This year’s StocExpo Europe took place against more challenging conditions for the storage sector, highlighting the importance of operators to adapt as the market enters a new energy era.
2018 saw the most volatile market for the last four years as sanctions against Iran, bleak Chinese demand and other international events took their toll on markets.
As 2019 progresses, everyone in the industry will be keeping a close eye on global economic, political and trade developments and the possible implications they could have.
However, there are areas of optimism in the storage market, particularly when it comes to the refined products and petrochemicals market and operators should consider investing more in flexible assets to capitalise on these opportunities.
Adaptable and flexible supply chain logistics will be key for the future of the tank terminal industry. The first day of the conference examined the key market trends affecting the sector as well as sharing expert insight on the current and future developments facing the industry.
Stephen Harrison, principal at Nexant, Energy, and Chemicals told delegates that globally, the growth of refined products and petrochemicals will remain strongest in the developing regions of the world where population growth and greater wealth results in net demand doubling to 2030. North America and Asia, in particular, remain the two largest consumers up until 2030.
He said that tank storage capacity will need to adapt to new supply chain structures as a result of new legislation, shifting trade flows as well as emerging forms of energy. For example, Asia and the Middle East will account for three-quarters of new capacity additions globally up to 2030.
Looking at the market in Europe, Harrison said that there is a likelihood of refinery closures in southern Europe and that the requirement for storage in these regions is expected to grow.
Additionally, the changing product specifications will also increase demand for blending requirements in storage facilities.
‘European tank and terminal operators need to be aware of the long-term changes in demand to the global trade in gasoline. Western Europe refiners will need to improve their competitive position.
‘Flexibility will be key to managing the next five to ten years,’ he said. He said that uncertainty in the refined product storage market is expected to continue through 2019 but that in Western Europe in particular, merger and acquisition activity is strong.
THE SECOND REVOLUTION
The next five to ten years will be fascinating for the oil industry according to Jean-Baptiste Renard, CEO, 2PR Consulting.
Looking at what is in store for oil majors and what the second revolution will be Renard said that over the last five years, the storage and energy industry has gone through a revolution, namely the shale oil revolution. The growth of shale oil production, which drove down the barrel price of oil, coupled with continuing technological advances has seen prices drop from $110 per barrel in 2013 to around $60 per barrel today.
‘There is a second revolution coming,’ he said. ‘The decarbonisation revolution. More than half of the new electrical capacity is wind and solar. The world is going towards low carbon.’
He said that it is not a case of if it will happen but when and questioned what this means for oil majors. He projected that there will be peak demand after which time it will then go down.
‘This will kill their business model, so what can they do? They can keep focusing on the right barrels and getting the ones that are not going to be stranded. It is not a matter of being profitable, it is a matter of survival. If you do nothing then it will be extinction,’ he added.
He added that the storage industry is subject to the same challenges and that having the right asset with the right product and flexibility for blending will make a big difference.
Looking in particular at the storage sector in Germany, Frank Schaper, director of the German Tank Storage Association said that the storage market is particularly unique because its primary focus is the distribution of petroleum products. 70% of independent tank storage capacity is located inland, with 30% located on the coast.
‘Tank storage logistics is a complementary function to the core trading business. At the moment everything is fine with the industry but in the future, there will be challenges such as limited product diversification, ageing infrastructure, German regulatory framework, and the energy transition.
‘But when we critically review the challenges, we can find opportunities, such as increasing jet fuel consumption, IMO 2020, which could result in new niches for storage, as well as the growth of LNG as an energy carrier.’
In the afternoon Jon Stenning, associate director at Cambridge Econometrics, examined how the low carbon transition could impact the oil and petrochemical market, particularly the implications of changing demand for transport fuels.
The European Commission’s long-term strategy sets out the required steps to realise a net-zero greenhouse gas economy by 2050 and this could result in a substantial drop in oil demand to 2050 compared to the business as usual model.
Stenning said: ‘The deployment of low carbon technologies is going to accelerate in the near future. This has major implications for future oil demand and prices and will present a clear challenge to the oil and related industries.’
THE DAY AFTER TOMORROW
Every aspect of society has been affected by the digital revolution and businesses need to adapt to this new world in order to survive and win new customers.
Steven van Bellenghem, an expert in customer focus in a digital world, delivered his insights on how to win customers in a world of AI, robotics, and automation.
He explained that we are at the beginning of a new S curve – the AI revolution. ‘It has the potential to change society and the way we work. At the moment people are in between fear and excitement about it.’
According to van Bellenghem, the easy days of digital are over and we are now in store for more complex days as customer assumptions continue to grow. ‘The bar of customer expectation has risen – people now expect more, faster than before and cheaper than before.’
Looking to the next business step change, van Bellenghem says that we are on the cusp of a flip from a mobile mindset to an AI mindset, however, he warned that companies should not purely focus on technology but focus on bringing value to customers.
‘It should be about customers,’ he said. ‘The key question is how can we create value in the new world of digital. Time is your customers’ most valuable resource. You need to first start with the
customer experience and then work backwards. You need to invest in your day after tomorrow.’
Continuing the ‘Terminal of Tomorrow’ theme Matthew Hudson, terminal manager at Shell Haven UK spoke about how to deploy new technologies.
‘Projects work better when they are run by the front line,’ he explained. ‘You should encourage your team to identify bottlenecks and challenges and make a good business case for innovative
Using this method, operators are more likely to accept change, than if they are simply told to use new equipment. Hudson explained how he took one of his frontline operators off his day job for six months in order to focus on deploying new technologies.
When it comes to proof of concept, Hudson explained it’s important for this process to be quick, inexpensive and using a realistic scenario.
As an example, Shell did a proof of concept on a robotics technology in three months. Hudson’s motto is: Try quick, fail fast and win big. ‘A failure is equally as valuable as a successful trial,’ he explained.
Hudson also added how important it was to share successes and failures with the rest of the company, which he does using the sharing site Yammer.
Ronald Backers, business intelligence at the Port of Rotterdam also spoke about the rise of digitalisation. Although the port has world-class infrastructure, Backers recognises that this is no longer enough – and digitalisation has a big role to play in increasing efficiencies and cutting costs.
The port is working on many initiatives – it is currently trying to build a digital twin. The port has also just created an app for bunker deliveries. Since the introduction, customers have been able to decrease delays from 19% to zero.
In addition to the conference, technical presentations were hosted on the show floor in the Innovation Theatre by EEMUA, iTanks as well as VDMA.
StocExpo Europe will return for its 2020 edition at the Ahoy Rotterdam on March 10 – 12 2020. For more information visit www.stocexpo.com.