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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Saudis Bet Big On Houston As Drilling Activity Picks Up

Oil Rig

A Saudi logistics company has just opened a Houston office to seize the opportunity to ship increased volumes of oilfield and plant construction equipment to the Port of Houston as the Texas and U.S. drilling activity is gaining momentum.

Bahri Logistics – which had opened its U.S. headquarters in Baltimore back in 1992 – is now opening an office in Houston to take advantage of expected higher demand for oilfield equipment, called breakbulk cargo in the shipping industry: these are large items that need to be loaded and shipped individually rather than in containers.

Bahri, or the National Shipping Company of Saudi Arabia, is 22 percent owned by the Public Investment Fund of the Saudi Government, 20 percent by Saudi Aramco Development Company, and the remainder is held as public shares by Saudi nationals. Its 2016 revenues by segment showed that oil shipping accounted for 72 percent of revenues; general cargo for 13 percent; chemicals, 11 percent; and dry bulk, 4 percent.

Ibrahim Al-Omar, Group CEO at Bahri, said in the company’s press release:

The Port of Houston is the leading breakbulk port in the U.S. and is consistently top-ranked in terms of foreign waterborne tonnage. Moreover, Bahri is the leading direct RoCon liner service provider between the U.S. and the Middle East.

The manager also spoke to Houston Chronicle, saying:

Whenever you see people running from any business, I think it’s the time to enter.” Related: Are U.S.-Saudi Relations Turning Sour?

Bahri’s Houston office will help firms export cargo for construction projects in the Middle East, while also helping companies import materials for the construction of LNG and petrochemical plants in the Houston area.

Looking forward, we think it’s the right time actually to invest here in Houston and to have a very strong presence preparing for the boom that will come in the future,” Al-Omar told the Chronicle.

Bahri group plans to bring its Bahri Chemicals business to Houston later in 2017 to monetize on the petrochemical boom, and then its oil division at some further point in the future, Al-Omar said to the Chronicle.

A Saudi company boosting its presence in Texas is nothing new. State oil giant Saudi Aramco – which indirectly owns part of Bahri – is set to become the sole owner of the largest refinery in the U.S., the 600,000-barrel-per-day Port Arthur,Texas, refinery, after it splits the assets and liabilities of its joint venture with Shell later this year.

While expectations are for a strong rise in the oil and gas and related facilities industry, the 2014 oil price crash quite naturally affected oilfield equipment cargo transportation.

Shipping of breakbulk cargo amid the oil price rout had suffered, with steel for oilfield equipment transportation to Houston dropping by 39 percent in 2016, the Chronicle reports, quoting Greater Houston Port Bureau’s analysis of Census Bureau data.

According to the Port of Houston Authority, facilities owned and operated by Port Houston handled 34.8 million tons of maritime cargo last year, down by just 3 percent over 2015 despite headwinds from reductions in steel.

“Steel imports were down as expected for the year,” executive director Roger Guenther said in the Port of Houston Authority’s statement.

But the higher and more stable oil prices that have led to a drilling resurgence in Texas are expected to contribute to higher volumes of breakbulk cargo shipping at Houston this year.

Capt. Bill Diehl, president of the Port Bureau, told the Chronicle that he expects Houston’s breakbulk traffic to rise this year, as he has heard that energy firms have started asking manufacturers about prices for potential contracts.

Apart from the Saudi logistics firm, other foreign companies are exploring Houston locations to open offices and capitalize on the petrochemical boom, Robert Kramp, director of research and analysis for Texas and Oklahoma at CBRE, told the Chronicle. Related: Trump’s Budget: Valuing Military Over Energy

However, there’s one big unknown for those foreign firms, and it’s not connected with the price of oil. It’s the potential import tariffs that the Trump Administration could introduce.

So, those companies might be hedging against potential tariffs, according to CBRE’s Kramp.

Still, the fact that foreign companies are now looking to grow their Houston businesses and operations speaks volumes of the recovery in the Texas oil and gas industry.

By Tsvetana Paraskova for Oilprice.com

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