Enterprise CEO: Houston as important as Hormuz for global oil shipments

HOUSTON (Bloomberg) - U.S. oil-pipeline operator Enterprise Products Partners LP is irked that the Middle East’s Strait of Hormuz hogs the spotlight over the waterway that flows in its own backyard.

“In many respects, the Houston Ship Channel is now just as important as the Strait of Hormuz,” Chief Executive Office Jim Teague said Wednesday on a conference call with analysts. “Neither this country nor the world has ever fully understood or appreciated the importance of the Ship Channel, but the U.S. oil and gas and petrochemical industry is beginning to.”

Teague has good reason to talk up the Ship Channel: Enterprise has devoted more than $8-billion around it over the last five years, he said on the call. On July 30, the company announced deals with Chevron Corp. that will allow for the expansion of its system from the booming Permian shale basin to a terminal in Houston.

Those agreements also supported the investment decision to proceed with an oil terminal in the Gulf of Mexico. The terminal is dependent on a permit approval by the federal Maritime Administration, which will likely come in the second quarter of 2020, Randy Fowler, chief financial officer said on the call. Construction of the terminal will take “a couple of years,” Fowler said.

The Houston Ship Channel is home to the second-largest petrochemical complex in the world and is home to the second-busiest U.S. port by tonnage. Still, it falls short of the Middle East strait, which is the world’s most important oil transit chokepoint, according to the U.S. government. In 2018, 21 MMbbls of crude, condensate and petroleum products such as gasoline -- or about 21% of global petroleum liquids consumption -- passed through it daily.

The Strait of Hormuz has been in the limelight in the past few months after Iran shot down an American drone near it, escalating tensions between the two countries. Later, a British tanker was captured by Iran’s Revolutionary Guard after U.K. forces seized one of the Islamic Republic’s tankers near Gibraltar for allegedly violating sanctions against Syria.

In the Houston Ship Channel, “I haven’t seen any ships have bombs put to their hull. I haven’t seen any tankers seized. I haven’t heard Britain talking about consequences,” Teague said, jabbing at the geopolitical tensions surrounding the strait before claiming U.S. exports have steadied the price of oil amid the disputes.