrap a proposed export terminal located 13 miles off the coast that would compete with an onshore expansion by the port. The proposals come at a time when analysts see U.S. crude exports exceeding 8 million barrels a day after 2021, supported by a growing system of new pipelines now being built to serve the Permian Basin.

It’s a fight that’s becoming increasingly fierce. In its push to waylay the Trafigura plan, port officials have asked regulators to deny the application, spotlighted past criminal allegations against the Swiss-based trader, raised environmental concerns and accused the subsidiary leading the project of exploiting a loophole to rush through its application.

“Those are all factually correct statements,” said Sean Strawbridge, the port’s chief executive officer, in an interview in Washington where he met the Texas congressional delegation, among others, to drum up support for his project. “None of them are conjecture, speculation, misinformation or fake news.”

The port has teamed up with the Carlyle Group to build an onshore export terminal that can load the biggest supertankers at Harbor Island in Corpus Christi Bay. Trafigura’s facility will be located in deep water off the coast of North Padre Island, and fed by subsea pipelines.

10% Plan

The system planned by Trafigura is expected to handle about 10 percent of the expected growth in U.S. oil production, according to an emailed statement by Texas Gulf Terminals, the Trafigura subsidiary behind the project. The trader has rejected environmental concerns raised on the project, and dismissed the suggestion that it opted for an offshore proposal to circumvent state and local regulations. The unit declined further comment.

While the subsidiary behind the project said in its statement that its terminal will complement “additional infrastructure investments in the area,” Strawbridge said Trafigura’s plan to load a half-million barrels a day would force the port to trim their own proposal.

“If we took a hair cut on that, we certainly think there would be a market for our project as well,” he said. “But perhaps instead of three docks, we could go with two.”

Trafigura Investments

Trafigura has been at the port for a decade. As one of Corpus Christi’s biggest customers, the trading house has invested in a marine export terminal there and two condensate splitters, according to its website. At one point, the two sides discussed a joint effort to develop an onshore deepwater facility to handle tankers, Strawbridge said.

Then Trafigura announced its rival proposal. “At that point, we had to tell Trafigura: Look, we can’t be going down two parallel paths here,” Strawbridge said.

Since then, Corpus Christi has been on a wartime footing. Strawbridge, for instance, said Texas Gulf Terminals is attempting to get early approval for its project by exploiting “an arcane federal statute that was enacted in 1974 in another time for another purpose.”

In another instance, a lawyer for the port wrote a letter to regulators complaining the trader’s application was incomplete, that it was unclear who would hold eventual ownership of the terminal and spotlighting a guilty plea in a Texas courtroom in 2006 over the Iraq Oil-for-Food Program.

© 2019 Bloomberg L.P

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