Supply and demand as well as strategic locations ultimately dictate what investors looks for in a terminal
Storage has been described as a stable and attractive investment opportunity nestled within a market that has experienced some instability recently.
However there remains some guiding principles that investors need to look out for when choosing to invest in a terminal – principally the nature of supply and demand within the regional market as well as location.
In an interview with Tank Storage Magazine Jay Reynolds, chief commercial officer at Zenith Energy Management says that when scoping out potential for an investment the asset needs to have a ‘raison d’être’.
‘It is a bit like real estate – it is all about the location,’ he explains.
‘We like to say that the asset has to have a reason for being there. We look to build a company around a group of high grade, well run, safe and profitable assets.
‘We pay a lot of attention to the supply and demand within the regional economy – so if the economy in question is a large producer or if there is high demand because there is a strong need for imports.
‘We try to understand the drivers behind the need for infrastructure. It has to be underpinned by the fundamentals and we pay close attention to that.’
Formed in August 2014, Zenith Energy’s first acquisition within the storage terminal market was the Bantry Bay Oil Terminal in West Cork, Ireland from Phillips 66.
Focusing on the regions that surround the Atlantic Basin – namely Europe, Latin America and Africa – the company keeps a close eye on the economies that dictate each regional market.
Europe has experienced a reduction of two million barrels a day in capacity and around 30 to 45 refineries are at risk of closure over the next five to 10 years.
However, the demand for refined products remains – a demand that is satisfied through imports.
‘This creates opportunities for the conversion of some of the refineries,’ explains Reynolds.
‘In Europe it is about repurposing and restructuring the supply chain.’
However the African and Latin American markets are different. Despite lacking foreign investment in infrastructure, they are very promising and robust growth markets thanks to the demand for refined products.
‘All these markets have got strong potential. Essentially they need to be fundamentally sound – they need to have a strong supply and demand and a need for infrastructure.’
- Reynolds will be speaking on the morning of the second day of the Tank Storage Germany conference at the Hamburg Messe on November 25 and 26 about what investors look for in a terminal. For more information visit www.tankstoragegermany.com