Mukesh Parikh, senior consultant at SmartHead Consulting, examines the risks of operating storage terminals in India and how the country’s emerging economic landscape has the potential for exciting opportunities
The improved economic landscape, coupled with government efforts to transform India into a manufacturing hub is resulting in greater demand for energy.
The present socio-economic scenario is leading to a number of threats and risks as well as a plethora of opportunities for the tank storage industry. A section of leading players of the bulk liquid industry believe that the increase in the volume of liquid imports and exports will drive conversion from containers to bulk for a number of liquid products. Conversion away from containers to bulk is a unique feature in the maritime industry in recent years.
For major ports in India with a capacity utilisation of over 80%, efficient and safe handling of increasing bulk liquids is a challenge. Major privatisation initiatives and concession agreements are focused on developing and expanding container handling capacity at the ports, terminals as well as inter-modal corridors.
However, the process of developing bulk liquid industry infrastructure does not receive similar attention as container handling infrastructure. The development of tank storage is carried out by tank storage terminal operators at major ports using a plot of land offered by the port authority, usually at a considerable distance from the jetty. These tank storage terminal operators have no control over the development of marine infrastructure, which is a function of the port authorities.
CRZ regulations and environment compliance requirements necessitate locating the storage tanks at a considerable distance from the ship side and marine jetty, leading to additional investment in longer and bigger pipelines.
In addition to the development related threats and risks, a number of business and operations related risks are faced by Indian storage terminals. A substantial operations risk is inadequate understanding and non-compliance of HSE and a number of ISO manuals by a majority of the operating staff. This non-compliance can lead to catastrophic risks. The extent of such risks and threats increases exponentially with the increase in volume of business and higher operations activities.
Inadequate infrastructure in hinterland connectivity and the mode of transportation for petroleum products and petrochemicals leads to another operational risk as the majority of bulk liquids are transported by road.
Pipelines and rail are known to be safer modes. However, a lack of rail infrastructure and rolling stock (dedicated bulk liquid wagons), compels the cargo owners to use road transportation. Multi-modal transport connectivity, using rail and inland waterways transport, provides a good opportunity especially with increased volume of bulk liquids. Some ports and terminals have created rail handling infrastructure at their liquid storage terminals. There are still a number of opportunities in terms of ownership of rolling stock – dedicated bulk liquid wagons and providing multi-modal services.
Business risks associated with recent price deregulation of petroleum products by the government, encourage private players to explore downstream distribution. This will lead to greater demand for storage capacity at every stage of the distribution channel, which presents an opportunity for the operators to expand their capacity. Storage and distribution of bulk liquid is further streamlined in a seamless manner by GST system, what are being implemented throughout the country effective from July 2017.
Systematic risk mitigation measures provide a number of exciting opportunities in emerging economic scenario of India. Green field port developments, especially by the private sector, provides an integrated approach to develop terminals in line with and in parallel to the development of port infrastructure and hinterland connection. During last two decades, private ports have been developed at Pipavav, Mundra, Krishnapatnam, Dahej, Hazira and Dhamra along with parallel liquid bulk handling infrastructure.
Additional opportunities for the development of new ports and tank storage terminals continue, with the announcement of the Sagarmala project. With six new port projects and planned additional port capacity of 1400MMT during the next decade, the entire coastline and inland waterways are being developed. Pan India operators have leveraged their multi-location presence by adopting an integrated management system (IMS), replacing a number of different ISO manuals, thereby improving the level of compliance and mitigating operations risks in addition to using the IMS as an effective business promotion strategy.
Parikh will be speaking more about the threats, risks and opportunities for terminal operators in India on the second day of the Tank Storage Asia conference on September 27 & 28. For more information visit www.tankstorageasia.com.