All about Asia
This issue focuses on Asia to coincide with November’s Tank Storage Asia expo & conference in Kuala Lumpur and even we were surprised by the level of activity in the region. There are over 60 projects listed in the terminal construction/expansion list, and there’s certainly no sign of this growth slowing down. China stands out as a country with an enormous potential for terminal growth. Its demand for energy keeps growing and in 2009 it overtook the US as the world’s largest vehicle manufacturer. Total oil consumption is expected to rise to 11.6 mpd by 2015, compared to the 8.5mbpd seen in 2009. Because its own resources are so limited more storage space is urgently needed. Product storage in the country is likely to increase to around 500 mbbl by 2015, almost 15% above that seen in 2009. Vopak is the largest third party terminal operator in the country, with seven terminals in operation and two due to enter service next year. In an interview with Vopak China’s president Jan Bert Schutrops on page 39 he explains just how fragmented the market is. Many independent traders have only one terminal in one location and some ports own their own terminals. Because the petroleum industry is dominated by powerful state enterprises entering the market is not easy but Schutrops is seeing the market gradually open up. He feels there are now new opportunities for foreign companies that can provide superior quality services to some local players. Vietnam is another country which is in desperate need of additional storage to reflect the sheer pace at which oil consumption is rising. Previously the country had to import all it fuel products. It now has one refinery and plans for two more and is aiming at self-sufficiency in oil products by 2015. The first oil refinery is facing the problem of having huge stockpiles of products with no storage space. An additional one million tonnes of storage capacity is required.
M&A activity climbs to unprecedented levels
Through August 2010 15 transactions have been executed in the US alone, with approximately $5.4 billion (€3.9 billion) of total transaction value changing hands1, often from captive owners to independent operators. This comes on the heels of another 10 transactions having been completed in the industry in 2009. Although transaction value has ranged from $3.4 million to $1.9 billion, the average trade tends to involve several million barrels of storage capacity, with an average transaction value north of $200 million involving buyers and sellers that are both privately owned and publicly traded. This unprecedented growth in M&A activity not only signals a strategic shift in the traditional asset ownership paradigm, but also highlights the level of interest from opportunistic independent operators who want to capitalise on domestic and global energy usage trends. Industry characteristics Third party storage and terminalling entities are generally independent operations that support various types of customers including refiners, blenders, traders and marketers of liquid products. Products stored at these locations include: refined petroleum products, crude/black oils, NGLs, renewable/biofuels, chemicals, fertilisers, asphalt and other liquid products. Revenue is typically derived from leasing tank capacity, operational charges associated with blending/specialty services and throughput charges for the input and output of product.
Timing is everythin
Alaska International started building a bulk liquid storage terminal in 2007 at a critical time for the economic climate. Nevertheless, by choosing a strategic location, the company pushed forward and is preparing to launch the terminal. The facility is located in the Hamatiyah Free Zone in Sharjah, UAE. Not only does it have good access to shipping there is also a national highway for truck-based transport. Now to take advantage of the liquid petroleum industry in the region the company is now working on tripling its capacity. ‘While the economic climate has shifted significantly since we started in 2007, this has just been a temporary setback and the market fundamentals remain strong,’ says Kabeer Mamnoon, SVP of corporate strategy and development at Alaska International. Mamnoon remains optimistic for the long term growth of the industry. ‘New terminal builds have slowed in the region, but are poised to grow again as the economic recovery takes hold,’ he explains. The company is seeing a steady resurgence of demand for storage. As the world’s economy is recovering production has started to ramp up, driven by emerging markets like the BRIC countries. This translates to more demand for energy and petrochemical products, which in turn creates a lift in demand for storage. ‘Once we officially launch later this year and have a certain level of capacity rented out, we will begin the expansion phase with the build out of additional tanks. We will then will begin further expansion.’
China in focus
China is expanding its petrochemicals and refining industries as part of the government’s long term economic development programme aimed at creating employment and improving living standards. Plans call for a series of new ethylene cracker projects, refineries and petrochemical complexes to be commissioned over the next five years in a number of coastal provinces and inland areas that are targeted for accelerated economic development. The expansion of export manufacturing industries and China’s growing domestic consumer market are major factors driving increased demand for intermediate and downstream petrochemical products. Investment in hi-tech manufacturing and the automotive industry continues to expand, further increasing demand for plastics and other related products. Growing production and demand for chemicals and petroleum has created a growing market for third party storage facilities at China’s major ports. Independent third party chemical terminal facilities have developed the fastest until now due to the nature of the chemical business.
Wireless technology makes everything better
For US-based Tesoro’s Salt Lake City refining facility good plant efficiency comes down to three things: convenience, simplicity and responsiveness. The key reason that Tesoro values wireless technology is simplicity and cost-savings. ‘The bottom line is that wireless technology cuts costs,’ states Tesoro engineer Jeff Wheelwright. ‘Wireless products save time and money by not having to run conduit and wiring over long distances, and it has a much shorter startup time – meaning we can get up and running sooner which means we’re able to do more business.’ Tesoro’s Salt Lake City refinery produces such a high volume of product every day (approximately 58,000 barrels) that even the slightest break in production means high self-imposed penalties, so fast and simple integration of wireless transmitters, radar gauges and level alarm probes help ensure continued efficiency and profitability. There are many wireless level gauging solutions on the market but Tesoro went with US-based L&J Engineering. ‘There are many digital protocols out there and L&J was the only one we found that supported any current or future protocol offered,’ explains Wheelwright. ‘We started using wireless transmitters when we started having problems with old wiring that ran through the tank. This eliminated 90% of the problems we were having and solved several technical issues as well.’
Malaysia's growing role as a storage hub
Demand for liquid bulk shipping capacity and tank storage terminals has been steadily growing over the past few years, particularly in Asia. Going by the current global trends and developments this growth is expected to accelerate further over the next few years. There are at least four key drivers responsible for this continued growth in demand. Continuation of global dependence on oil- and liquid-based energy carriers Despite the rise in global concerns regarding CO2 emissions and climate change, energy forecasters still predict long term growth in oil demand – growing from 87 million bpd today to about 110 million bpd by 2030. The International Energy Agency (IEA) projects that by 2030 nearly 60% of the world’s energy usage will still be in the form of liquids (including biofuels and natural gas). The rest will be shared among coal, renewables and nuclear energy. A key contributor to this expected growth is the coming acceleration of auto markets in China and India. The booming auto industry in these Asian giants is a guzzler of petroleum, and with a burgeoning middle class from a total of 2.5 billion people, there are still miles to go given these huge untapped markets. Demand for biofuels is likely to grow too, but a significant market share is still decades away. Oil will indeed remain a very significant energy source for decades to come. Liquid energy carriers will remain the cheapest in terms of transportation costs and will continue to dominate the car markets. This will be a key catalyst to the growth in demand for tank terminal storage. Increasing diversification of liquid products Crude oil contributes less than 60% to the total liquid bulk trade today, a sharp drop from 90% 20 years ago. The market today is demanding more petrochemical products, cleaner and lighter fuel and petroleum products, alternate fuels and more specialised products than ever before. Diversification in products leads to diversification in shipping and storage requirements in terms of location, sizing, nature etc. Thus, the growth in diversification in trade in liquids leads to growth in demand for more diversified storage facilities and terminal space.
Revving up Indian infrastructure
India’s GDP is estimated to grow at a rate of 8.75% during 2010-2011. High economic growth will make it necessary to import enhanced volumes of crude oil – and this will require a growth in infrastructure. There are 13 major ports in India. Crude oil and finished petroleum products are the largest commodities handled by the ports, constituting a share of 35%. Volumes of crude oil and finished petroleum products handled at the major ports have gone up from 103.28 million tonnes in 2001-02 to 166.89 million tonnes during 2007-08, and they are expected to keep growing. India’s petroleum consumption has grown from 55 million tonnes during 1990-91 to 128.9 million tonnes during 2007-08. At the moment around 75% of total oil consumption is met through imports. To facilitate rising petroleum consumption, the Ministry of Shipping has drawn up a mega infrastructure addition programme under the National Maritime Development Programme (NMDP) to ramp up crude oil, petroleum products and other liquid bulk cargo handling capacity at major ports. It would also increase cargo handling capacity for other general cargo as well. Involving an estimated investment of Rs.55, 804 crore (€897,400) NMDP is implementing 276 projects. Among the projects identified, 76 projects will create new berths and jetties, 25 projects will be for deepening port channels, 52 for procurement, replacement and upgrading of port equipment, and 45 for improving port connectivity with the hinterland.
Wireless in practice
Terminals can use industrial wireless systems to optimise productivity and reliability, improve safety and security and ensure regulatory compliance such as compliance to safety standards. Increasingly, the adoption of industrial wireless technologies is changing the economics of operational investments. In some cases, deploying a wireless network versus a wired solution can cut instrumentation project costs in half. And in situations where speed-of-deployment and timeto- revenue are critical, wireless is by far the best alternative. Valuable applications A growing number of process industries recognise the value of wireless measurement and equipment monitoring and the way it can serve more reliably in applications where wiring often brings not only added cost, but also high maintenance and unreliability. With a wireless approach plant infrastructure investments reduce immediately and the ROI can be significant. Projects that previously could not occur now become immediately worthwhile. The appeal of wireless technologies for industrial monitoring and control is strong. Customers can reach equipment whose motion or remoteness makes hard wiring impractical. Customers can integrate systems in which physical layouts, overstuffed cable trays or expensive trenching mean that wired alternatives add up to more expense than communicating through the air. In general, customers can add devices faster than is possible with wires. An ultra-secure and ultrareliable wireless network infrastructure supports all types of plant safety, reliability and efficiency requirements.
Decisions made easy
Running a terminal can be a hard job. A management team typically has to deal with many questions: ‘Why are we having an increasing number of demurrage claims? We have designed all berths to have an average occupancy of 65%, have not we? Are there not enough loading pumps? The number of small ships has increased, but this could not be causing the problem. No, these ships are processed much faster. Or could it? Should we invest in the terminal again? If so, should we increase pumping or berth capacity?’ Important decisions to make Long term investment decisions can considerably impact the terminal’s financial return. Take as an example a tank terminal with four berths. Each of these berths is dedicated to one of the four products traded at the terminal. Each berth has a yearly throughput of 50 million barrels and an occupancy rate of 40%. The tank terminal’s management wishes to increase the throughput of product 1 to 75 million barrels per year in order to increase profit. However, the team is afraid that the already substantial demurrage claims will increase even further. They consider investing in new infrastructure to handle the increase. Three options are possible, but it is not yet clear which one would provide the best financial return: 1) De-bottlenecking, i.e. to make all four products available on all berths. This option is perceived to be a low investment option with considerable demurrage reductions. 2) Building an extra berth and de-bottlenecking. This option provides maximum flexibility, low berth occupancies and demurrage. With this option, the terminal is ready for further expansion, but at a cost.
Cold cutting in action
After carrying out statutory inspections at the end of last year Shell UK was informed it needed to replace steel floor plates in three floating roof tanks of 95,000m3 capacity (76m diameter by 22m high). The general scope of work was to remove and renew the tank floor plates, repair or replace the corroded sections of the tank floating roof plates (centre deck and pontoon plates), replace the floating roof periphery seals and replace the floating roof articulated roof drains. Shell UK awarded this major tank refurbishment contract to Amec Power and Process Support Services, based at Canalside, Ellesmere Port, UK. On site gas tests confirmed that hydrocarbons were trapped under the floor plates. For safety reasons conventional hot work methods usually used to cut and remove the floor plates were not permitted. Instead Amec used subcontractor Jet Set Hydro Technics to carry out ultra high pressure water cutting methods (UHPWC) using Ragworm technology. The cutting system uses 70% less water than conventional cold cutting and low impact under the floor plates. The amount of water was especially important in this case because the floor plates were heavily impregnated with crude oil. The more water that is mixed with this, the higher the associated disposal costs.
Safety first,returns later
Operators and contractors in the aboveground storage tank industry are continually improving the overall safety culture. The ever-increasing safety requirements can at times add operational and financial challenges for tank owners. But certain technologies that have been implemented to improve safety can also provide substantial financial and operating advantages. The conversion of internal floating roofs from leg supported to cable suspended is an example of how a new technology can be a ‘win-win.’ Floating roofs have always presented unique challenges to tank owners. The ability to clean, inspect, and repair tanks becomes very difficult if a floating roof is in its lowest position. A typical floating roof in its low position is 3-4 feet from the floor of the tank when it is empty. Years ago, tank owners were willing to send people into tanks while in-service to adjust the position. Prior to removing the tank from service, the floating roof leg supports could be adjusted to their high position. The high position is typically 6-7 feet from the floor of the tank once out-of-service. With a floating roof in the high position, out-ofservice tank entry becomes much less challenging. Now, due to the current safety requirements, few companies are willing to permit entry onto a floating roof while the tank is in service, which leaves the challenge of working around a floating roof at its low position.
Aluminium dome fire safety
Over the past few decades aluminium dome roofs have developed into one of most common roof structures for new or converted storage tanks. A very low rate of incidents has been recorded for these tanks, compared to steel fixed roof tanks or open top external floating roof tanks. But certain design aspects need to be carefully considered including fire detection systems, fire fighting systems, frangible behaviour confirmation for the roof and cooling requirements for aluminium dome roofs. Design codes API 650 on tank design for new atmospheric storage tanks and NFPA 11 for the design of foam fire fighting systems are the most important relevant design codes. Vapour concentrations For products stored with a low flash point (and often high vapour pressure) the vapour concentrations under aluminium domes should be as low as possible. For this reason the design and environmental codes are often based on free vented internal floating roof tanks, ensuring minimum vapour concentrations both inside as immediately adjacent to the tank. The free venting arrangement is required to keep the tanks out of the Explosive Level (below 10% L.E.L. – Lower Explosive Level). Research done at multiple tank farms such as Vopak in the Netherlands and BP Sweden has confirmed vapour concentrations for internal floating roof tanks are typically minimal, even under more critical circumstances such as in summer periods or for landed floating roofs being commissioned.
How to safely dismantle a tank
An ageing tank needs to be inspected to ensure its structural integrity and longevity. Repairs are often necessary, but sometimes the tank needs to be replaced. For one particular tank farm in the UK, a tank needed to be dismantled and removed, without disrupting the day-today activities of the facility. Day-to-day activities included receiving fuel via shipping tankers and its transfer to site storage, distribution of fuel using the road loading gantry and lorry distribution. The tank was located in the centre of a tank farm with no direct access for plant or equipment. The area was crossed by live feed lines and service systems creating significant hazards and restrictions to operations. Project management had to be closely monitored and had to work in conjunction with site operations. Site and project specific risk assessments highlighted crossovers in operations and outlined specific areas of risk. A safe system of work was developed to address the specifics of the site and project; management tools in the form of site and project specific method statements were developed, along with a construction phase safety plan. Control systems in the form of permit processes, auditing and monitoring procedures and systems of management created a robust framework around which the safe system of work operated.
No longer optional
Due to increasing market, competitive, regulatory and social pressures, terminal automation is more important today than ever before. Nevertheless, many smaller petroleum product terminals continue to operate with a relatively low level of automation and many larger terminals operate with outdated, poorly supported automation technology and/or a hodgepodge of disconnected systems. Due to the recent flood of mergers and acquisitions, many multiterminal owner-operators also find themselves with different systems (or, at best, different versions of the same systems) installed in their various terminals. This can make it difficult to coordinate activities, obtain the required information, avoid incidents, train operators, and support the systems. To overcome this, terminal management systems (TMS) are available to extend the capabilities of terminal automation systems (TAS) to help optimise the supply chain and provide more effective tools for real-time decision support (relative to allocations management, credit management, product pricing, etc.). Several prominent, full-line automation suppliers have also effectively leveraged their general automation expertise and wide-ranging portfolios (including some well-targeted acquisitions) to develop comprehensive terminal automation solutions with compelling value propositions. Most suppliers to this market can point to a successful track record of projects and a fairly long list of customer reference sites. Almost all claim to be able to work well with SAP, Oracle/JD Edwards, and other back office ERP systems used within the oil and gas and chemicals industries. Several even have certified interfaces.
Ensuring safety during construction
In the past tanks were constructed using a stage by stage method of erecting tank plates from the bottom to the top. This method is fairly risky, however, as after every shell course the working height increases. It was also difficult to position each plate, even in very low winds. Tank lift jacks are one way of overcoming this problem. These are a special type of climbing jack on a tripod structure, which are provided with two sets of fail safe grip jaw teeth. These hold the jack rod on the trestle as it climbs in incremental lifts holding the shell plates. These jacks are operated by a centralised hydraulic power pack and raise the tank high enough to the desired elevation to accommodate men and equipment working underneath it and to position the next shell course plates. Due to the special type of grip mechanism there is no chance of the tank slipping down at any time and there is total safety. In India, erection of tank shell plates by tank lift jacks units has been universally accepted and some clients have even made it mandatory.
Tank settlement can be characterised as uniform, tilt planar, outof- plane, or edge settlement. API 653 has clear guidelines as to how to measure tank settlements. When settlement is beyond the standard limits repairs will be recommended. Tank lifting is a general repair recommendation to remove the settlement and upgrade the tank foundation. Uniform settlement does not cause stresses on the tank structure. Tilt planar settlement rotates the tank in a tilted plane, inducing stresses into the tank wall and the nozzle attachments. Outof- plane settlement results when the tank settles in a non-planar configuration. This type of settlement induces stresses in the tank wall, floor to shell weld, and nozzle attachments because of the resultant external loads and moments on tank attachments and hoop stresses. Edge settlement occurs when the tank settles sharply around the periphery, resulting in buckling of the tank shell and deformation of the bottom near the shell, bottom corner joints, nozzle attachments, and the roof support structures. These types of deformation may be elastic or stable plastic which cause high stresses at the base of the shell, shell to bottom weld joints, bottom plates, the centre column and tank structural members such as rafters and girders.