Latest storage news
Inter Terminals' major chemical storage expansion at its Seal Sands terminal in the UK is almost complete.
Representing the largest organic development project for 10 years, the project comprises new tanks and pipeline links on the back of contracted demand for chemical storage at the facility.
Two 7,000 m3 mild steel tanks have been constructed with internal floating roods and a dedicated import pipeline for receiving product into storage by sea. Additionally, an existing cross-country pipeline is being redeveloped to allow the direct transfer of stored product to nearby chemical manufacturing plants.
A further three mild steel tanks, with a total capacity of 13,000 m3, have also been built with interconnecting infrastructure to enable to export of product by sea and by road via a new tanker loading facility.
The facility is located on the River Tees on England's east coast and the investment demonstrates the company's commitment to working closely with its customer base to identify and develop solutions for specific product storage and handling requirements.
Paul Oseland, commercial director of Inter Terminals, says: 'Our Seal Sands terminal has developed specialist expertise in storing and handling a wide range of chemicals, many of which have distinct storage requirements.'
Total refined product stocks at the UAE port of Fujairah stood at 15.864 million barrels in the week to November 22, up 5.1% from the previous week, despite a major drop in middle distillates, according to data from the Fujairah Energy Data Committee (FEDCom).
Stocks of middle distillates plunged by almost 28% to just 1.531 million barrels, a new record low, and less than half the 3.47 million barrel average for the year so far, according to a report by Platts Analytics.
The latest inventory fall comes as the arbitrage opportunity to move gasoil to Europe is firmly closed, with the East-West Gasoil EFS at a near three-month low of minus $10.32/mt on Tuesday. While the gasoil market has been the weakest performing part of the barrel in recent weeks, both Singapore and Persian Gulf time spreads have strengthened as regional demand improves.
The front-month time spread for Arab Gulf Gasoil has been in a contango since the beginning of November, up from a recent low of minus $1.47/b two weeks ago. On the supply front, sources noted a steady stream of outflows from India and the Middle East in recent weeks. Kuwait Petroleum Corp. is closing a sell tender for 500 ppm sulfur gasoil loading over December 8-9.
FUEL OIL STOCKS STILL LOW
At the same time, stocks of heavy distillates and residues rose by 16% to 9.641 million barrels, a new eight-week high. However, the figure is still below the 10.3 million barrel average since the start of the year.
Fuel oil inventories have been low since the beginning of October amidst a backwardated market structure and sluggish bunker demand. On average, some 2 million mt has left the region each month for Asia, and this is expected to continue into December, Platts Analytics said, as the price incentive for fuel oil supplies to the east remains in place. Front-month Singapore 380 CST swaps have seen a premium of around $7-8/mt relative to Arab Gulf 180 CST for the past month.
Light distillate stocks showed the least variation this week, only edging up 0.9% to 4.692 million barrels. European gasoline has been heading to West Africa and the US, which could signal a more limited supply to meet healthy Middle Eastern demand. Asian supply was seen trending upwards on increased Chinese export volumes expected in November and into December. However, this is likely to be matched by strong demand in Indonesia, Sri Lanka and Vietnam. As a result, the outlook for petrol East of Suez looks unchanged, Platts Analytics said.
The Global Tank Storage Association (GTSA), designed by the industry, for the industry, has been officially launched. Created to represent the needs of the terminal industry worldwide, the GTSA provides a platform for members to share and exchange information on its core values, such as the environment, safety and security.
By creating the world's biggest network of tank terminal professionals, the GTSA will have the power to have a meaningful impact on regulations and proposals affecting the storage sector.
The GTSA will also strive to internationally publicise and address the issues impacting its members globally.
The impressive Board of Directors is made up of CEOs and influential thought leaders from major terminals in all the key storage regions across the globe.
The Board of Directors currently includes:
- Pieter Bakker, Director, Buckeye, USA
- Jaap Koomen, General Manager, Burgan Cape Terminals, South Africa
- Yusr Sultan, Managing Director for Terminals, Emirates National Oil Company
- Martyn Lyons, CEO, Inter Terminals
- John W. Schlosser, President, Kinder Morgan Terminals
- Walter E. Wattenbergh, Group CEO, LBC Terminals
- Frank Erkelens, CEO, Odfjell Terminals
- Douglas van der Wiel, President, Oiltanking Asia
- Guy Bessant, President, Stolthaven Terminals
- Martijn Notten, CEO, Vesta Terminals
- Siavash Alishahpour, Managing Director, VTTI Fujairah Terminals
The association will be run by the Board of Directors. The Chairman will be announced following the Board's first meeting in London in December 2017.
The Global Tank Storage Association is open to everyone in the tank storage sector and is free to join.
Benefits of becoming a member of the GTSA include:
- Updates from the Board of Directors progress regarding global initiatives for the industry.
- A platform for members to share and exchange information on GTSA core values, such as: environment, safety and security.
- Monthly e-newsletter containing terminal news & information on industry updates.
- Monthly regulatory updates.
- Reduced subscription price for Tank Storage Magazine, the voice of the storage terminal industry.
- Reduced subscription price for Tank Storage Intelligence, the central online information portal for everything relating to tank storage.
- VIP invitation to all StocExpo & Tank Storage events.
- Preferential rates on delegates passes to StocExpo Europe, Tank Storage Germany, StocExpo Middle East Africa & Tank Storage Asia.
- Preferential rates on exhibition stands at StocExpo Europe, Tank Storage Germany, StocExpo Middle East Africa & Tank Storage Asia.
- Preferential rates for seats at the Global Tank Storage Awards.
- Hear about networking opportunities & special offers before anyone else.
To find out more about the GTSA or to join, please contact Margaret Dunn, Director General, Global Tank Storage Association on +44 7905 273691 or Nick Powell, Executive Director, Global Tank Storage Association: +44 7920 408587
The Dialog Group plans to expand Langsat Terminal (Three) into a 300,000 m3 storage facility.
In its first quarter 2018 financials the company says that it increased its stake in Langsat Terminal (One) and Langsat Terminal (Two), both providing centralised tankage and terminal facilities in Tnajung Langsat Johor.
The expansion of Langsat Terminal (Three) is part of its strategy to grow sustainable and recurring income and further enhancing shareholders' value in the long term.
As previously reported, Dialog's Pengerang Deepwater Terminal phase 1 is being expanded with an additional 430,000 m3. The construction of phase 2 is on schedule and it is securing new potential partners for phase 3, which will include the development of industrial land and more petroleum and petrochemical storage terminals.
Phase 3 and future phases will be developed on a 800 acre parcel of land.
The company increased revenue by 19.1% in its first quarter to RM778.7 million.
It says: 'Dialog remains confident that its business model is well structured and can withstand the current oil price volatility and currency movements.'
Significantly altered trade flows as a result of investments into Russian port infrastructure and logistics has elevated the level of storage competition in the Baltics region.
In recent years, liquid cargo flows in the Eastern Baltic region have undergone significant change. These investments into Russia's infrastructure have increased the ability of Russian Baltic ports to attract and handle more Russian origin cargo.
As a result, large cargo flows historically transhipped with the ports of the Baltic states are instead being diverted to these Russian ports and putting a strain on the Baltics' logistics sector.
In an interview with Tank Storage Magazine, Lars Pantzlaff, general manager at Ventspils Nafta Terminals, says that the political tensions between Russia and the rest of the western wold following the annexation of Crimea have further compounded the issue.
'With Russian cargo flows, which historically represent the major share for the terminals in the Baltics states, significantly declining, competition for cargo flows is building with increasingly available tank capacity,' he explains.
However, there is still opportunity for the storage sector to thrive, predominantly due to petrol and petrol products demand.
'While gasoil flows are under severe pressure with a potential to decline further, the emphasis is on petrol and petrol components that can see preferential handling in terminals in the Baltic states.
'With Russia falling short as being the major source for future cargo flows, the two refineries and their output in Belarus has become a major focal point,' he says.
'Additionally, trading companies operation in the entire Baltic region consider hubs to consolidate their trade flows, even if loading ports are different.'
The largest storage players in the region are Ventspils Nafta Terminals, part of VTTI, the private Ventbunkers, state-owned Klaipedas Nafta, Krovinių Terminalas, part of Achema group, Vopak and Alexela terminals. These operators handle middle distillates, petrol and its components and fuel oil. These operators are facing growing competition from storage operators in the Russian ports of Ust-Luga, Primorsk and St Petersburg, which have increased their capacities in recent years.
The focus is now on terminals in the Baltic region being as flexible and diverse as possible to provide added value to customers, according to Pantzlaff.
'While the pressure on cost for tank storage will be mounting in the current trading environment, the flexibility and diversity of terminal services is becoming ever more critical to provide distinction and value to customers,' he adds.
'The internal efficiency of terminal operations relating to its infrastructure, its availability, processes, organisation and having the right people to master change is going to be crucial.'
Pantzlaff will be providing a comprehensive overview of the storage market in the Baltics on the first morning of the Tank Storage Germany conference on November 29 at the Hamburg Messa. For more information visit www.tankstoragegermany.com.
Trafigura has announced plans to develop a second LNG import terminal project at Port Qasim in Pakistan.
The commodity trader announced its plans following the inauguration of GasPort's new LNG floating storage and regasification import terminal at the port, which it is a minority investor of.
The new terminal will more than double Pakistan's current LNG regasification capacity, and will be able to supply 90 million cubic feet of gas to private buyers in Pakistan each day.
However, even after this facility reaches full capacity, there will still be a significant supply shortfall of 19 million tonnes of LNG per annum, which has spurred Trafigura to develop a second terminal.
The company will partner with PGPL in developing a new merchant FSRU project. The JV will sell gas to private sector end-users without direct government involvement. It will include a new jetty, berth and a second FSRU, benefiting from cost synergies with the existing facility.
It also offers the potential to turbo-charge import growth and rapidly scale up industrial use of LNG in the country.
Peninsula Petroleum has reached a new storage agreement with the Houston Fuel Oil Terminal to support its bunkering operations in the region.
The company says this is the latest step in its strategy of converting its remaining light physical operations into a full physical model (barging plus storage logistics) in the Americas.
Moving into the terminal means presence in one of the busiest fuel oil terminals globally, enabling Peninsula to source product directly from the local Platts MOC, one of the main keys to maintaining a long-term competitive and reliable supply structure.
The agreement includes the capability to supply bunkers ex-pipe for those ships calling at the terminal.
Alex Lyra, global head of supply and trading, says: 'Growing our global portfolio of storage positions into the terminal is not only an important step towards further consolidating our local bunkering operation but also a key element for the integration of the group's regional physical footprint, both on the Atlantic and Pacific coasts.'
HES International has agreed to purchase the Valt Asphalt Terminal from Valt.
The bitumen terminal in Botlek Rotterdam delivers storage, handling and blending services to the European and African bitumen market.
During next year, HES plans to upgrade the terminal by investing in tanks and ancillary infrastructure.
Paul van Poecke, head of liquid bulk terminals at HES, says: 'This acquisition is in line with HES International's liquid bulk strategy to expand our storage footprint in Europe.
'The existing and potential future storage capacity can play an important role in meeting the increasing local and regional bitumen trade flows, in particular with IMO regulations, focussed on reducing sulphur levels in marine bunker fuels, kicking in by 2020.
'Besides the terminal is located close by our HES Botlek Tank Terminal and adjacent to European Bulk Services, both 100% subsidiaries of HES, providing significant levels of synergy.'
Total refined product stocks at the UAE port of Fujairah stood at 15.09 million barrels in the week to November 13, down 0.9% week on week, according to data from the Fujairah Energy Data Committee (FEDCom).
Total stock levels fell to a new record low for a third week in a row, about 23% lower than the average of 19.6 million barrels seen since the beginning of the year, S&P Global Platts Analytics said in a report.
Stocks of light distillates fell by 4% week on week to 4.649 million barrels. Healthy demand in the East of Suez continues to draw barrels from Europe, according to Platts Analytics.
Stocks of middle distillates rebounded from last week's record low, rising 21.6% week on week to 2.121 million barrels.
However, European petrol supply to the Middle East may tighten as the trans-Atlantic arbitrage to the US is resuming. This would suggest the Middle East will need to draw additional Asian barrels to meet demand, the report said.
The front-month time spread for Arab Gulf Gasoil has been in a contango since the beginning of the month and was at minus $1.36/b Tuesday, according to Platts data. Additional tenders for December-loading gasoil and jet fuel from Bahrain's Bapco, Egypt's Midor and India's Essar Oil have emerged over the past two weeks, underscoring the excess of supply in the market.
Stocks of heavy distillates and residues fell 3.7% to 8.32 million barrels and remain at the lowest levels recorded since February, FEDCom data showed.
IL&FS is going ahead with a planned phase II expansion project at its Fujairah terminal and has denied that it is looking for a buyer.
It has strongly rebutted news reports that it is exploring a sale of its storage terminal, saying that the news is incorrect and misrepresents facts.
It has confirmed that it is not divesting its share in the Fujairah terminal, that its occupancy level is robust and that its revenue is stable. It is also progressing with its planned expansion to be able to provide improved services to existing and potential customers.
In a statement, a spokesperson of IL&FS Maritime Infrastructure Company in Mumbai, says: ‘IL&FS Group has a long term vision for Fujairah and will continue to remain positive on the oil storage business in the region regardless of the current geo-political situation.'
Mobil Oil New Zealand plans to build two fuel storage tanks to improve fuel supply capacity for the South Island.
The tanks at its fuel terminal in Lyttelton will replace those damaged by a 2014 landslide at Mobil's Naval Point facility. They will be located adjacent to Mobil's existing terminal at George Seymour Quay and will store petrol and diesel. They are expected to be complete by early 2019.
The work is the latest in several recent major investments by the company to enhance its fuel product offerings to customers. This includes work to upgrade its bulk fuels terminal at Mount Manganui.
Andrew McNaught, country manager for Mobil, says: 'Construction of new tanks will resort fuel storage capacity at our Lyttelton operation, which, along with the Lyttelton-Woolston pipeline and Woolston Terminal, is an important part of the fuel supply chain in the South Island.
'This project represents a significant investment in New Zealand's fuel supply chain and demonstrates our commitment to the local market.'
The global energy sector will be significantly reshaped over the next 20 years as the US is set to become the undisputed global oil and gas leader.
The International Energy Agency's World Energy Outlook 2017 sets out four major trends that are 'profoundly reshaping' the energy sector: the resurgence in oil and gas production from the US, significant declines in the cost of renewables, the share of electricity in the energy mix is growing and China's move towards a cleaner growth mode.
These four themes are altering the face of the global energy system and upending traditional ways of meeting energy demand, according to the document.
The document sets out that over the next 25 years, the world's growing energy needs will be met firstly by renewables and natural gas, as plummeting costs turn solar power into the cheapest source of new electricity generation.
It says that rising oil demand will slow down, but is not reversed before 2040, despite the steep rise of electric car sales.
Dr Fatih Birol, executive director for the IEA, says: 'These are extraordinary times for global energy, and they are reflected in what I believe is an extraordinary WEO.
'Electric vehicles are in the fast lane as a result of government support and declining battery costs but it is far too early to write the obituary of oil, as growth for trucks, petrochemicals, shipping and aviation keep pushing demand higher.
'The US becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics.'
The shale oil and gas revolution in the US continues thanks to the ability of producers to unlock new resources in a cost-effective way. By the mid-2020s, the US is projected to become the world's largest LNG exporter and a net oil exporter by the end of that decade.
The report says this is having a major impact on oil and gas markets, challenging suppliers and causing a major reorientation of global trade flows, with consumers in Asia accounting for more than 70% of global oil and gas imports by 2040.
And while oil demand continues to grow, it is at a steadily decreasing pace due to fuel efficiency and rising electrification bringing a peak in oil used for passenger cars. Other sectors however, such as petrochemicals, aviation and shipping, are driving up oil demand to 105 million barrels a day by 2040.
A full analysis of the report will be included in the December/January 2018 edition of Tank Storage Magazine.
Blackline Partners and TPG Sixth Street Partners have created a new JV aimed at acquiring and developing oil and gas midstream infrastructure assets.
The new company, Blackline Midstream, has acquired SEA-3, owner of New England's propane storage and distribution terminal in New Hampshire from Trammo.
The facility consists of 530,000 barrels of propane storage, a five-lane 24/7 truck loading rack, an ocean-access marine vessel receiving and loading dock and a six spot rail receiving rack. Additionally, SEA-3 has a fully approved upgrade project which will significantly increase the rail unloading capacity of the terminal, giving it access to both domestic and international markets.
Mike Day, CEO of Blackline Partners, says: 'Blackline's deeply experienced operations management team, combined with TSSP's financial strength and expertise position us to integrate SEA-3 into a strong, well-equipped midstream growth platform.
'We will immediately commence the rail expansion project at Newington in order to position SEA-3 as the most flexible and reliable propane supply terminal in the northeast US.'
David Herr, VP of marketing at Blackline, who will be managing product commercial operations for Blackline Midstream, adds: 'With the rail expansion project, we will be able to remain competitive under any market supply scenario.
'All existing commercial agreements will be carried forward, and customers of the terminal will experience a seamless transition following the acquisition.'
Saudi Aramco has agreed to a slate of oil and gas megaprojects, including new pipelines, gas plants and offshore oil fields, valued at nearly $4.5 billion.
Eight agreements were signed with several oil and gas service contractors to expand gas production and localise domestic content.
These projects include the Free Flow Pipeline Contract, which allows for an early start of the Haradh Gas Increment Programme. It comprises the installation of around 450 kilometres of pipeline network by early 2019. Another project comprises the facilities to process 600 MBCD of Arab heavy crude oil from Zuluf offshore field. This includes water injection and oil wellhead platforms, tie-in platforms, trunk lines and flowlines in addition to new processing facilities.
The crude will then be transported to Ju'aymah terminal via new downstream pipelines. The separated gas and condensate streams will be transported to the proposed Tanajib Gas Plant via new pipelines.
Amin H. Nasser, Saudi Aramco president and CEO, says: 'These agreements we signed are part of our natural gas expansion, as we add about one billion standard cubic feet per day.
'These new supplies will help reduce domestic reliance on liquid fuels for power generation, enable increased liquids exports, provide feedstock to petrochemical industries, and reduce carbon emissions.
Odfjell Terminals has recorded a lower EBITDA in its third quarter due to lower storage revenues and the effects of Hurricane Harvey.
The operator delivered an EBITDA of $8.7 million in the third quarter compared to $10.3 million in the previous quarter. The reduction is due to lower storage revenues, primarily in Rotterdam, as a result of the departure of 'contango customers' and the disruption at its Houston facility following Hurricane Harvey.
The average occupancy rate of commercially available capacity was 86%, compared to 92% in the last quarter as a result of the contango effect in Rotterdam.
The company has finalised the basic engineering and has all the required permits in place for the first independent ethylene export facility in the US, based in Houston. A final investment decision is expected in the first quarter of 2018.
Additionally, its new facility in Tianjin, China, has received it final permit to operate, and the opening of the port for foreign vessels is expected in the fourth quarter. Its value creation programme in Rotterdam is progressing and PID production is stable, at expected levels.
Kristian Mørch, CEO of Odfjell, says: 'The third quarter was a challenging quarter for our tanker and terminal divisions. Our balance sheet remains robust and our competitiveness continues to increase, so we are positioned to benefit once our markets recover. The sale of our Singapore terminal, in line with our strategy, will result in a significant gain.'
Savage Companies plans to significantly expand the capabilities of its new petroleum transload terminal in central Mexico in 2018.
Operations at the new facility, run by a subsidiary of Savage, will start in January 2018, with expansion plans expected later in the year. The facility, located near the city of Querétaro, is served by the Kansas City Southern (KCS) de Mexico railroad and provide access to strategic ports and US based refinery centres.
The facility will provide a location for transferring and storing refined petroleum products. It will initially serve manifest rail volumes, transferring products directly from railcars into trucks.
Savage plans to add tank storage and fixed facilities for high-speed rail unloading, product blending and truck loading. At full build out, the terminal will handle unit train volumes.
Kirk Aubry, Savage president and CEO, says: ‘We are excited to leverage our team’s experience operating transload facilities and rail operations to reduce the logistics costs of moving and managing refined petroleum products in Mexico.’
Patrick J. Ottensmeyer, KCS president and CEO, adds: ‘We believe this terminal will facilitate additional refined product exports from US Gulf Coast refineries in support of Mexico energy reform. Savage’s experience and commitment to excellence gives us the confidence that this new refined products terminal will provide additional market options in support of Mexico’s new energy infrastructure.’
TransMontaigne Partners will purchase the Martinez Terminal and Richmond Terminal from an affiliate of Plains All American Pipeline for $275 million.
The acquisition by a subsidiary of TransMontaigne expands its storage and terminalling footprint in the San Francisco Bay Area refining complex. It is expected to close at the beginning of 2018.
The facilities include two waterborne refined product and crude oil terminals, comprising a total of 64 storage tanks with 5.4 million barrels of storage capacity. They have extensive connectivity to domestic and international refined product and crude oil markets through significant marine, pipeline, truck and rail capabilities.
They are supported by multi-year, fee-based agreements with contract terms of up to five years.
Fred Boutin, CEO of TransMontaigne Partners, says: 'We believe that this transaction strengthens our position as one of the leading refined products terminalling and transportation service providers in the country.
'The West Coast facilities are strategically located within the San Francisco Bay area refining complex, one of the largest refining complexes in North America.
'This acquisition, combined with the organic growth we have executed this year, supports and extends our commitment to deliver stable and growing distributions over the long term.'
Total refined product stocks at the UAE port of Fujairah were 15.230 million barrels in the week to October 30, down 4.2% from the previous week, according to data from the Fujairah Energy Data Committee (FEDCom).
Total stocks sank to a new record low for the second week in a row, as the markets stayed in backwardation, and rising prices gave an incentive to sell quickly, Platts Analytics said.
Stocks of light distillates diverged from the general downward trend, however, rising by 13.6% week on week to 4.845 million barrels. The increase is in part down to strong demand from the Middle East, which has drawn in material from Asia. Some Indian products, which would normally find a home in Asia, have been drawn to the Middle East instead, further restricting supply.
The opposite was true for stocks of middle distillates, which fell by 22.3% week on week to a record low 1.744 million barrels. There is no longer any arbitrage to move gasoil to Europe from Asia, but volumes from the Middle East continued to make their way westward, Platts Analytics said.
Diesel and gasoil stocks in Europe's Amsterdam-Rotterdam-Antwerp hub fell by 3% to 2.171 million mt in the week to Wednesday, their lowest since June 2014, PJK International data showed. Additional spot supplies of gasoil have emerged as the bulk of ongoing refinery maintenance in both the Middle East and Asia will soon be completed.
Stocks of heavy distillates and residues also fell by 7.9% to 8.641 million barrels, an eight-month low. Fuel oil is currently backwardated in Singapore, meaning traders in ARA and the Middle East have little incentive to keep volumes in storage, Platts Analytics said.
Power demand is also high in Iran due to a recovery of the economy, reducing exports from Iran. With Middle East premiums high, flows to Singapore are likely to slow down in the coming weeks, Platts Analytics said.
OPEC has revised its long-term oil demand outlook upwards by 1.7 million barrels a day as oil is set to dominate the energy mix in the future.
In its 2017 World Oil Outlook OPEC says that total primary energy demand is set to increase by 35% in the period to 2040 and that oil is expected to remain the fuel with the largest share in the energy mix through to 2040.
The document sets out that long-term oil demand has increased by 1.7 million barrels a day compared to its 2016 counterpart, with total demand sitting at over 111 million barrels a day by 2040. This is despite the talk of relying more on alternative forms of energy, from renewable fuels to the growing trend of electric vehicles.
In fact, long-term oil demand will come mainly from road transportation, making up 5.4 million barrels per day, followed by petrochemicals and then the aviation sector. However, OPEC does recognise various international efforts to increase the use of electric vehicles into consumer behaviours. It says that in the passenger car segment, electric vehicles will represent 12% of the car fleet by 2040.
Additionally, the international organisation does not expect to hit peak oil demand over the forecast period to 2040. And around half of the estimated refining capacity additions will be focused in the booming Asia-Pacific region, which is projected to add 9.5 million barrels per day by 2040.
OPEC Secretary General His Excellency Mohammad Sanusi Barkindo, says: 'The past year has been an historic one for OPEC and the global oil industry. Since publication of the World Oil Outlook in 2016, the oil market has undergone a fundamental change. It has been a period where the rebalancing of the global oil market has gathered vital momentum, buoyed by a number of important factors.
'We need to remember that the short, medium and long-terms are all intertwined, which is underscored in the World Oil Outlook 2017.'
Channoil Consulting's Charles Daly provides an overview of some of the key factors investors look for when considering a terminal transaction
The logistics of the oil industry depend, to a material extent, on the location and capacity of oil terminals.
These can be sea-fed by oil tankers or inland and fed by block train, road tanker or pipeline. No matter where they are located they have a value in the supply chain. These installations therefore have an intrinsic value both to the current owner and to potential entrants into the supply chain, either as traders or marketers. Nowadays we have seen this interest extend to investment funds and pension funds.
In this process the financial advisors and the technical and commercial advisors will be involved in establishing a fair value for the target.
Most people will have heard the expression 'location, location, location' as applied to the purchase of residential property. This applies equally, if not more so, for oil terminals. In supply chain logistics for other businesses you will note that location of distribution warehouses is critical to the overall profitability of the whole concern. In oil logistics a terminal may not be as easily sited strategically, primarily due to environmental concerns and the desire to keep oil installations away from centres of high population density.
The size of the terminal is critical to the valuation. If the terminal is for local market distribution, where there is usually no spare capacity to allow for growth, an evaluation of the potential for acquiring additional land must be made. A terminal that is only used for supplying a given market has limited flexibility and therefore can only be evaluated in the context of the local market. The durability of that demand therefore governs the value.
For an independently operated international warehouse, the size becomes more of an issue. Today cargo sizes have become bigger and bulk building and bulk breaking are an important function of an oil terminal. Given this, in order to satisfy the demand of more than one customer, such a terminal will need to be of a minimum size. Current sizing of terminals is from about 350,000 m3 to 1,200,000 m3. This size of terminal needs enormous tracts of land and waterfront. To give you an example, a terminal of about 350,000 m3 will need a minimum land area of 10-15 hectare (25-38 acres), and at least three or four jetties.
A coastal terminal will require jetty capacity based on the estimated utilisation. If it is to be a local market depot, then there will be only a one-way traffic in by sea and out by rail or road tanker or even pipeline. There is an exception for terminals that supply their markets further inland by river barges, since these will require barge berths to operate.
If the terminal is large, such as at a refinery or an independent international warehouse, then there will be a number of jetties of different sizes for the various services.
The jetties are the aortas of the terminal and any restriction here would diminish the value considerably.
The size of the current and forecast market is one of the most critical pieces of information required to assess the value of an oil terminal.
The age of the terminal will naturally have an impact on the value. Age will be reflected in the amount of pollution in the land due to spillage and leakage in the past. The other aspect of age will be the corrosion to the tank and pipeline walls. Petroleum products tend to have relatively high acidity content; older terminals tend to suffer correspondingly higher levels of corrosion due to higher sulphur contents in the past. Ultrasound testing measures the thickness of the tank and pipe walls and will therefore give a fairly accurate estimate of the useful life of the terminal.
Health & safety
Following on from the age of the terminal, the safety equipment in place would probably need upgrading in the case of an old terminal. All terminals must meet the appropriate legislation in the territory they are located in. Although regulations may be less onerous in certain countries, it usually behoves the terminal owner to meet the most stringent regulations existing in the international oil industry, as any lesser standard will make them unacceptable to the major users, thus giving limited flexibility for resale and use.
As stated before, oil terminals are usually sited as far away from residential areas as is possible. There are two reasons for this, one is the obvious one of fire hazard and the other is noxious smells. Oil terminals are usually subject to an operating licence and this licence must be renewed periodically.
Daly will be talking more about what investors looks for in a terminal on the second morning of the Tank Storage Germany conference on November 29 and 30. For more information, visit www.tankstoragegermany.com.