Sean Strawbridge: Leading Growth at the Port of Corpus Christi

These are exciting times for everyone involved with the Port of Corpus Christi. On September 9, 2017, the Port of Corpus Christi agreed to terms with the U.S. Army Corps of Engineers on a plan to widen and deepen the Corpus Christi Ship Channel. This news became the centerpiece of a long string of positive developments related to the port and its future that took place during 2017.

THEO-T-first-US-crude-export_16x9The joint project with the Army Corps of Engineers will widen the ship channel to 530 feet, making it wide enough for two-way ship traffic, and deepen it to a depth — 54 feet — that will allow all but the very largest class of super-tankers and cargo ships to not only come into the port, but also leave it after having been fully loaded. With the U.S. oil industry’s rush to expand exports, this will be a major improvement to the port’s service offering. While these larger tankers have to this point been able to enter the port, they’ve not been able to take on full loads because the ship channel’s current depth of 47 feet cannot accommodate their full displacement.

While the Port of Corpus Christi began studying the need to deepen and widen the ship channel in 1990, the 2015 decision by Congress and President Barack Obama to reverse the decades-long ban on exports of crude oil produced in the United States lent the project a greater sense of urgency. Since the repeal of the ban went into effect in late 2015, U.S. volumes of crude exports have skyrocketed, from around 300,000 barrels of oil per day (BOPD) to the 1.8 million BOPD estimated by the U.S. Energy Information Administration (EIA) for September 2017.

Leading Growth at POCCA_FINAL EDIT LG

It will come as a surprise to many that about half of that daily export volume of crude oil moves through the Port of Corpus Christi; it may surprise even more to learn that the port of Corpus Christi is now the fourth largest port by tonnage in the United States.

“That’s really happened over the last decade,” says Sean Strawbridge, the Port’s new Chief Executive Officer. “The port has been around for 91 years, and it was a sleepy little port for a long time, one that was land rich and cash poor. But we’ve had a reversal of fortunes in recent years. We have roughly $50 billion in private industrial development going on in and around the ship channel right now.”

That’s a very big number. But if you think Strawbridge might be exaggerating, you’re wrong. Consider the following examples of major investments he’s talking about:

• Cheniere Energy’s Corpus Christi LNG facility scheduled to begin operations in 2018 represents a $13 billion capital investment;

• Austria-based Voestalpine’s hot briquetted iron (HBI) plant, a $1 billion investment that imports iron ore from overseas mines and improves the purity using U.S. produced natural gas, then reexports the HBI to automotive manufacturers around the world;

• Tianjin Pipe Corporation’s and their $1.3 billion seamless steel pipe factory;

• ExxonMobil and Saudi Arabia Basic Industries Corporation (SABIC) are partnering on the world’s largest ethylene cracker unit, with a price tag of $12 billion;

• Howard Energy Partners is investing $150 million in a new oil storage facility, having signed a 30-year lease with the port for the land to house it;

• In December, Houston-based Hilcorp and Switzerland-based Vitol announced plans to build a new storage facility at the port as part of a joint crude export project;

• The projected cost of the project to deepen and widen the ship channel is $327 million;

• The port has plans for more than $1 billion in capital investments over the next 10 years; and

• Corpus Christi’s cross-harbor bridge is being replaced with a new bridge with a 205-foot clearance at a cost of $950 million.

But these and the many other major investments being made in and around the port don’t tell the whole story of the growth being created by this burgeoning facility. The Howard Energy Partners storage facility is a good example: It will ultimately be interconnected with a major new pipeline that will carry crude across South Texas to Laredo, and then into northern Mexico.

Producers and midstream companies are also looking at the Port of Corpus Christi as an outlet for the constantly growing volumes of oil, natural gas and natural gas liquids (NGL) being produced in the Eagle Ford Shale in South Texas and the Permian Basin in West Texas. The list of projects either already under construction or in the planning stages is breathtaking:

• Buckeye Partners is building a line with a capacity to carry 400,000 BOPD from Wink and Midland to Corpus Christi;

• A consortium of several companies is building the 650-mile Epic pipeline, which will have the capacity to carry 590,000 BOPD to the port;

• Permico Energia is building a 510-mile pipeline that will carry Permian natural gas to Corpus Christi. The $2 billion project includes a fractionator plant situated at the Port of Corpus Christi that will separate out NGLs and transport them via pipeline to the Mont Belvieu NGL facility between Houston and Beaumont;

• Magellan Midstream Partners has plans for a 375-mile pipeline that would take up to 350,000 BOPD from Crane to Three Rivers, and then from there either to the Houston Ship Channel or the Port of Corpus Christi;

• Plains All American Pipeline is planning a second expansion of its Cactus Pipeline system that would up its capacity

from a current 390,000 BOPD to 575,000 BOPD by fall 2019;

• Pipeline giant Kinder Morgan has plans for a 430-mile pipeline that would transport up to 1.7 billion cubic feet of Permian natural gas per day from Waha to Corpus Christi.

There are other midstream projects underway in addition to those listed here, but you get the picture: The change in export policy, combined with the Port of Corpus Christi’s plans for expansion and major investments in enhanced facilities and services will create a literal revolution in the Texas midstream industry’s capacity to carry oil, natural gas and NGL from the Permian Basin to the southern Texas Gulf Coast.

Strawbridge credits another less-noticeable factor that is currently driving the port’s ability to attract all this new investment: air quality. “We enjoy our air attainment status [under the EPA’s ozone standards],” he says. “Why is that so important? Our air quality is so good here that companies that are making those investments don’t have to buy credits to offset their emissions. We work with them very closely to ensure that attainment status continues, because for us that’s solid gold. Houston doesn’t enjoy that status, Baton Rouge doesn’t enjoy that, Los Angeles doesn’t enjoy that.”

Strawbridge had overseen all of this breathtaking and rapid expansion and investment over the last two years from his previous role as the port’s Deputy Executive and COO. He will have an even more visible oversight role moving forward, because in mid-December it was announced that he would replace longtime Executive Director John LaRue, who has led the port’s progress for the last 23 years. LaRue will remain aboard in an advisory role for the next 12 months, but then will start to enjoy some much deserved time off in 2019.

“I’ve been lucky to work with some really great people in my career,” Strawbridge says, “but the leadership John LaRue has shown here in Corpus Christi is truly exceptional.” After a long and very successful career, Strawbridge considers himself fortunate to be in his current situation:

“This is really a transition; and the great thing for me is, how many guys get to come into a new position and still have the mentorship and the leadership of the previous leader to lean on? John is a tremendous talent and we’re very fortunate to have him. So, I’m really lucky.” That, as we will see, is a sentiment Strawbridge expresses quite often.

A Long and Varied Career Path

Strawbridge began his career as an accountant in the airline industry. After a brief stint there, he got his induction into the shipping industry when a company called SeaLand Service recruited him. He was immediately hooked.

Sean Strawbridge, CEO, Port of Corpus Christi

“SeaLand was owned by the CSX Railroad at the time I went to work with them. But it was founded by a man named Malcolm McLean, whom Fortune magazine rates as one of its top 100 industrialists of the 20th century. He’s the man who invented the model for the modern shipping container,” Strawbridge says. Indeed, McLean, who made his first fortune in the long-haul trucking business, is credited for revolutionizing ship transport when, in April 1956, he loaded 58 fully filled trailer vans — later called containers — aboard a refitted tanker ship, the SS Ideal X, and sailed them from Newark, New Jersey, to Houston. Those trailer vans were ultimately modified into the shipping containers we see today, and the rest, as they say, is history.

“My first job with SeaLand was in Houston,” Strawbridge says, “And that was such a wonderful experience. When you look at the port industry and the maritime industry today, it is littered with ex-SeaLand executives. And that is because SeaLand was such a self-critical organization that really focused on always improving, on process improvement. Early on, I was a manager; and as a manager, your first job, your No. 1 priority, was to prepare your people for advancement. That’s the culture that I was indoctrinated in and it’s served me so well over these years. Whenever I’ve run into old colleagues around the industry, we always laugh and reminisce at the days that we were at this great company called SeaLand. I’m really grateful to have been a part of that — to have had that experience early on has been very valuable, and it has guided me through the rest of my career.”

After nearly 10 years with SeaLand, Strawbridge left to take a position in the investment banking industry and quickly discovered an entirely new and different world. “At the time I thought that every company was like SeaLand,” he says with a laugh. “When I left and went into the investment banking industry, I very quickly realized that it was a completely different culture in investment banking, in the world of high finance. I spent four years in that world, and it serves me well today. But the maritime industry beckoned and I returned to it in late 2002. Everything happens for a reason. I’ve been extremely fortunate.”

With a more recent employment history that includes stops in Long Beach, California, where he was Managing Director for the Port of Long Beach, and Palm Beach, Florida, where he served as Vice President of International Asset Development with the Oxbow Corporation, Strawbridge has accumulated a broad portfolio of training and experience that make him uniquely qualified to fill the large pair of shoes that LaRue, who has led the Port of Corpus Christi for the last 23 years, will ultimately leave behind.

But why come to Corpus Christi, and why now? “Well, that’s an interesting story,” he says. “You know, this is a small industry, and we all kind of know each other. It turns out that the same recruiter that put John here 23 years ago, Tim McNamara, called me and said he really wanted me to take a look at this opportunity in Corpus Christi,” he pauses to laugh, “and I said, ‘I haven’t lived in Texas in almost 20 years and Corpus [sounds] a little small to me.’

“So Tim says, ‘You haven’t even looked at it, so you don’t know how big it is or has the potential to be.’ Tim was right. ‘All right I’ll look at it,’ [I said].’ So, he sent me the strategic planning, sent me the annual report. I looked at that and then started doing some digging on the Eagle Ford and the Permian, and it certainly piqued my interest.”

“Then I had an exchange with John [LaRue] and decided, what the heck, I’ll come out and interview. I had never met John — I had heard a lot about him but never actually met him. So, I called some folks who knew him, and his reputation proved so stellar, I had to come see for myself. Ultimately John was the reason I decided this was an opportunity I wanted to pursue.” The Commission and LaRue must have felt the same, because they made the offer.Sometimes things are just meant to be.

Feeling Welcome From Day One

Strawbridge considers himself fortunate to have landed in Corpus Christi after a life that has seen stops in places like Seattle; Portland, Oregon; San Francisco; Phoenix; Dallas; Houston; and Panama City, Panama; in addition to Long Beach and Palm Beach.

“South Texans are just real,” he says. “They make you feel like family from day one. In all of those places that I’ve lived, I’ve never truly felt, believe it or not, like I was ‘home.’ I get here and I feel like I’ve been here, and grew up here and was raised here, from day one, just by the way I was welcomed into this community.” He pauses and chuckles, “That’s a real treat for somebody who spent a lot of time with Wall Streeters, large institutional investors, investment banks and private equity firms, you know, where it’s really about the transaction. People here in South Texas, they’re not what I would call a transactional culture. They are a very collegial culture, they’re a familial culture, and it’s really neat to be a part of the Port of Corpus Christi family and the South Texas Coastal Bend community.”

But as friendly as the culture in Corpus Christi is, the city’s laid-back attitude and slow pace of development over the last 40 years present their own set of challenges to the port, which is a large business that currently employs approximately 220 men and women.

“Our No. 1 asset is not our ship channel, it’s not our docks, it’s our people,” Strawbridge reflects. “We have a tremendous amount of institutional knowledge that over the next five years is going to walk out the door and go into the next natural phase of their life.” Indeed, more than 40 percent of the port’s workforce will be eligible for retirement in the next five years. The challenge the port is facing is very similar to the one the oil and gas industry is facing, where a high percentage of the aging workforce will also be retiring over the next five years, in what is becoming commonly referred to as the “Great Shift Change.”

Of course, the issue around “Great Shift Change” anywhere is: Who is going to be there to come on for the next “shift”? For the port, as in the oil and gas industry, it’s a really good question: “Today at the port, out of 220 employees we have eight millennials. That’s eight employees under the age of 30,” Strawbridge says. “In Corpus Christi, we’ve got two great educational institutions here — well, three if you count Texas A&M [University]-Kingsville — but in the city itself we have Texas A&M [University] Corpus Christi and Del Mar College. Those schools educate tomorrow’s leaders; they get their degrees and then most choose to move out of Corpus Christi. They move to Austin or San Antonio, Houston or Dallas, or elsewhere for that matter. So, one thing we — meaning everyone in the city and the region — have got to do is to create an environment that makes those young people want to stay right here in Corpus Christi. And I hope that all of us as the region’s leaders, not to mention us as fathers and mothers, will work on that goal together, to create that inviting environment for change and youth.”

Under Strawbridge’s leadership, the port is also taking action to ensure some of those young people choose to stay in Corpus Christi to have a career opportunity in port management. Not surprisingly, Strawbridge draws strongly on his decade with SeaLand in his approach to the problem.

“As we go about planning to attract a younger demographic, we’ve set the table for creating a culture that will really position the Port of Corpus Christi for success going [into] the next decade,” he says. “I’m a results-oriented manager, but it can’t be results for results’ sake; it has to be results obtained within the construct of a certain set of core values.

“We didn’t have a stated set of values at the port when I arrived, so we’ve gone about creating them. Those values are what we call our SEAPORT values. SEAPORT is an acronym that is easy for our folks to remember and understand. Starting with S for safety — because of course safety of our people always comes first — empowerment, accountability, preparedness, optimism, respect and teamwork. Those are the stated organizational values that we have rolled out to our team, not only because we truly believe [in] adherence to those values, but they will hopefully help to create the same kind of trusting yet self-critical work environment that I was able to cut my teeth on when I was with SeaLand.

“The gratitude that I have for that experience [at SeaLand] is something that I want to impart on the rest of the organization here. Priorities will always change in any workplace, but these values never change, and they’re about giving people that same kind of job-enriching experience. What you don’t want is people watching the clock and [who] can’t wait to get out of here; you want to create an environment where they can’t wait to get to work, and they’re excited about being here and the work they are engaged in. I believe we are on the right path to achieving that environment.

We are in a natural transition right now. We’ve got a very experienced staff — our average age is 50, and our average tenure is over 12 years. The average American worker is 42 and the average tenure is four years, yet we’ve got people who’ve been working here nearly 40 years, a lot of 30-year-plus folks and a tremendous amount of 20-plus-year staff. We certainly don’t want those people walking out the door without impacting their knowledge and wisdom and mentoring tomorrow’s leaders. It’s the one thing that keeps me up at night, though the opportunity for tomorrow’s leaders today is very exciting.”

The Energy Port of the Americas

When most people hear the word “port,” they think about ships. Ships coming in and out, ships being offloaded and reloaded, big ships, medium-size ships and small ships — in most of our minds, a port is that place where the ships are.

But, as previously mentioned, the Port of Corpus Christi is about much more than ships. It’s about storage facilities, refineries, LNG export terminals, pipelines, rail and diversified cargoes. We asked Strawbridge to talk about how the port works and this great diversity of activities that takes place there each and every day.

“What makes the port work is the fluidity and the connectivity of the different modalities that goods move. For example, when you look at a container port, what makes a container port work is its connection to roads, highways and railroads due to the intermodal nature of containers. It’s no different with a port like Corpus Christi, only our ‘roads’ are primarily crude and natural gas pipelines. Rail is also important to us as is evidenced by the $50 million in rail improvements the Port of Corpus Christi has undertaken in the last four years. These investments improve our connectivity to Mexico and the U.S. Midwest for our agriculture customers, as well as new businesses such as [ExxonMobil-SABIC].

“The Intracoastal Waterway, which serves our barge movements, which are approximately 40 percent of our total tonnage, is mission critical.

“All ports are waypoints in a supply chain. If your goods are stuck in a supply chain, they’re not passing the cash register. In other words, in a container market, if a container filled with Nike shoes is stuck somewhere in the supply chain, those shoes aren’t on the shelves and ready to be sold. It’s the same concept for us here — only with crude, [natural] gas and petroleum products — our primary function is to keep those supplies moving.”

“If those pipelines bring oil or gas here and we don’t have enough storage capacity or enough deep draft channel access or enough docks, that’s a problem. Thus we tend to focus on the areas where we can make a significant difference. Today, that’s ensuring we deepen the Corpus Christi Ship Channel, the main artery for the region’s commerce. We are a landlord port so we are always looking at developing available land for its highest and best use, keeping in mind a modality-agnostic approach. In other words, whether it’s coming in or out by pipe, by vessel, by rail or by road, we want to make sure that there are no bottlenecks in our system.”

It is clear that the port is not just about ships, but transporting petroleum products via ship and barge is the port’s major and most rapidly expanding business. When we noted that Jarl Pedersen, the port’s Chief Commercial Officer, told an audience at a recent conference that more than 70 percent of the crude oil coming into the Port of Corpus Christi is then exported to be refined, Strawbridge was eager to expand on the subject.

“We are an energy port, and three or four years ago we decided to start referring to ourselves as “The Energy Port of the Americas,” he says. “That was a very bold step for us to take, but we have since demonstrated that we are indeed the energy port of America. We have become the largest port for the export of U.S.-produced crude, and not by a little but by a lot.” He notes that the EIA recently reported that the U.S. is currently exporting almost 2 million BOPD. “Talk about that, nearly 2 million barrels, almost half of that goes right out of the Port of Corpus Christi.”

The EIA’s projection that the volume of U.S. crude exports will double by 2020 is not at all intimidating to Strawbridge, who says, “We believe that if you looked at it going from 2 million to 4 million barrels per day, this interpolates into nearly double our current production at the Port of Corpus Christi, possibly more.” Robert Duvall’s character in the movie True Grit, Ned Pepper, might call that “bold talk,” but given the Port of Corpus Christi’s demonstrated ability to manage great expansion and change, it would probably be a mistake to doubt Strawbridge.

“We’re obviously in a growth mode right now,” Strawbridge continues, “I’ve managed growth, I’ve managed steady state, and I’ve managed decline. I will tell you, the hardest thing to do is manage growth because you don’t know exactly how long it’s going to grow, how far you’re going to go, or how much capital you’re going to need.

“But all the signals we’re getting from our customers and from the market today are really pointing toward continuing to invest for our future, and as stewards of these public assets we need to take full advantage of those opportunities when they present themselves. We’re a government agency, and as a government agency these are public assets. What we want to be and what we aspire to be, and what I think we already are is a shining example of government that works in a time when we so rarely have the opportunity to say that.”

A government agency with its own taxing authority that has never taxed anyone in 91 years. What a concept.

Building Bridges, Literally

One of the most visible investments of the port’s funds over the next few years will be the project that recently broke ground that will replace the existing 138-foot-high cross-harbor bridge with a new, even higher bridge that will have sufficient clearance (more than 200 feet) to allow the passage of the largest Panama Canal-compliant super-tankers. Set for completion in 2021, it is a major project that is critical to the port’s plans for future growth.

It is a project that is near and dear to Strawbridge’s heart, and a project that, without the proactive steps taken by the Port of Corpus Christi Commission, might not have happened.

“That’s what the Port of Corpus Christi represents today. We fund all these investments from revenues generated through users of the port. While the port does have tax authority, we’ve never exercised that authority in our 91-year history and we have no intention of exercising it at this point. We are going to continue to operate as a business — a for-profit business — but unlike the private companies that distribute [their] profits to [their] shareholders, our profits go right back into the surrounding infrastructure. Our shareholders are the users of the port, and they all benefit from us reinvesting those earnings back into the infrastructure to support their growing businesses.”

“Well, let me be very clear about that,” he begins, “it’s an extremely important infrastructure project for the region. It’s [close to] a billion-dollar bridge funded by TXDoT, by the Federal Highway Administration [FHWA], and by the Port Authority, which approved $85 million worth of cash and land to be dedicated to the project. Had it not been for the bold actions taken by the Port of Corpus Christi Commission in 2015, that project would likely have disappeared. The Port Commission saved that project, and we’re very proud of that.”

The back story: A few years ago, residents of a neighborhood that would have been impacted by the construction project and the right of way for the new bridge filed a civil rights complaint in federal court against the Federal Highway Administration. At that point, a lot of finger-pointing ensued.

“Essentially, the feds said, ‘Hey, this is a state problem,’” Strawbridge chuckles, “And TXDoT said, ‘This is a regional problem.’ When it got to that point, it was essentially made clear to us that if we didn’t resolve that problem here at a local level, that the billion dollars of funding earmarked for the bridge were going to bet reprogrammed elsewhere. Dallas would have loved to have those funds, Austin would have loved to have those dollars, Houston certainly would have grabbed that money.

“So, the Port Commission took a radical step to reach an agreement with the neighborhood community … in the form of a voluntary buyout of over 500 properties. Never been done before anywhere in the country; and the fact that I was able to take that responsibility with the wonderful staff that we have and put that commitment to the actionable program that we have today is just a testament to the overall commitment by the port, by port staff and their recognition of the value of this new bridge to the region.

“I came to the Port of Corpus Christi in July of 2015, and it was just a few months later, in October, that the Commission took the decision and reached this momentous agreement with FHWA and TXDoT. To see a port commission take that leadership role really signaled to me that I was in the right place, that this was a pro-growth, but a responsible growth, kind of governance. I’ve served many boards. I’ve served some good boards, and I’ve served some bad boards. And I will say that I am in the right place right now, because I serve at the pleasure of one of the best boards that I’ve ever been affiliated with. So, it’s just another reason why I feel extremely fortunate that I’ve landed here in Corpus Christi.”

Responding to Hurricane Harvey

If you believed the news media reports about the landfall of Hurricane Harvey last August, you would think the city of Corpus Christi got lucky. Most reports claimed it had dodged a bullet, because the eye of the storm crossed into Texas right over the coastal town of Rockport about 20 miles up the coast, putting Corpus on the so-called “dry side” of the storm. But no one in Corpus Christi thought they had dodged a bullet with Harvey, which had very significant impacts on the city. At one point, the storm caused a large drill ship to come loose from its moorings, therefore blocking the entrance to the port for several days.

We asked Strawbridge to talk about how the port responded to the challenges the storm created.

“I was in the emergency operations center when the storm hit, where we were sheltered in place. We had our first responders, our entire police force, our emergency management team and our incident management team all here during the storm. And we were here for five days. I didn’t sleep in my own bed for five days. I’ve never gone through a hurricane before. I’ve done a fair amount of incident management training and have been through a couple of significant incidents.” He laughs, “So I will tell you, this was a new experience.

“When I got here in 2015, the port didn’t have an emergency management coordinator, didn’t have a robust emergency management platform. So, having started from where we were two years ago to how we were prepared for Hurricane Harvey, I couldn’t have been more pleased. The team really came together to respond to the demands of that storm. We got the call on that vessel [the drill ship mentioned previously] about 1:30 in the morning and the call was not so much on the ship; it was on the two tugs that had been sunk by the drill ship as the ship broke free from its moorings.

“There was no crew on that drill ship — it was being held in place by the two tugs. Our concern, first and foremost, was for the safety of the crews of those two tugs; and we worked in coordination with the Coast Guard to try to stage communication with those crews. When you’re in the middle of a storm, though, nobody is going to respond. But the good news is, at first daylight the Coast Guard had helicopters out there and we had our boats out there, and those crews were safely removed from those tugs.”

When it came to getting the channel cleared, Strawbridge and his team worked closely with their federal partners. “The [Army] Corps of Engineers has responsibility for maintaining the channel, but the United States Coast Guard has responsibility for the security of the channel. So, with the Coast Guard, who has their incident command center set up over at the fairgrounds, we had a port representative at their command center. The reality is that we all have to work together on incidents such as this. The port doesn’t operate in a vacuum. The port is a regional asset, and we rely on all of our partners at the federal, state and local levels. Through what I think was great coordination with all of those partners, we were able to solve that issue, get that drill ship removed from the channel and safely over to Gulf Marine Fabricators, where it could be prepared for its journey to Brownsville to be scrapped.

“At the end of the day, that’s where the port, the value of the port, really comes into action. We had a barge fire recently and unfortunately there were two fatalities. I got the call on that incident at 4:30 in the morning when it happened. I was here shortly thereafter, as was our Director of Operations, and we stayed here making sure that the response teams had everything they needed.

“And that’s really my job: to ensure that the professionals that have been hired to do the job that they’ve been hired to do have all the resources they need; otherwise, I stay out of their way and make sure that they’ve got a fresh pot of coffee on.”

Andrew Carnegie is quoted as having once said, “No man will make a great leader who wants to do it all himself or get all the credit for doing it.” He could well have been talking about Sean Strawbridge.

 

About the author: David Blackmon is Associate Editor for Oil and Gas for SHALE Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles, the last 22 years engaged in public policy issues at the state and national levels. Contact David Blackmon at david@shalemag.com.

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