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Oiltanking returns to Indonesia

The facility benefits from a strategic location outside the Singapore Straits
The facility benefits from a strategic location outside the Singapore Straits

Designed to serve the growing demand for petroleum products in Asia, Oiltanking Karimun promises to be a key player in the competition for efficient storage

Strategically positioned in the Singapore Straits and perfectly placed to participate in Platt’s trading environment, Oiltanking Karimun is the manifestation of the company’s continued investment in the region to maintain its competitive advantage.
Sitting just outside Singapore, where land scarcity is significantly constraining new terminal developments, the new terminal serves the growing demand for petroleum products in Asia with 730,000 m3 of capacity.
The facility, a joint venture between Oiltanking and Gunvor Group, recently received 60,000 metric tonnes of petroleum and petroleum components.
An attractive proposition is the fact that the facility in Indonesia has a glut of ready-to-build land to allow for further expansion. The region is still grappling with market imbalances including refinery closures in Japan and Australia coupled with increasing demand.

The company returns to Indonesia after selling a facility in Merak back in 2014.
As the supply and demand interplay starts to balance out in the region following a period of healthy demand, the storage environment has become far more competitive, underlying the importance of continual investment to maintain a slice of this lucrative trading environment.
In an interview with Tank Storage Magazine, Sjoerd Boer, vice president of Oiltanking Asia Pacific, says that the company’s continous substantial
investments in the region is now starting to bear fruit in this competitive environment.
He says: ‘Demand has been healthy over the last couple of years and as a result a substantial amount of capacity has been added.
With supply now coming more in line with demand, dynamics are changing as well. We see contract tenures shortening and customers are being more critical before entering into new agreements and are more demanding when it comes to the performance capability of the terminals.
‘There are a few players and companies that operate in this increasingly competitive environment who are now, more than ever, critical in their choice of logistics providers.
We have seen that other terminals are finding it increasingly difficult to compete for high profile customers whose business determines the market these days.’
In addition to more exacting requirements from some high-profile customers, smaller customers are slowly being pushed out of the market by larger organisations, who have more capital and thus can take on bigger risks.
‘Since 2008 demand dynamics have changed considerably, for example following much more transparency in the trading environment,’ says Boer.
‘Competition is now severe between trading companies, where it has increasingly become about size, access to systems or higher risk appetite to retain the same, or even lower, margins.’

The flexibility and efficiency of Oiltanking Karimun reflects the growing transparency in the market which has driven shorter turnaround times and the ability to handle many sensitive products simultaneously.
The terminal can serve various markets and product segments ranging from clean petroleum products and fuel oil. This diversity also allows it to adapt to the ever changing demand flows.
Boer explains: ‘Demand has been healthy although we seem to be slowly moving towards a market where supply seems to be in line with demand. Of course it also differs by product.
‘The fuel oil market for example, is a market which will decline over the next 10 years following the implementation of the new sulphur cap regulations in 2020 or 2025. This could potentially impact the demand for fuel oil storage in Singapore, currently the largest bunkering market in the world.
‘However, despite this healthy demand for storage, limited land availability and a scarcity of waterfront access in Jurong Island has made it difficult to grow further there. We have a lot of experience dealing in Indonesia and Karimun is only 25 nautical miles from Singapore, so when the opportunity crossed our path, we seized it.’
Along with the rest of the world, the region has also benefited from the low oil price and contango market however the effect on individual terminals varies greatly and the impact is not lasting.
Boer explains that Oiltanking has a diversified portfolio of customers in the Singapore Straits and all of them are in the industry for long-term plays and thus are not always influenced so much by the fluctuating market structures.
‘Our portfolio includes not only traders but IOC’s, NOC’s, chemical players and customers with long-term vested interests. Singapore is
also a premium location for many good reasons and for pure short-term contango play, customers will start searching for less favourable (and cheaper) locations first.
‘Also, apart from contango economics, for petroleum, blending economics are just as important for our customers when it comes to

The facility benefits from a strategic location outside the Singapore Straits