Following the sale of its two biggest US assets in 2014, Oiltanking is on the expansion track again with a newly acquired terminal and ambitious plans for a new deepwater facility in Texas
Oiltanking North America’s decision to re-enter the crude storage sector was a pragmatic one supported by favourable global market conditions and better shale economics.
The company’s North American division has hit the headlines recently following the acquisition of Oiltanking Galveston Country terminal and a 220 acre parcel of industrial land in Texas City for the development of the Texas Independent Deepwater Expansion terminal (TIDE).
Two years prior to this, the company sold its Oiltanking Partners entity, comprising storage assets on the Houston Ship Channel and in Beaumont, Texas following a period of rapid growth as a result of the shale boom. The proceeds from the sale were invested back into the company’s growth plans both in the US and internationally.
However, the sale left a hole in Oiltanking’s North America portfolio and has since driven the company’s ambition to re-enter crude storage and the flourishing export and import markets in the Houston and Texas City area. Houston is home to around 2.5 million barrels per day of refining capacity and its ship channel has more than 50 million barrels of storage capacity, which is capable of receiving and sending out large volumes of crude, oil products and petrochemicals.
In an interview with Tank Storage Magazine, Jerry Hardman, director, business development & commercial, explains that the need for additional infrastructure in Houston, which attracts a significant majority of crude North American shale plays, supported the company’s decision to invest.
He says: ‘Houston’s existing infrastructure allows for export capabilities not seen in any other American port. As US crude production continues to grow again, mainly due to a more favourable global oil market and ongoing progress being made in improving shale play economics, it needs more outlets than Houston can provide.
‘The need for this infrastructure and outlets has lent support to Oiltanking investing in a terminal with crude export capabilities.’
The TIDE terminal will comprise an initial storage buildout of more than three million barrels, with the potential to add a further 10 million barrels as well as the construction of a finger pier with two deep-water docks with 45 foot draft, with the potential to extend to five. This makes the terminal the only independently-owned, private ship docks in Texas City.
Upon the completion of the first phase in late 2019 the terminal will form a viable export/import/blending hub alternative in the Houston market offering significant flexibility and optionality. It will also be well-positioned to cater for NGL’s and clean refined product flows.
Diversifying its portfolio further, the company also acquired the Galveston County terminal, which serves the specialty chemicals and petrochemicals market with 430,000 barrels of capacity spread over 78 tanks. It has ample room for additional capacity expansions and accompanying logistics infrastructure.
Hardman says the facility will increase the company’s chemical storage footprint and will give it opportunities to expand into new products or projects.
Both acquisitions are situated close to, and support, the company’s Texas City terminal, which offers sophisticated infrastructure with 3.5 million barrels of liquid petroleum products, renewables and chemicals storage capacity.
The Texas City facility is strategically located at the mouth of Galveston Bay, allowing for deepwater access to and from the Gulf of Mexico. Additionally it also faces low congestion compared to Houston, allowing for quicker ship turnaround times and little to no demurrage.
The wider Texas City area has more than 800,000 barrels per day of refining capacity with the likes of Valero and Marathon’s Galveston Bay refinery, which, after integration and expansion, will be the second largest refinery in North America.
Hardman says there are several regions in the US of particular interest to Oiltanking as part of its growth strategy – the Gulf Coast, Midwest and East Coast.
‘The Gulf Coast accounts for the majority of crude oil, petrochemical production and refined product output in the US,’ he says.
‘Therefore, it stands to reason there are more opportunities here in storage and logistics optimisation than in most regions of North America. The Midwest and East Coast are also attractive but for various reasons.
‘The Midwest is the second largest region for production and the economically advantaged refineries are looking for additional outlets to increase net backs and fill market ‘shorts’ typically supplied by other regions. The East Coast has some of the highest petroleum consumption rates in the US and is highly dependent on imports for both crude and refined products supply.
‘In fact, the South Atlantic region has been experiencing higher population growth rates in the past decade. As storage terminals and logistics are Oiltanking’s core competency, these areas of high production, changing product flows and population increase should be focused on.’
As part of its global growth strategy, Oiltanking is also looking to diversify its storage portfolio and as such, has developed a gas strategy to grow its position in gas.
‘We plan to expand into natural gas and natural gas liquids logistic infrastructure. We plan to achieve this through expansion at our existing facilities and acquisition and I would like to see us acquire gas liquids assets in North America in the next one to two years.
Hardman adds: ‘I hope that Oiltanking achieves and surpasses the goals we have set for growth in North America. I also hope that we continue to expand our existing assets, complete the development of the TIDE terminal and acquire assets with unique attributes and/or locations.’