Deer Park

The Houston Ship Channel (HSC) is one of the busiest shipping lanes in the U.S. Each year, thousands of vessels utilize the waterway, importing and exporting goods ranging from pharmaceutical products to what the Census Bureau classifies as “Leather Art; Saddlery Etc.; Handbags Etc.; Gut Art”. More to the point of today’s blog: over 10 million tons of energy products move through the channel each month. But as ships grow ever larger, the ports and canals that service them must also adapt to be able to handle their increased dimensions. The Houston Ship Channel now finds itself in a situation where it must adapt to meet increasing market demands. Today, we continue our series on the issues facing some Texas ports and the measures being taken to help alleviate them.

In terms of raw tonnage, the Port of Houston is by far the busiest in the United States. The 52-mile-long Houston Ship Channel (HSC) — running from just outside downtown Houston out to an area between Galveston Island and Bolivar Peninsula — is the artery that enables the heavy ship traffic, much of it tied to crude oil, LPG, petroleum products and other hydrocarbons. But in the same way that Houston’s Interstate 45 traffic backs up during the morning commute, the ship channel traffic, which normally runs at about 60% of peak levels, can be (and has been) subject to delays when there’s an accident, visibility problems, or a slow-moving double-wide taking up two lanes. With energy-related export activity on the rise, efforts are underway to address those issues. Today, we begin a series on the issues facing some Texas ports and the measures being taken to help alleviate them.

Any joint venture has its pros and cons for each party, and in an ideal world, everyone involved in a JV sees net benefits from pairing up with a partner. A quarter-century ago, state-owned Petróleos Mexicanos (Pemex) purchased a 50% stake in Shell’s Deer Park, TX, refinery. The JV partners also entered into a 30-year processing agreement under which each would purchase half of the refinery’s crude feedstock and own half the output. Separately, Pemex agreed to supply as much as 200 Mb/d of Mexico’s heavy sour Maya crude to Deer Park and Shell agreed to supply Pemex with 35-40 Mb/d of gasoline to help meet Mexico’s refined products deficit. The partners recently agreed to an early extension of the deal by 10 years from 2023 to 2033, while reducing the supply of Maya crude after 2023 to 70 Mb/d, to be sold at a fixed price. Today, we continue an analysis of the JV and the new changes to it.

Twenty-five years ago, in 1993, the Mexican national oil company — Petróleos Mexicanos, or Pemex — purchased a 50% stake in Shell’s Deer Park, TX, refinery. The joint-venture partners entered into a 30-year processing agreement under which each would purchase half of the refinery’s crude feedstock and own half the output. Separately, Pemex agreed to supply as much as 200 Mb/d of Mexico’s heavy sour Maya crude to Deer Park and Shell agreed to supply Pemex with 35-40 Mb/d of gasoline to help meet Mexico’s refined products deficit. The partners recently agreed to an early extension of the deal by 10 years from 2023 to 2033, while reducing the supply of Maya crude after 2023 to 70 Mb/d, to be sold at a fixed price. Today, we begin a two-part series on the joint venture with a look at how Pemex has benefitted.