File photo
File photo
According to Bloomberg, America’s biggest oil-export port is prepared to cut its spending in half.
Texas’ Port of Corpus Christi is preparing for its customers to start cutting back after global oil prices dropped over the past few weeks. The hub says it will possibly defer more than a third of its capital budget for 2020 after the hub witnessed the worst price rout in nearly 30 years.
“Certainly you can expect there’s going to be a hit on exports,” said CEO Sean Strawbridge, adding the hub is reviewing its capital plan and making adjustments where cuts are needed.
The majority of the port’s contracts are based on take-or-pay clauses. However, this doesn't change just because the price of oil does. Take-or-pay clauses are prevalent in long-term supply contracts in the energy industry. This means the hub would get paid whether barrels are shipped or not.
Early losses of the price crash could be the two pipelines that the hub has under construction. The two pipelines are contracted with Phillips 66’s Liberty and Red Oak projects. The pipelines are being constructed to connect the Rocky Mountains and Cushing, Oklahoma, respectively, to the hub.
“It wouldn’t surprise me if those lines were delayed,” Strawbridge said.
However, Phillips 66 says the timelines for the pipelines are still on schedule.
In January, the port oversaw about 40% of the U.S. oil exports or 1.38 million barrels a day. With the new pipelines in operation, those numbers have the potential to double or even triple.
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