America’s biggest oil-export hub is poised to slash spending and possibly defer more than one-third of its 2020 capital budget amid the worst price rout in nearly three decades.
Texas’s Port of Corpus Christi, which recently surpassed Houston to become the country’s largest source of U.S. crude exports, is bracing for its customers to start cutting back after global oil prices cratered this week.
“Certainly you can expect there’s going to be a hit on exports,” said Sean Strawbridge, the port’s chief executive officer. “We have reviewed our capital plan and we’re going to make some adjustments and be disciplined about pulling back.”
While many of the port’s agreements are based on take-or-pay contracts—meaning the port gets paid whether barrels are shipped or not—an extended downturn that stifles crude production could stall future growth opportunities. Given the “sheer swiftness“ of the market meltdown, industry bankruptcies are “undoubtedly going to happen,” he said.
Early casualties of the crash could be two pipelines under development—Phillips 66’s Liberty and Red Oak projects—that are set to connect the Rocky Mountains and Cushing, Oklahoma, to the port. “It wouldn’t surprise me if those lines were delayed,” Strawbridge said.
Phillips 66 said in a statement that timelines for the projects are unchanged.
The port in January was responsible for about 40% of total U.S. oil exports, or about 1.38 million barrels a day. The new pipelines were expected to further boost those volumes.
For now, Strawbridge has identified about $100 million of the port’s $275 million capital spending program that can be deferred to next year if needed, although no decisions have been made. He declined to specify what projects might be cut or delayed.