Rising U.S. oil and gas production expected to drive harbor and terminal upgrades over next several years.
The boom in U.S. oil and gas production is having a beneficial effect on the Port of Houston, one that’s expected to keep growing in coming years.
“The energy sector, the resurgence in that field — specifically the Eagle Ford Shale — is already creating significant impact on the whole port of Houston,” said Roger Guenther, executive director of the Port of Houston Authority. The Eagle Ford Shale formation is located in South Texas.
Guenther, who has worked at the port for 26 years, became its executive director in January. The port authority operates eight public terminals, including the Barbours Cut and Bayport container terminals that Guenther said account for about 15 percent of the region’s tonnage.
In addition to the port authority terminals there are about 150 other terminals located along the 52-mile-long Houston Ship Channel.
Each year, more than 200 million tons of cargo move through the Port of Houston, carried by more than 8,000 vessel and 200,000 barge calls.
The importance of the Port of Houston to the nation’s economy was illustrated in March when the Houston Ship Channel
was closed for several days by an oil spill when the bulk carrier Summer Wind
collided with a Kirby Marine barge carrying No. 6 fuel oil, breaching one of the barge’s tanks.
In just three days, at least 93 ships requiring pilots — 46 outbound and 47 inbound — were in queue waiting for traffic to resume, plus numerous smaller tugs and barges. On the fourth day the channel reopened to limited traffic, and in another few days the backlog was worked off and traffic restored to normal.
“There is a tremendous amount of investment going on in the industry here. The manufacturing facilities up and down the channel have committed, some studies say, at least $35 billion dollars over the next three to five years in related facilities,” Guenther said.
Exports of oil, gas and petrochemical products are expected to grow, including chemicals products such as plastic resin that move through the port of authority’s container terminals, he said. Resins and plastics accounted for 31.8 percent of containerized exports through Houston last year, followed by chemicals and minerals at 16.2 percent.
Manufacturers have expanded resin production. The Energy Information Administration (EIA) reported earlier this year that “low U.S. natural gas prices have helped increase domestic plastic production after a decline from the 2008 recession. Because many U.S. plastic manufacturers use natural gas as their primary fuel source and natural gas-sourced liquids as a feedstock, continued low prices for those resources could boost raw plastic exports, given higher foreign energy prices.”
The energy required to make plastics “has decreased markedly since 2002, suggesting some efficiency improvements in plastic production, along with structural changes, such as new products or technological advances,” EIA added.
Guenther said some resin manufacturers are even talking about doubling and tripling their current export volumes.
The port has not yet seen the impact of those new facilities, but expects to experience it when they come on line in 2016-2017. “The preparation for that is what we have on our plate,” he said.
“We have these manufacturers coming to us for the first time ever, saying ‘hey we’re investing all of this capital to produce this, are you going to have the facilities to export?’” Geunther said, noting the port is committed to supporting this increased business.
The port currently handles about 1.95 million TEUs, and Guenther said between its Bayport and Barbours Cut container terminals “has the ability to expand however quickly if we need to — up to 5 million TEUs. We have a lot of growth opportunity. We have plans in place and have already started projects to prepare for this growth that we expect to come through Houston.”
The Houston Ship Channel is at a 45-foot operating depth, but the approach channels to its two container terminals are only at 40 feet. Guenther said the port plans to deepen them both to 45 feet by the end of the year.
PHA Market Development, Journal of Commerce/PIERS data.
“The big ships are already coming, we’re already seeing 8,500-TEU ships come into Houston,” he said, but added without 45 feet of draft they cannot be fully laden.
Deep channels are particularly important, he said, because Houston is a major exporting port and many of its leading export commodities are heavy. About 60 percent of the cargo handled at the port is exports and 40 percent imports.
Rather than go through the process of seeking federal authorization and appropriation of funds to deepening its container channels — a process the port believes may take as long as 15 years — Houston is funding the project on its own.
“We have been working closely with the [Army] Corps of Engineers and we are on the cusp of getting these permits to move forward with the dredging of these two channels within weeks at the cost of over $100 million,” Guenther said during an interview in March. The channel to Bayport Terminal is about four miles long and the one to Barbour’s Cut channel is about two miles long.
Guenther noted that in addition to deepening the channels, they are being widened to improve safety and navigation.
The addition of the new set of locks at the Panama Canal to accommodate larger, more efficient ships, and the opportunity that it presents for increased imports to Houston is another reason the port is seeking to deepen and widen the channels to its container terminals.
A decade ago, Guenther said, there were no direct all-water container liner services to Houston from East Asia. Today, there are two, the CMA-CGM Pacific Express 3 service and the COSCO/Hanjin Gulf of Mexico/All-Water Texas Service, and he said they now account for about 25 percent of the port’s business.
Guenther said increased imports are being driven by both a rapid rise in population in the region, which again, he notes, is being driven in part by opportunities for employment in the energy sector.
The Dallas Morning News
reported in December that “Texas added more than 387,000 residents between July 1, 2012, and July 1, 2013, and more than 1.3 million since April 1, 2010, significantly more than any other state,” citing estimates released by the U.S. Census Bureau.
More people mean increased demand for imports from the Far East, and opportunities for the region to attract distribution centers, Guenther said. Several large retailers — Walmart, Home Depot, Rooms to Go, Academy Sports and Outdoors — have distribution centers in the region, and the port is encouraging distribution up to the Midwest through Houston.
In addition to improving its ship channel, the port plans to spend $700 million to $800 million over the next decade on landside infrastructure at its two container terminals.
Guenther explained the port is redeveloping the 30 year-old Barbours Cut terminal — acquiring bigger cranes and improving docks to accommodate them.
Barbour’s Cut has 12 cranes, but some of them can only handle Panamax ships that carry 13 rows of containers across their beam. The port has four new super post-Panamax cranes being built for the terminal that will be delivered later this year and accommodate ships with 22 containers stacked side by side.
The port also last summer received a $10 million TIGER grant from the U.S. Transportation Department to support berth expansion at its Bayport Terminal from 3,300 feet to 4,000 feet. The terminal has nine cranes and will add several more by next year.
On the breakbulk side, Guenther said the port has had several good years. Steel is Houston’s leading breakbulk commodity and the port handled about 4.65 million tons in 2013, 5.48 million tons in 2012 and 4.3 million in 2011. Any year when the port handles 3 million tons is considered good, he explained.
This article was published in the May 2014 issue of American Shipper.