Potential customers in Asian markets impacted by the Coronavirus are creating roadblocks in the race to build oil-exporting terminals offshore Texas, according to Sentinel Midstream’s CEO, Jeff Ballard.
Ballard said he hoped the outbreak will mostly have ended by the summer, but added: “The coronavirus is a big gut punch right now. It’s put talks on hold.”
He said in an interview this week that negotiations are stalling. Sentinel’s Texas GulfLink deepwater terminal project remains on schedule, but the spread of the COVID-19 virus comes just as the company is trying to nail down contracted shippers and buyers, especially in Asian markets.
Dallas-based Sentinel, a private equity-backed start-up, is the underdog competing with the much larger Enterprise Products Partners to build large oil-exporting terminals offshore Houston.
The virus has put a halt on traveling to Asia to meet with potential customers. Any communications are only by phone and email, which Ballard said isn’t his normal style: “It’s not comforting because I’m a face-to-face person.”
In unfortunate timing, the outbreak comes months before the US Maritime Administration is expected to start handing out the first permits to commence construction on the deepwater terminals that would allow VLCCs to fully load in the greater water depths.
Conventional wisdom within the industry said the market would support one offshore terminal in the Houston area — likely SPOT — and another offshore of Corpus Christi — Phillips 66’s Bluewater terminal. But Sentinel believes there’s enough market demand for two terminals offshore of Houston, Ballard said.
“Is there enough for two?” Ballard said. “The market wants competition. It keeps people honest.”
Ballard believes Sentinel is now only about a month behind Enterprise in the permitting process.
He said the expectation is Sentinel will get the final permit anywhere from June to September and start construction as early as the third quarter. Construction would take 18-24 months, allowing for a potential start-up in mid-2022, (which is roughly the same timeline for SPOT).
Elsewhere, last week Magellan Midstream Partners confirmed its interest in partnering with Sentinel. Texas GulfLink’s pipeline would connect to Magellan’s large East Houston pipeline and storage complex, which also is a major pricing hub.
In January, Sentinel added momentum by signing on oil and gas trader Freepoint Commodities as an anchor shipper on the project. SPOT has Chevron as its anchor. Both offshore terminals are expected to connect to Exxon Mobil’s planned Wink-to-Webster crude pipeline system from the Permian Basin.
For more information visit www.sentinelmidstream.com