CORPUS CHRISTI – Texas Energy Day fell on May 13, but it was a little different than past events. Started in 2017 by the Texas Oil & Gas Association (TXOGA), the first event drew more than 450 participants to the state capitol. Due to the COVID-19 pandemic, the event had to switch gears and went online instead.

This year, the Port of Corpus Christi hosted a virtual discussion with various industry leaders to talk about the importance of oil, natural gas and liquefied natural gas (LNG) in everyday life as well as how to move forward after the COVID-19 pandemic severely disrupted the industry.

Crisis Management

Buckeye Partners LP is a Houston-based petroleum distributor that manages more than 6,200 miles of pipelines as well as more than 100 truck-loading terminals. In 2018, the company, in a joint venture with Phillips 66 Partners LP, announced they would be creating a South Texas gateway terminal in Ingleside which will offer 3.4 million barrels of crude oil storage capacity.

“The South Texas Gateway Terminal will serve as a premier open-access deep-water marine terminal in the Port of Corpus Christi,” Executive Vice President of Buckeye and President of Buckeye’s Global Marine Terminals business unit Khalid Muslih said at the time.

With the COVID-19 pandemic ravaging the oil industry – causing oil prices falling below zero in April – it seems that the oil industry is shifting focus as they sit tight and wait for the nightmare to be over.

“We’re able to provide over 100 million barrels of storage capacity as a key outlet for refiners to manage the rapid decrease in refined products demand and, in turn, we were also able to provide our producers and marketers the ability to store their oil to preserve its value,” Muslih said. “Locally, we’ve invested quite heavily in South Texas, particularly in the Corpus region, and our soon-to-be-open South Texas Gateway Terminal, which was originally developed to export large volumes of U.S. crude oil on very large ships.

“But in the near term, we will provide up to 10 million barrels of storage capacity to again help preserve the value of U.S. crude  production here in the near term.”

Muslih said he expects that things will cycle back and the infrastructure already developed in the area has helped the oil and gas industry absorb the shock wave of the falling prices. He added that this infrastructure will play a key role in recovery as demand begins to once again rise.

“I think that’s what we all certainly hope for,” Port of Corpus Christi CEO Sean Strawbridge said.

Mounted tensions

The big question on everyone’s mind is how long will it take for this supply/demand imbalance to work itself out globally given that the industry saw nearly 30 million barrels a day of demand destruction on a global scale?

Strawbridge added that China is the world’s largest LNG consumer, and they are slowly coming out of the pandemic, which should be good news. At the moment, tensions between China and the United States are strained, so how will that affect shipments to the country?

“I’m going to tell you something you already know,” Cheniere Energy Senior Vice President for Policy, Government and Public Affairs Christopher Smith said. “Trade tensions with China present us with some challenges. When you look at the global LNG market you know China is an important market, but one of the things that I’ll emphasize – and this is the way that we think about all of our business – ours is a decadal business, our investments are decadal. These are multi-billion dollar investments for each train and so the thing that we emphasize is that our business cycle extends beyond the political cycle, like even in the most difficult moments we continue to talk to suppliers, and we continue to talk to buyers in China. We are the connective tissue that connects drillers in West Texas with buyers in Beijing. 

“We think that business fundamentals of those connections continue to be good,  and we need to be kind of bullish on our long-term prospects.”

Smith added that Cheniere will continue to have relationships with China and others because they’re not only selling natural gas, they’re selling the reliability of our suppliers, selling the reliability of the Cheniere infrastructure in Corpus Christi and Sabine Pass and selling the overall regulatory environment in the United States. He said dealing with Cheniere should ensure customers that the product is going to be managed in such a way that the product overall is going to be attractive, especially when it comes to methane emissions.

“I think energy plays a pivotal role in our trade discussions with China, both oil and gas, and Cheniere is certainly at the forefront of that,” Strawbridge added.

Environmental impacts

The industry leaders also spoke briefly about an issue where they see a lot of criticism – the oil and gas industry’s impact on climate change.

“I think oil and gas is the real leader in environmental progress, and it’s clear that all of us here know there’s a global responsibility to care for our planet,” TXOGA President Todd Staples said. “And that’s why the oil and gas community is doing so much when you look at us using technology and using innovation. While production has skyrocketed over the last decade, carbon dioxide emissions have declined by double digits. Methane emissions have declined by double digits.

Staples said that climate concerns were one thing, but climate hysteria is another. He added that the industry needs to be smart in the way they meet their energy needs, and that’s why they created the Texas Methane and Flame Coalition, to come together to talk about ways to mitigate flaring to mitigate methane emissions, all while continuing to meet the energy needs that our world depends on.

Staples said that 96% of the products U.S. citizens use every day come from a component of oil or natural gas. He said people need to realize that the quality of life that they enjoy today is because of the commitment to innovation and technology, using artificial intelligence, carbon capture utilization and sequestration, using drone technology, innovating leak detection and repair equipment along with cleaner burning fuels.

“I think there’s a bright energy future,” Staples said. “I think we will continue to see breakthroughs on environmental progress that will enable this industry to continue to be a strong partner and to have the energy security that is essential for national security, and we proudly and boldly embrace these steps that we’re making.”

The uncertain future

“Out of chaos comes opportunity,” Strawbridge said quoting Sun-Tzu’s “The Art of War.”

He asked what the oil industry leaders should expect in the wake of COVID-19 in the state.

“Texas leads the way in the energy space in the United States,” Moda Midstream CEO Bo McCall said. “The amount of investment and technology that has gone in over the last five years has been remarkable. As you see in the Port of Corpus Christi and the Coastal Bend itself, billions of dollars continue to be invested.

“This is an unprecedented blip in the energy industry, and we’ll see how we come out on the backside of that, but (Moda Midstream) is very excited about the long term position.”

Staples added, “Well, it’s certainly been painful, and we know we’re not through the choppy waters yet. I think if you look at the demand destruction and how rapidly this industry has responded to try to bring into stabilization the demand and supply elements, I think it’s a real signal of the potential and moving forward.”

Smith said that the energy industry is a collective story of partnerships, and they must all work together to get their products from distributors and out to customers as soon, and as efficiently, as they can.

“We have to do all this together,” Smith continued. “We’ve got a common goal. We’ve got a common mission. 

“But when you look at the attractiveness of U.S. LNG on the global market, again, what we’re offering is that collective set of partnerships. And that’s not something that we’re building overnight. It’s not something we’re building right now in the COVID era. It’s something that we are capitalizing on, all the work that we’ve done over the years.

“So I remain very confident in the prospects for the energy markets in Texas. For U.S. LNG and for our future ability to continue to compete on the global market.”