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Lower Costs, Less Congestion Lure Companies away from Houston Ship Channel

Posted by PortVision on Jun 27, 2017 6:07:00 AM

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The multi-billion dollar investments currently being made in and near smaller ports along the Gulf Coast by some of the largest energy companies in the country are part of the long history of ports in the area.

Back in 1900, Galveston was the most profitable port in Texas. But a category 4 hurricane, with winds of more than 140 miles per hour, roared in from the Gulf of Mexico, killing thousands and nearly wiping that low-lying barrier island off the map. After that, planners decided the best place for a main port in the region was farther inland. So, they dug out the bayous and created what is now the 52-mile long Houston Ship Channel and its largest port, the Port of Houston.

In the time since, the Port of Houston has grown to rank among the top three U.S. seaports in annual tonnage, not to mention the fact that it serves twice the international deep-water traffic as any other U.S. port.

The price of success

The success of the Port of Houston is undeniable, but also not unmitigated. In recent decades, there’s been much investment in the area around the channel and the port. Today more than 270 facilities from 200+ companies pack the Port of Houston. The result? More and more congestion, delays, and little land left for development.

Weather, too, has sometimes has an impact. In 2015, fog caused the Houston Ship Channel to close for an annual total of 680 hours—the equivalent of almost a month—up a full 77% from the year before. When the fog rolls in, ships in that busy channel have little choice but to find a place to park until it lifts. And in the world of commerce, delays like that can be costly.

As energy companies seek to take full advantage of the growing demand overseas for U.S. crude, gasoline, liquefied natural gas, and petrochemicals, they are now looking to other ports.

New opportunities for smaller ports

With the cheap natural gas boom—and the world’s demand for it—leading to an increase in the vessel traffic in the already bustling Houston Ship Channel, smaller ports in the Gulf are becoming more attractive for reasons that include both efficiency and economic factors.

Port Freeport, for instance, offers quick and easy access to deep water. Unlike the Houston Ship Channel, which is 50+ miles long, Port Freeport’s channel is a mere eight miles from the deep-water sea buoy in the Gulf.

At the Port of Brownsville, there’s prime land for lease for less than $6,000 per acre per year. Compare that to the $60,000 per acre per year along the Houston Ship Channel. Lower prices like Brownsville’s have enticed some $43 billion in investment in projects there that include a LEED-certified steel mill, a pipeline that crosses the border into Mexico, and three liquefied natural gas plants. The port is also working to get Congressional approval to make its ship channel ten feet deeper.

Just last month, Occidental Petroleum (OXY) tested a VLCC at it's new Ingleside dock, hoping to be able to export crude to foreign markets in Asia, Europe, and Latin America by 2019. In March, OXY also opened a new petrochemical plant near Corpus Christi in a joint venture with Mexichem.

Point Comfort and Palacios, southwest of Houston, are also the sites of new facilities and expansions.

Here’s how Steve Tyndal, senior director of business development for the Port of Brownsville, summed up his and other smaller port’s competitive advantages, “Houston has been so good for so long, it’s just challenging for them to do some of the things that are easy to do here . . . I think that’s what’s moving the fueling industry toward the border.”

With the recent and dramatic increase in energy exports from ports along the Gulf Coast and other locations in the U.S., PortVision's AIS vessel-tracking software offers users both real-time and historical tanker movements all over the world. To learn more, sign up for a free trial HERE.

Topics: Tankers, oil, LNG, Shipping, Crude, Gasoline