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Latest storage news


Terminal News
September 6, 2019
Update: Storage terminals damaged following Hurricane Dorian
Two storage terminals in the path of Hurricane Dorian sustained damage as the category 5 storm moved across the Bahamas and up the east coast of Florida. The deadly storm, which wrecked devastation on communities in the Bahamas, has killed at least 50 people in the country and destroyed or severely damaged 13,000 homes when the storm hit with winds of up to 185 mph...

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Two storage terminals in the path of Hurricane Dorian sustained damage as the category 5 storm moved across the Bahamas and up the east coast of Florida.



The deadly storm, which wrecked devastation on communities in the Bahamas, has killed at least 50 people in the country and destroyed or severely damaged 13,000 homes when the storm hit with winds of up to 185 mph.



Dorian equalled the highest winds ever recorded for a hurricane at landfall when it struck the Abaco Islands. The storm then moved north-west and across Florida's east coast.



Equinor says that its South Riding terminal in the Bahamas, which comprises 6.75 million barrels of crude and condensate storage capacity, sustained damage and that oil was observed on the ground outside of the onshore tanks. All personnel in the Bahamas were confirmed safe and accounted for.



Equinor has a team working at the terminal, including an advanced onshore response team with oil spill technical specialists.



At the time of printing, an onshore team started to recover oil and move it into tank storage. A response team continues to assess the damage and plan the recovery work. Initial recovery assets have been deployed and additional machinery and equipment is being added. The company says that no oil is leaking from the terminal.



Equinor has donated $1 million to one or more relief organisations involved in the response for the Bahamas.



The storm also passed over Buckeye Partners' Bahamas Hub, a 26-million-barrels petroleum storage, transshipment and blending facility at Freeport.



Initial assessments found minor damage to the facility from wind and rain, and no indications of any product release.



The company has partially resumed operations at the terminal. Work continues on completing final assessments and restoring full operations at the facility in the near future.



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Terminal News
September 5, 2019
NuStar Energy completes three pipeline projects
NuStar Energy has completed three key pipeline projects that significantly expand its capacity to move products to Corpus Christi and Northern Mexico.The company recently completed a project connecting its existing 16-inch pipeline in South Texas to the Plains Cactus II pipeline that transports WTI volumes from the Permian Basin to South Texas...

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NuStar Energy has completed three key pipeline projects that significantly expand its capacity to move products to Corpus Christi and Northern Mexico.

The company recently completed a project connecting its existing 16-inch pipeline in South Texas to the Plains Cactus II pipeline that transports WTI volumes from the Permian Basin to South Texas. It also completed the second stage of its WTI export project, a new eight-mile 30-inch pipeline to transport crude oil from a connection to the Plains Cactus II long-haul pipeline in Taft, Texas, to its Corpus Christi terminal.

NuStar is also building 600,000 barrels of additional storage at the Corpus Christi terminal, which will bring its total capacity to 3.9 million barrels. This project is expected to be completed in December 2019.

Brad Barron, NuStar president and CEO, says: 'We are very excited about the continued growth of our South Texas Crude System, which is once again experiencing throughput at near the historically high levels we saw in the Eagle Ford's heyday in 2015, and the increased utilisation of our Corpus Christi export terminal, which is now handling the leading edge of the impending wave of Permian long-haul crude oil.

Additionally, the company is moving volumes on its newly expanded Valley Pipeline System in South Texas after increasing the system's capacity to supply refined products from Corpus Christ to the Rio Grande Valley and Northern Mexico. The expansion doubles the pipeline's capacity to 90,000 barrels per day.

NuStar also began moving volumes of diesel into Northern Mexico following the reactivation of its existing refined products pipeline connecting its Laredo Terminal in South Texas and its Nuevo Lardeo Terminal in Mexico. The company is currently building additional tankage and truck loading bays at the Nuevo Lardeo Terminal, all of which are expected to be completed in February 2020.

'We are pleased we were able to utilize and expand existing assets to help address the supply imbalance in Northern Mexico that is expected to continue growing and exceeding that country's infrastructure.

'It is an amazing coincidence that all three of these projects, each of which has been years in the making, all began moving volumes within 24 hours of each other.'



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Terminal News
September 5, 2019
Maersk & Koole Terminals to produce low sulphur marine fuel
Koole Terminals & Maersk Oil Trading will start producing IMO 2020-compliant bunker fuel.Production will take place at the Petrochemical Industrial Distillation (PID) unit, located at Koole's Botlek site in the Port of Rotterdam. The toll distillation deal allows Maersk to product very low sulphur fuel bunker fuels and will enable Maersk to further expand its bunker supply volumes in Europe...

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Koole Terminals & Maersk Oil Trading will start producing IMO 2020-compliant bunker fuel.

Production will take place at the Petrochemical Industrial Distillation (PID) unit, located at Koole's Botlek site in the Port of Rotterdam. The toll distillation deal allows Maersk to product very low sulphur fuel bunker fuels and will enable Maersk to further expand its bunker supply volumes in Europe.

Annual production is expected to cover 5% to 10% of Maersk's annual fuel demand.

John Kraakman, CEO of Koole Terminals, says: 'Koole Terminals continues to explore opportunities to contribute to a sustainable society. One of the initiatives is to utilise our PID unit for producing environmentally friendly transportation fuels. We are proud to partner with Maersk and produce a low sulphur bunker fuel to support the reduction of sulphur emissions in order to reduce air pollution.'

Head of Maersk Oil Trading at A.P Moller – Maersk Niels Henrik Lindegaard adds: 'The fuel manufacturing process allows Maersk to produce compatible low sulphur fuels that comply with the IMO 2020 sulphur cap implementation, reducing the need to rely on 0.1% price-based gasoil and fuel oil outside the ECA zones.

'Our activities with Koole will be an important driver in ensuring stable, reliable services for Maersk's customers during a potentially volatile period for global shipping.'



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Terminal News
September 4, 2019
Qatar Petroleum signs agreement for Zeebrugge LNG terminal
Qatar Terminal and Fluxys LNG have signed a long-term LNG Services Agreement for the Zeebrugge LNG terminal.Under the agreement, Qatar Terminal subscribes unloading slots at the facility from the expiry of the current long-term unloading contracts and up to 2044...

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Qatar Terminal and Fluxys LNG have signed a long-term LNG Services Agreement for the Zeebrugge LNG terminal.

Under the agreement, Qatar Terminal subscribes unloading slots at the facility from the expiry of the current long-term unloading contracts and up to 2044.

His Excellency Saad Sherida Al-Kaabi, Qatar's minister of state for energy and president and CEO of Qatar Petroleum, says: 'We believe this will further support our customers in Belgium and Europe in general, by providing them access to reliable LNG supplies from Qatar and allowing them to maximise the utilisation of such supplies.

'Qatar Petroleum has long invested in and anchored LNG receiving terminal capacity in Europe, a key LNG market, as part of our supply destination portfolio diversification strategy. We continue to be committed to supporting the EU's energy policies and to providing reliable energy supplies into Europe.'

Pascal De Buck, CEO and chairman of the executive board of Fluxys Belgium, adds: 'This agreement further extends our long-standing cooperation with Qatari partners, secures long-term activity at the Zeebrugge terminal and further strengthens the facility's position as a versatile LNG gateway into Europe offering customers optimum destination flexibility.'



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Terminal News
September 4, 2019
Olerex completes acquisition of Oiltanking Tallinn terminal
Aqua Marina, the holding company of the Olerex Group, has completed the acquisition of Oiltanking's Tallinn terminal in Estonia.The terminal comprises more than 78,000 m3 of storage capacity and provides truck and ISO tank-loading infrastructure for the local and regional distribution of motor fuels and chemicals...

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Aqua Marina, the holding company of the Olerex Group, has completed the acquisition of Oiltanking's Tallinn terminal in Estonia.

The terminal comprises more than 78,000 m3 of storage capacity and provides truck and ISO tank-loading infrastructure for the local and regional distribution of motor fuels and chemicals.

The transaction was completed on August 30. Olerex is the Estonian fuel retail market leader, based in the domestic capital.



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Terminal News
September 4, 2019
Institutional investors own 100% of Koole Terminals
Institutional investors have bought out Ontario Teachers' Pension Plan's 40% stake and the Investment Management Corporation of Ontario's 9.99% stake in Koole Terminals.Following these transactions, institutional investors now hold a 100% stake in Koole Terminals...

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Institutional investors have bought out Ontario Teachers' Pension Plan's 40% stake and the Investment Management Corporation of Ontario's 9.99% stake in Koole Terminals.

Following these transactions, institutional investors now hold a 100% stake in Koole Terminals.

John Kraakman, CEO of Koole Terminals, says: 'A wholly-owned structure will give us a clear mandate to execute the Koole Terminals' strategy while maintaining our commitment to delivering a high level of customer service and safety performance.'



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Terminal News
September 4, 2019
BP sells Alaska business for $5.6 billion
BP has sold its entire Alaskan business, including interests in giant Prudhoe Bay field and Trans Alaska Pipeline to Hilcorp for $5.6 billion.The sale includes BP's entire upstream and midstream business in the state, including BP Exploration, that owns all of BP's upstream oil and gas interests in Alaska, and BP Pipelines' interest in the Trans Alaska Pipeline System...

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BP has sold its entire Alaskan business, including interests in giant Prudhoe Bay field and Trans Alaska Pipeline to Hilcorp for $5.6 billion.

The sale includes BP's entire upstream and midstream business in the state, including BP Exploration, that owns all of BP's upstream oil and gas interests in Alaska, and BP Pipelines' interest in the Trans Alaska Pipeline System.

The transaction is expected to be completed in 2020. The deal forms a significant part of BP's plan to divest $10 billion of assets over 2019 and 2020.

Bob Dudley, BP group chief executive, says: 'Alaska has been instrumental in BP's growth and success for well over half a century and our work there has helped shape the careers of many throughout the company. We are extraordinarily proud of the world-class business we have built.

'However, we are steadily reshaping BP and today we have other opportunities, both in the US and around the world, that are more closely aligned with our long-term strategy and more competitive for our investment. This transaction also underpins our two-year $10 billion divestment programme, further strengthening our balance sheet and enabling us to pursue new advantaged opportunities for BP's portfolio within our disciplined financial framework.

'As a highly-capable operator with extensive Alaskan experience, Hilcorp is ideally-placed to take this important business on into the future, continuing to optimise its performance and maximise its value for the state of Alaska.'

He adds: 'Our exit from Alaska does not in any way diminish BP's commitment to America. We remain very bullish on the US energy sector. In just the last three years we have investment more than $20 billion in the US and we will continue to look at further investment opportunities here.'



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Terminal News
September 3, 2019
Monterra Energy to build Mexican inland storage terminal
Monterra Energy has announced plans to build a new inland terminal in Mexico in addition to its Tuxpan terminal, which is currently being built.Addressing delegates at the Argus Mexico Fuel Markets Summit, Monterra president Michael Williams says the new terminal will likely have under one million barrels of storage capacity and will have a throughput capacity of 50,000 b/d...

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Monterra Energy has announced plans to build a new inland terminal in Mexico in addition to its Tuxpan terminal, which is currently being built.

Addressing delegates at the Argus Mexico Fuel Markets Summit, Monterra president Michael Williams says the new terminal will likely have under one million barrels of storage capacity and will have a throughput capacity of 50,000 b/d.

The new terminal will be located just outside Mexico City and will act as a 'sister' terminal to the 2.2-million-barrel terminal that is currently being built near to Tuxpan.

Argus Media reports that Monterra's Valle de Mexico terminal system will have blending capabilities and connect with existing rail and pipeline capacity.

The terminal will allow double tank trucks from Tuxpan, which are currently not allowed to enter most urban areas of Mexico City.



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Technical News
September 3, 2019
Sam Carbis Solutions Group and Loadtec Engineered Systems have launched the Carbis Loadtec Group. From September 1 Loadtec migrated its personnel and systems over to the new company and the team will provide seamless support for customers. Loadtec's extensive product portfolio remains unchanged...

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Sam Carbis Solutions Group and Loadtec Engineered Systems have launched the Carbis Loadtec Group.

From September 1 Loadtec migrated its personnel and systems over to the new company and the team will provide seamless support for customers. Loadtec's extensive product portfolio remains unchanged.

Alec Keeler, managing director of Loadtec and the new Carbis Loadtec Group, says: 'Loadtec Engineered Systems has exclusively represented Carbis for 22 years on a worldwide basis and we are used to working together, cooperating and developing unique solutions for our customers' unique applications.

'We are now a manufacturing company and will offer a closer, faster and improved service with the backing of a long established and financially strong, international partner.'

Shawn Mizell, president of Sam Carbis Solutions, a family business based in Florence, South Carolina, adds: 'I am very excited at the opportunity this partnership affords both companies and look forward to what the future holds.'



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Terminal News
August 30, 2019
UK refining sector won’t be crippled by no-deal Brexit
The dynamics of the UK's refining industry will shift, and margins will narrow in the event of a no-deal Brexit, however research indicates it will not cripple the sector.Wood Mackenzie research suggest that fuel tariff changes will hit margin's and will help boost exports from Russia and Belarus...

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The dynamics of the UK's refining industry will shift, and margins will narrow in the event of a no-deal Brexit, however research indicates it will not cripple the sector.

Wood Mackenzie research suggest that fuel tariff changes will hit margin's and will help boost exports from Russia and Belarus. The UK government plans to remove the tariff on gasoline imports, which under World Trade Organisation (WTO) rules would mean the removal applies to all imports, regardless of country of origin. Meanwhile, UK refineries would receive less for their gasoline exports, with this being taxed at the approximate rate of 5%.

Heitham Tolba, principal analyst, European refining and product trade at Wood Mackenzie, says: 'In this case, UK refineries would see their 2019 Net Cash Margin (NCM) decline by an average of just $0.45/bbl. However, if tariffs are raised on all export destinations, domestic prices could fall. This is because while it will be more expensive to place barrels overseas, exporters still need the differential to make exports worthwhile.

'In a worst-case scenario, domestic gasoline prices would also decline by an approximate rate of 5%. The average 2019 NCM of UK refineries would fall by about $1.25/bbl, so a decline in earnings of around 30%. Nevertheless, all refineries maintain a positive NCM in our 2019 forecast.'

He adds: 'On paper, the premise that in the event of a No-Deal Brexit, the UK would be awash with cheap imports and a 0% import tariff would hit domestic refiners hard, sounds feasible.

'But in reality, there is limited independent import infrastructure in the regions where the refineries are located. Where it does exist, it tends to be small and would not be able to import the volumes required to seriously affect UK refineries. Any impact would be on the marginal barrel.

'In those UK regions which are already solely supplied by imports, such as north-east England or the Thames, a 0% import tariff should make fuel cheaper. Suppliers could extend regional supply from these assets, but the extent to which these could affect refineries' supply envelopes would quickly become constrained by road delivery logistics. Most independent import terminals also lack rail or pipeline connectivity, constraining their ability to supply any cheaper imports to other regions and pressure refiners' inland markets.'

Tolba says that imposing a zero tariff on imports would see a reshuffle of gasoline imports into Europe. Russia and Belarus would likely divert their gasoline exports from the Amsterdam, Rotterdam, Antwerp (ARA) hub, sending them directly. They would do this as direct export into the UK would be tax free, while deliveries into Europe would be taxed at the European Union's current 4.7% tariff on fuel imports. Conversely, imports from the ARA hub to the UK would decline as this diversion takes place, meaning that the net change in trade is likely to be minimal.

He says that about 40% of the UK's total gasoline imports are sourced from the Netherlands, with much of these volumes originating from Russia and Belarus.

'However, a significant increase in the share of gasoline imports coming from Russia and Belarus in to NWE is unlikely, thanks to a lack of pipeline infrastructure and the high cost of transporting gasoline to destination markets by rail.'



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Terminal News
August 30, 2019
A holistic approach to managing risk
Oiltanking Asia Pacific’s Lai Siang Yeong explains how one of the largest independent tank storage operators has utilised Singapore’s new Safety Case regime to tailor its risk mitigating measures and address risk in a more comprehensive manner...

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Oiltanking Asia Pacific’s Lai Siang Yeong explains how one of the largest independent tank storage operators has utilised Singapore’s new Safety Case regime to tailor its risk mitigating measures and address risk in a more comprehensive manner.

Introduced in September 2017, Singapore’s safety case regime enhances and streamlines regulations for major hazard installations and offers a more holistic approach for storage operators to address and manage their risks.

The Workplace Safety and Health regulations stipulate that major hazard installations (MHI) such as petroleum refining facilities, chemical processing plants and installations storing large quantities of toxic and flammable substances are required to submit a safety case as part of their license to operate.

Following the introduction of this new legislation, Oiltanking has had to submit two safety cases for its Seraya and Meranti sites. The safety case is one in which an MHI sets out how risks from major accident hazards can be reduced to as low as reasonably practicable (ALARP), ensuring safe operations in a sustainable manner.

In an interview with Tank Storage Magazine, Oiltanking Asia Pacific’s regional assets & operations & HSSE manager Lai Siang Yeong says that the new regime allows flexibility and a greater understanding of how to address risks.

‘The safety case regime allows flexibility for storage operators like Oiltanking to tailor our risk mitigating measures and address the risk in a more holistic manner. Under the regime, Oiltanking has taken on greater responsibilities to ensure that our storage facilities are operating safely and sustainably.'

As part of the safety case requirement, Oiltanking has:

• Proactively identified and managed its Health, Safety, Security and Environment (HSSE) risks through integration of all HSSE protocols.

• Reviewed and demonstrated that a systematic process is in place to identify and implement safety measures on-site.

• Assessed our safety measures and considered how organisational, technical and human factors contribute to safety in our installations.

• Conducted a gap analysis on business processes and improved any identified gaps.

• Improved our safe operations using ALARP demonstrations.

Managing stakeholders, aligning management systems and enhancing the skills and competency of team members all presented challenges during the safety case process. However, the support and engagement by the company’s senior management team was instrumental to the success of this journey. Across functions and departments, all members took on the ownership and embarked on this new regime together as a team.

Lai says: ‘We also started to engage the regulators proactively before the pre-receipt session to align parties’ expectations. Document availability and validity was initially challenging as there were hundreds of documents to be reviewed and updated. To overcome this process, a central document management system was developed for effectiveness on traceability and transparency.

‘Whilst the top management was supportive of the regime, we had to ensure all employees from ground level up understood their involvement in the safety case regime. Changing the mindset of the company’s employees to adhere to this new regime required a structured approach.

‘The core team members were sent on a four-day safety case practitioner workshop organised by the Singapore Chemical Industry Council/MHD. Regular platforms and engagements took place across all levels in the organisation. Additionally, quarterly updates on the safety case submission progress status were held to encourage an open discussion on the feedback and challenges faced.’

Following the acceptance of its safety case, Oiltanking will now:

(a) Review and implement a framework to close the gaps identified in the MHD improvement plan,

(b) Continue to improve business process to help identify hazards and mitigate risks through automation and digitalisation,

(c) Create a working group within the MHIs to share knowledge and experience in this new regime.

Lai will be speaking more about the company’s experiences of building up a safety case on the second day of the Tank Storage Asia conference on September 26 at the Marina Bay Sands, Singapore. For more information visit www.tankstorageasia.com.



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Terminal News
August 29, 2019
Texas International Terminals to produce low-sulphur fuel
US Gulf Coast storage operator Texas International Terminals is planning to launch a crude processing facility to produce low-sulphur marine fuel.Reuters reports that the Galveston terminal plans to operate its own crude distillation unit to produce bunker and gasoil for affiliate GCC Bunkers...

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US Gulf Coast storage operator Texas International Terminals is planning to launch a crude processing facility to produce low-sulphur marine fuel.

Reuters reports that the Galveston terminal plans to operate its own crude distillation unit to produce bunker and gasoil for affiliate GCC Bunkers.

The move is ahead of an anticipated surge in demand for very low-sulphur fuel oil as a result of the IMO 2020 regulation limiting the amount of sulphur in marine fuel to 0.5%.

The company currently operates a facility with bunker storage capacity of 50,000 barrels and, according to Reuters, plans to add 750,000 barrels of fuel oil storage and 500,000 barrels of gasoil storage.



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Terminal News
August 29, 2019
Blackstone makes offer to buy out remaining Tallgrass shares
Tallgrass Energy has received a take-private proposal from Blackstone Infrastructure Partners to acquire all remaining shares in the company.The non-binding, preliminary proposal makes the offer to acquire all outstanding Class A shares not already owned by shareholders for $19...

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Tallgrass Energy has received a take-private proposal from Blackstone Infrastructure Partners to acquire all remaining shares in the company.

The non-binding, preliminary proposal makes the offer to acquire all outstanding Class A shares not already owned by shareholders for $19.50 per share. This represents a 35.9% premium over the company's closing price on August 27.

The current shareholders own a 44.2% stake in the company.

Tallgrass' board will form a conflicts committee comprising independent directors of the board to consider the proposal.



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Terminal News
August 29, 2019
Nebraska Supreme Court approves Keystone XL pipeline
The Nebraska Supreme Court has affirmed a decision by the Nebraska Public Service Commission that approved the Keystone XL pipeline route through the state.The decision by the commission was made in November 2017.Russ Girling, TC Energy's president and CEO, says: 'The Supreme Court decision is another important step as we advance towards building this vital energy infrastructure project...

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The Nebraska Supreme Court has affirmed a decision by the Nebraska Public Service Commission that approved the Keystone XL pipeline route through the state.

The decision by the commission was made in November 2017.

Russ Girling, TC Energy's president and CEO, says: 'The Supreme Court decision is another important step as we advance towards building this vital energy infrastructure project.

'We thank the thousands of government leaders, landowners, labour unions and other community partners for their continued support through this extensive review process. It has been their unwavering support that has advanced this project to where it is today.'



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Terminal News
August 28, 2019
Multinational consortium preferred bidder for Cyprus LNG terminal
A Chinese-led consortium has been selected as the preferred bidder for the construction of Cyprus' €300 million LNG import terminal.The consortium of companies: China Petroleum Pipeline Engineering, Aktor and Metron with Hundong-Zhonghua Shipbuilding and Wilhelmsen Ship Management ranked first in the evaluation for the construction of the facility, which would introduce natural gas in Cyprus...

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A Chinese-led consortium has been selected as the preferred bidder for the construction of Cyprus' €300 million LNG import terminal.

The consortium of companies: China Petroleum Pipeline Engineering, Aktor and Metron with Hundong-Zhonghua Shipbuilding and Wilhelmsen Ship Management ranked first in the evaluation for the construction of the facility, which would introduce natural gas in Cyprus.

If the procedure goes to plan, contracted with the successful bidder will be signed mid-October 2019.

Defa chairman Symeon Kasdianides says: 'Here at Defa we believe that the future of the country is aligned with natural gas and we expect it to play a major role in the economic development of the country in years to come. The establishment of the natural gas market will boost the development of the whole energy and industry sectors of the Republic.'

The import terminal includes a FSRU, a jetty for the mooring of the FSRU, jetty borne and onshore pipelines as well as additional facilities. It is scheduled for completion in 2021.

The project is co-financed by a grant of 40% from the EU's 'Connecting Europe Facility'.



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Terminal News
August 23, 2019
Shifting tides of global crude trade
Sushant Gupta, director – Asia-Pacific Refining at Wood Mackenzie, examines the market dynamics currently shaping global crude trade flows and the impact IMO 2020 will have in the future Global crude trade flows are expected to change significantly, which will have profound implications for crude oil producers, refiners, traders, shippers and storage players...

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Sushant Gupta, director – Asia-Pacific Refining at Wood Mackenzie, examines the market dynamics currently shaping global crude trade flows and the impact IMO 2020 will have in the future

Global crude trade flows are expected to change significantly, which will have profound implications for crude oil producers, refiners, traders, shippers and storage players.

Large increases in US crude exports to Europe and Asia will redraw global crude trade flows and offer structural opportunities to traders and logistics players. They will need to align their storage and trading businesses according to the new trade flows and understand the growing export logistics infrastructure in the US and other regions.

Wood Mackenzie summarises key emerging themes from the analysis of complex global crude trade markets in its recently launched Crude Trade Service.

US crude exports go global

The largest change that the global crude market will experience in the next five years is the rise and globalisation of US light crude exports. Wood Mackenzie expects US refiners to increase light crude processing by about 2.1 million b/d from 2018 to 2025 and over 2.5 million b/d of light crude volumes are expected to be exported to Europe and Asia over this period.

Higher crude exports from the US to Europe will go against lower crude runs in Europe. To balance off, Europe will need to significantly cut its non-US crude imports. Some African and Middle Eastern crudes are likely to be displaced out of Europe as they have the flexibility to switch from a saturated European market to Asia's growth market.

Higher crude exports from the US to Asia are easily accommodated in the 4.2 million b/d of incremental crude imports required by Asia. However, US crudes will need to be appropriately discounted to compete with the more prevalent medium gravity Middle East crudes in Asia and to offset the higher transport costs for the US crudes to Asia.

Crude trade converges towards Asia

Wood Mackenzie forecasts that the world will need to run an additional 4.4 million b/d of crude in the refining system during the period 2018 to 2025 to balance the global refined product markets. Interestingly, Asia will account for about 70% of this additional crude run.

While crude runs in Asia increase, domestic crude production declines by about 1.1 million b/d. As such, the crude imports for Asia will increase by about 4.2 million b/d from 2018 to 2025. No other region needs to import as much incremental crude.

Global crude slate lightens

A major trend that Wood Mackenzie forecasts in future supply growth is that light crude supply rises the fastest, offsetting declines in medium and heavy crude. Almost all of the incremental global crude run is expected to be light crude and condensates. As a result, light crude's share in the global crude slate will increase by 5% by 2025.

Tightness in heavy crudes leaves Asian refiners scrambling for alternatives

Wood Mackenzie expects limited growth in the heavy crude supply of about 1.3 million b/d from 2018 to 2025. More importantly, this growth will come in only after 2022. Most of the traditional sources of heavy crude such as Venezuela, Ecuador, Colombia, Angola and Mexico will see steep declines in production. The Middle East and Canada will lead future growth in heavy crude supply.

Asia's heavy crude demand will continue to increase from new residue conversion investments, new heavy crude refineries, and with declines in domestic heavy crude production. As such, Wood Mackenzie expects the global heavy crude market to tighten during the period to 2023.

IMO 2020: a potential disrupter to crude trade?

With the growing light crude surplus and tightening heavy crude market, light-heavy crude differentials are expected to remain narrow. However, the IMO regulation taking effect in 2020 will have an opposing impact.

Because of the IMO regulation, Wood Mackenzie expects a stronger gasoil (S<0.5 wt %) and a weaker high-sulphur fuel oil (HSFO) crack (the price difference to crude), meaning a wider light-heavy differential. The impact of the IMO regulation is expected to outweigh that of the crude supply-demand dynamics, leading to an overall widening of light-heavy crude differentials after 2019.

In addition to a wider light-heavy crude differential, the IMO regulation will also result in a wider sweet-sour crude differential. To benefit from these trends, two groups of refiners are expected to emerge. Complex refiners will shift towards processing more of medium/heavy and sour crudes, while simple refiners will shift towards processing more sweeter crudes.

Refiners with capability to process more heavy and sour crudes will go after them. However, global crude supply is expected to grow in the opposite direction. We expect large global growth in light and sweet crude supply, while heavy crude supply growth is minimal. As such, heavy crude trade will be driven primarily by crude supply-demand dynamics.

However, the IMO regulation will provide a surplus of high-sulphur vacuum residue freed up from the HSFO bunker market that could be processed as feedstock by refiners short of heavy crude, mainly in USGC, China and India. Residue trade and supporting logistics are expected to develop to facilitate processing of this residue in the refining system.

To meet the higher demand of IMO-compliant fuels, a new market will also develop for very low-sulphur fuel oil (VLSFO, S < 0.5 wt %). Wood Mackenzie expects VLSFO prices to be approximately US$200/t higher than HSFO. This should incentivise refiners to produce VLSFO through investments in hydrotreating capacity, segregation of refinery intermediate low-sulphur fuel oil streams, or by processing more low-sulphur (sweet) crudes.

Large growth in the global sweet crude supply will be helpful overall to meet the IMO regulation. It will provide an opportunity for many refiners to increase processing of sweet crudes to produce VLSFO for the bunker market, particularly for those refiners that are not far off from meeting VLSFO sulphur specification.

Considerable uncertainty remains around the IMO implementation plan and its impact on crude trade. This includes degree of compliance to IMO regulation and scrubber penetration rates, how and which refiners re-optimise their crude slate, and whether refiners have the infrastructure or capability to segregate sweet crudes and internal low-sulphur fuel oil streams.

Gupta will be speaking more about the IMO 2020 regulation and the impact it will have on HSFO and LSFO on the morning of the second day of the Tank Storage Asia conference on September 25 & 26. For more information visit www.tankstorageasia.com.



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