Following a successful first year of operations in Cyprus, VTTV’s general manager discusses future expansion plans for the eastern Mediterranean oil hub
A year on from when the first tanker ships arrived at the newly constructed VTTV facility laden with oil products, the ambition to create an oil trading hub in the eastern Mediterranean has been made a reality.
Its strategic location nestled between Limassol and Larnaca in Cyprus makes it the first storage terminal of its kind in the eastern Mediterranean, connecting Europe and the Black Sea with the booming Asian and Middle Eastern markets.
Following successful completion of the first phase of the 544,000 m3 facility and on the back of growing demand for storage internally as a result of the increasing oil glut, executives at VTTV are pursuing plans to expand the terminal further.
The second phase, which is currently under evaluation has secured an environmental impact assessment approval and would involve the construction of an additional 13 tanks with an extra 305,000 m3 of storage capacity.
In an interview with Tank Storage Magazine George Papanastasiou, general manager for the facility located in the Port of Vasiliko, says that they are in discussions with the port authority to make the business environment they operate in more competitive.
‘Our aim of creating a hub for oil trading in the eastern Mediterranean is coming true.
‘We are willing to make this investment of €100 million in our expansion project as long as the port becomes more competitive to work within.
‘Currently there is a general port charge on cargos which we believe does not reflect the services we receive from the port authority. We are in discussions to reduce it and make it closer to the services that they provide us in order for us to be more competitive to our customers.
‘We have got support from the ministry of transport but it does also depend on the political will of the government as well as the port authority decision on port charges.
‘We are also evaluating the viability of the project, and finding out what level of interest there is in using the extra capacity to get a return on investment.’
The terminal’s geographical location is a key factor in its successful first year of business. Located close to the Gulf of Suez, a key maritime conduit connecting the Middle East to the Asian market, the facility has reaped the rewards of the low oil price with traders expressing significant interest.
Additionally, the terminal also benefits from a deep sea marine port, complete with four jetties and a maximum draft of 17 meters to accommodate vessels of varying sizes up to 165,000 DWT.
Papanastasiou says: ‘We try to have a diverse portfolio of customers so that we are not reliant on the fluctuations of the market. Therefore we have customers including traders who move products from A to B as well as customers who stock products on the basis of speculation on the back of the
The terminal also believes they have a strong offering to companies and oil marketers who are being required to relocate from Larnaca so that the area can be developed for residential use as well as a tourist destination. Currently, much of the oil storage capacity in the country is situated here close to Cyprus’ main airport.
DRIVERS FOR STORAGE DEMAND
VTTI’s decision to invest in Cyprus was a pragmatic one. Not only is it a free trading zone, meaning product can be removed without any tax charges, the country also benefits from a highly transparent tax environment – a factor that is appealing to traders.
‘Traders understand the EU business environment and generally speaking, it is a politically stable country compared to other neighbouring countries such as Libya and Egypt,’ explains Papanastasiou.
Assuming the necessary approvals are secured with ease and pending a decision from the Port of Vasilikos port authority, it is anticipated that the second phase of the terminal, which will be built on reclaimed sea land, will be operational by mid-2017.
‘We can see further development in the future. There is some offshore oil exploration happening in Cyprus and we are watching natural gas developments very carefully and closely.
‘We may decide in the future to invest in infrastructure to supply the Vasilikos Power Station with LNG.’