Tank Storage Magazine v11 i02


Volume: 11
Issue: 2
Date Published: March 4, 2015



From salvage to storage

Italy-based Neri Group, which has beenactive in the marine sector; particularly inthe removal of oil from the ill-fated CostaConcordia, is also a storage operator.The company owns three terminalssituated in Livorno harbour in Italy,southern Europe. The location is inthe heart of the industrial area andin the centre of Italy – around 300kmnorth of Milan and south of Rome.

New terminal, old faces

FinCo is one of the newest terminalsin Europe. The terminal, located inAmsterdam, the Netherlands, storespetroleum products as well as biofuels.It is owned by Coloured Finches, anenergy company that was establishedby former CEOs from the downstream oilindustry in 2012. These include Jan-Willemvan der Velden, who used to work atMabanaft, Rutger van Thiel, who camefrom Oiltanking and Peter Nohlmans, whoused to be the CEO of Argos Energies.FinCo is also active in Asia under thename AFCO, an international tradingcompany founded in 2013, with itsheadquarters located in Singapore.The company is already tryingto strengthen its position in theDutch downstream oil market byacquiring a number of businessunits from Enivem Holding, anotherDutch company that is active in thenorthwest European oil market.

Spending it wisely

In February Zenith Energy, anewly-formed internationalliquids and bulk terminallingcompany, announced itsacquisition of the Bantry BayOil Terminal in West Cork,Ireland, from Phillips 66. Afterspeaking to the company’sCEO, Jeff Armstrong,it’s easy to see why.The terminal, located onWhiddy Island in Bantry Bay,has a storage capacity of overeight million barrels and is oneof the largest and deepestports in Europe, capable oftaking vessels up to 23m draft.Since the first day ofpurchase Zenith has beenoperating the terminal at 100%capacity. ‘We have a mixtureof customers, from Ireland’sstrategic petroleum reserves,to strategic storage for dieselimports and petroleumexports and refinery supporttankage,’ Armstrong explains.Zenith will look to expandwithin the next 12 monthsas the site does not needany improvement works.‘There is one 100,000barrel tank that we need torefurbish,’ Armstrong says,‘but aside from that, Phillips66 has kept the facility in aphenomenal condition.’The tank farm is sittingon a 300 acre site, only 100acres of which is currentlyin use. ‘Terminal operatorsare in a good positionat the moment, with themarket being in contango,’Armstrong says. ‘But this won’tinfluence our growth plans.’Armstrong worked forKinder Morgan for 13 years sohas seen his share of marketfluctuation. ‘You cannot buildbased on contango. We willsecure our customers firstand then move forward withthe terminal expansion.’His experience workingin North America alsomeans that he has extensiveknowledge tracking tradeflows. ‘Over the last 5-6 yearsthe shale evolution has led toassets being converted fromimport to export facilities,’he explains. ‘Although thesector is now under pressureand production has declinedslightly, the industry remainsrobust. It will be interestingto see what happens overthe next six months.’

What a difference a year makes

Storage is once again a ‘musthave’in the oil supply chainand everyone wants a pieceof the pie. This time last yearhigh oil price, low volatilityand a backwardated marketmeant investing in storagewasn’t an easy decision. Butthen everything changed inthe third quarter of 2014.Oil price started droppingon the back of increasing oilproduction in the US. OPEC’sdesire to maintain marketshare meant they resisted callsto cut production, resultingin global supply outstrippingdemand. The contango (whenfuture prices are forecastto be higher than currentprices), which subsequentlydeveloped as prices droppedby 60%, has driven a renewedinterest in storage assets,the likes of which has notbeen seen since the creditcrunch hit in 2008-2009.Back then, plummetingprices resulted in a supercontango,which reachedalmost $30 (€26) per barrelduring a six month strip.Occupancy rates over thefirst three months of 2009were 94% on key storageassets. Fuel storage tanks inRotterdam, Singapore andFujairah were full to the brim.Throughout the world, recordnumbers of ocean-goingtankers were being hired asshore tanks had been filledto capacity. There was anestimated 100 million barrels atsea according to data sharedby ship-owners; a 12 monthcontango greater than $7per barrel covered the costof storing oil on a supertankerso there was money tobe made in anchoring avessel full of oil offshore andplaying the waiting game.

Full to the brim

Seven weeks into 2015 and theprice of Brent crude topped$60 (€53) a barrel for thefirst time, up from a six yearlow in January but still morethan 50% down on year-agolevels. The oil price began itsprecipitous slump last summerafter Saudi Arabia andother Opec nations pursueda market share strategy,allowing prices to tumblein order to drive out highercost production, particularlythe surging light oil outputfrom shale plays in the US.The result was, in the wordsof Carl Fredrik Odfjell, businessdevelopment managerat Odjfell Terminals, an ‘oilshock’. This is certainly truefor the upstream industry,where tumbling oil priceshave hollowed out balancesheets, with oil majors shelvingmajor projects and slashingcapex while independentsare struggling to servicedebts and hard-pressedservice companies areaxing thousands of jobs. TheBaker Hughes Rig Count, avenerable index of drillingactivity around the world,has been scrutinised to see ifSaudi Arabia’s strategy wouldsucceed in curbing outputfrom its rival producers in theliquids -rich shale plays of NorthAmerica. Come February 2015and the verdict was in, withthe US rig count down 30%since November and otherareas, from the North Seato Asia, also stacking rigs.

Current contango, predictions for 2015 and impact on tank storage sector

The recent slide in oil prices hasturned the petroleum industryupside down. Global oilmarkets became oversuppliedin the course of 2014 due tothe steady increase of USlight tight oil (LTO) outputand the economic slowdownof many economic regionsworldwide. This situationpersisted as OPEC chose todefend market share insteadof balancing markets. Theresult has been a 61% fall in oilprices between July 2014 andmid-January 2015. All of thesudden upstream explorationand production business hasbecome far less attractivewhereas downstream refiningmargins have recovered.While crude oil and oil producttank storage companiesare cheering again, somemarkets were backwardatedbehind. Because ofoversupply, generallyspeaking the oil price forwardcurve has switched frombackwardation to contango,making access to storageinfrastructure profitablefor physical oil traders.  

CSB finds 'significant gaps' in regulatory landscape

At 12:23 a.m. on October 23 2009,a large vapour cloud ignited at theCaribbean Petroleum facility near SanJuan, Puerto Rico. The blast damagedhomes and businesses that were locatedover a mile away from the facility.Amazingly no one was seriously injuredor killed as a result of the explosionsand fires, but the situation was severeenough for President Barack Obamato declare a state of emergency.Caribbean Petroleum had been asignificant petroleum products supplierfor Puerto Rico. The facility includeda tank farm and refinery that wasshutdown in 2000. Prior to October 23,the tank farm stored petrol, diesel fuel,jet fuel, and fuel oil in approximately48 operational aboveground storagetanks. The explosion and multiple tankfires affected 17 tanks. Less than oneyear after the incident, CaribbeanPetroleum declared bankruptcy andwas later sold to Puma Energy.  

The need for compliant tank storage overfill protection systems

The catastrophic fire andexplosion at the Buncefieldstorage terminal inHertfordshire, UK, identified arequirement to mitigate the riskof fire and explosion causedby over-filling storage tanksused for extremely inflammableproducts, such as petrol.When designing a tankoverfill solution the processincludes compliance reviewsagainst national and corporatestandards (where applicable)such as IEC 61508 and IEC61511, along with PSLGBuncefield learnings. Additionalremotely operated shut offvalve (ROSOV) requirements tomeet legislative requirementsare also considered inconjunction with a reviewand update of existing (attimes obsolete) installationsversus current technology. Thistypically results in the designand installation of a safetyinstrumented system (SIS)providing tank overfill protectionto required standards.Tank Storage clientstypically require• Project management;• Specification &procurement of materials;• Detail of design;• Calculations to verifythat installed systemmeets SIL requirements;• Specification of highintegritylogic solver(Emerson Delta V System)together with associatedacceptance tests;• Specification of installation,test and commissioning;• Site supervision;• Operator training;• Independent thirdparty review.  

A new approach to cleaning

When Vopak in Houston, Texas, foundthat its tank bottoms were too viscous topump, it needed to find a solution.The bottoms consisted of approximately7,800 barrels of various streams. These were splitfairly evenly between two 30,000 barrel tanks.One option was to pay to cleanboth tanks and then pay to dispose ofthe product. The second was to trial anew product from Halbouty Energy.In the trial Halbouty placed the equivalentof 1000ppm of ParaFlow material, splitbetween the two tanks. The material wasinjected into the first tank via an injection portand then allowed to settle for five hours.After the time was up the two tankswere plumbed together and the materialwas then circulated between the two tanksfor 24 hours. Following this, all the materialwas placed into one tank so that the legson the other tank could be dropped and itcould be degassed. This both evacuated thetank and helped the cleaning process.  

Tank inspection: standards, intervals and complexities

The US EnvironmentalProtection Agency (EPA)originally announced theSpill Prevention, Control, andCountermeasure (SPCC) rule in1973, requiring certain nontransportationrelated facilitiesto develop and implementan SPCC plan. The purposeof the SPCC regulation is toprevent the discharge of oilinto US navigable waters. Afacility’s SPCC plan describesthe preventive measuresestablished to contain a spillat the facility. It also describescountermeasures in the eventof a spill to prevent it fromreaching navigable waters.After several interimmodifications, the EPAformally amended the SPCCrule 2002 to make it largelyperformance-based. The EPAthen issued the final revisedSPCC rule regarding thestorage and handling of oils,both petroleum and nonpetroleum(40 CFR Part 112).Facilities affectedThis rule affects a multitudeof facilities that store oilin containers of manyconstructions and sizes.Facilities impacted are thosewith total aboveground (i.e.not completely buried) oilstorage capacity greater than1,320 gallons. Containers of oil,petroleum and non-petroleum,of 55 or more gallons are to beincluded when determiningthe total oil storage capacityat a facility.

Testing out every possible scenario

The need to streamlineinvestment costs hasprompted the search for newmethods to plan a storagefacility, especially when lotsof variables are involved.Discrete event simulationcan be used to combinehistorical data and datathat represents differentscenarios, which is invaluablefor decision making.There are many exampleswhere simulation applies, suchas deciding on the number oftanks and volume, the numberof loading bays, determiningproduct configuration forloading arms and comparinglogistics solutions.Before making animportant investment orchanging an operationalprocess, the idea is to createmodels that representreality, in order to forecastresults (volumes, operationaltimes, queues, flows).The method used to createa model is always the same:• Model the real system:Collect all the real dataavailable to feed thesimulation. This data canbe flowrates, demandsprofiles, settling times,failure probability, etc.• Build the simulation:Create the infrastructure inthe model (tanks, pipeline,elements like loadingbays, etc.) and givethem their characteristics(volume, products,process time, etc.)• Validate the simulation• Scenarios design:Generate all the ‘whatif’scenarios needed• Simulation• Results analysisThis process is describedbelow using the exampleof a simulation of a facilityhydrant to supply anairport.

How proper planning can increase €50,000 per week

The basic processes of running a terminalare straightforward, but planning themall in the best possible manner is stillboth difficult and time consuming.Amongst the aspects of a terminalthat need to be planned are jetty & berthallocations, tanks, movements / transfers,line-ups, line cleaning operations, pumps,surveyors, staff and client priority.All these factors amount to at least a fulltime job, yet rather surprisingly only very fewterminals employ a dedicated ‘planner.’Better planning can not only save money,it can also improve customer satisfaction.Customer satisfactionEspecially in a market where there is noshortage of storage capacity, particularlyin Europe, the number one requirement forterminals is that they keep their customershappy. Customers expect flexibility &priority, low costs, real-time view on orderstatus and stock levels and a faster andbetter response to their requests.In order for the terminal to be able toservice its clients best, it needs insight inhistorical, actual and future activities andplan these in the most optimal way.Planning requires knowledge ofthe impact of last minute changes andavailability of all information. Terminals needto see bottlenecks and dependenciesand be able to act and easily andeffectively communicate changesto all parties in the supply chain.  

A new approach to storage

Storing liquids in single hull tankshas been done for centuries.Storage tanks are used to storemassive volumes of liquid products.These tanks are usually made ofsteel, with one hull, and a roofthat allows a free flow of air.Such construction was deemedsufficient, without much thought for:• the emission of product vapour,and the loss of product,• the often accelerated corrosionof the tank, and the need forrepair or replacement, and• the environmental impact.Therefore, storing liquids in steeltanks with one hull has botheconomic and environmentalconsequences. Steel tanks are atrisk of corrosion. Corrosion processesare often enhanced by the directcontact of a stored liquid withthe steel tank. In addition, thetank allows free air to be presentinside it. When the temperaturedrops, at night for example,condensation may form. This waterwill mix with the stored product andmay deteriorate the quality of it,particularly in the case of biofuels.  

Spectacular cone replacement at Vopak Botlek

Nowadays when a tank roofneeds replacing, the easiestoption is often to replace thewhole tank. Vopak TerminalBotlek in Rotterdam foundone of its tanks, which storesbenzene, needed a new coneroof, but the company didn’twant to waste material as thetank was still working effecitvely.It also wanted to keep costslow and minimise the impact ofthe operations on the terminal.Vopak’s terminal is a busyone and the 20m diametertank in question is located ina tank pit with 14 other tanks,making this even more of achallenge. This meant duringhot work activites on thebenzene tank, fuel transferwould be not be possibleto the other tanks, limitingVopak’s customer operations.Manufacturing the new roofoffsite seemed to be the bestoption as this would havethe least impact on Vopak’scustomers. But this made thelifting and installation of the rooffairly difficult as the tank pit is110m distant from the quay side.    

Static earthing protection for road tankers

The loading and unloading ofroad tankers with flammableand combustible products,presents one of the mostserious fire and explosion risksfor site operations within thehazardous process industries.A study conducted by theAPI in 1967 identified staticdischarges as being responsiblefor over 60 incidents in roadtanker loading operationsand demonstrates just howlong this potential threat hasbeen acknowledged. Thenatural presence of staticelectricity in product transferoperations, combined with itsassociated ignition hazards,ensures that regulators takestatic control precautions forroad tankers very seriously.  

Initial storage tank internal inspections

API 653 provides storage tankowners and operators withmaximum inspection intervalsto establish initial and ongoingtank integrity. To this end,specific tank safeguards aredesigned and provided toprolong tank integrity with areasonable amount of risk.Based on those safeguards, anowner/operator has the optionto delay the initial inspectionfor as many as 30 years. But,there are instances wherethe precautions may not beenough to ensure integrity,allowing issues to developbeneath the surface, andgo undetected for decades.Is waiting for that maximuminterval always the best courseof action? Two case studiesmay suggest otherwise.In the first study, a 10,000barrel aboveground tankstoring a highly refined, lightpetroleum product is locatedat a coastal tank farm. Thetank was built in 2006 inaccordance with API 650,10th edition. In addition, thetank was built on a concretering wall foundation andpossessed an under-tankliner for containment with asand bedding and galvaniccathodic protection (CP)system. Upon completionof tank erection, the tankwas commissioned andplaced into service.The owner of thetank implemented anaggressive programmerequiring inspections at amaximum 10 year interval,regardless of age. The initialAPI 653 out-of-service tankinspection was performedin 2014, approximately eightyears after tank erection. Amagnetic flux leakage (MFL)tank floor scan was performedto identify topside and soilsidecorrosion and pitting.

Why lift a tank?

For more than 60 years tank jackinghas created an added value in tankmaintenance programmes. Thetechnique improves and extendsthe operation of existing tanks.Tanks were first jacked, mainly forfoundation re-levelling works. Tanksoften based on soft soil (river deltas)were settling in even and un-evenways, resulting in malfunctioning.Nowadays there are many morereasons to choose tank jacking intank maintenance. New authorityregulations, aging of tanks, reductionof out-of-service intervals and costsavingsall provide added motivationfor setting up a repair programmein which tank jacking is included.

Whatever the weather

Atreus Deck & Dome, a business unit of theAustria-based industrial service provider,the Kremsmueller Group, has now had achance to test out its unique silicone-freealuminium dome roof sealing technology.The company has just finished aninstallation in Quebec, Canada, whichtook a week to complete. It was the firstwinter installation, which was completedin temperatures of -8°C and in the snow.

Understanding the human factors is HSE & CSR

Despite an ever growingvolume of laws, rules,regulations and guidelinesrelating to health, safety andthe environment (HSE) andcorporate social responsibility(CSR), these issues arestill not a priority in manyorganisations. Economic gainand growth are often the mainmotivating factors, so suchpolicies are considered onlyto be useful if they containrisk or liability. Adherence tosuch standards and policies isoften not chosen out of freewill or duty, but is often seenas an undesired expenditure.In several storageterminal and energy industrycase studies, there hasbeen an unwillingness tospend money to moderniseinfrastructure or protectthe environment or health,unless it is ordered by law,authorities or environmentalprotection agencies.People no longer use theirconscience to protect humanlife or their environment. Thishas been replaced by a merereluctance to comply. Todo more than just comply isconsidered an extra expense.This is a false assumptionand too often proven byenormous costs incurred ata later date. Compliancecosts more than what thehuman conscience, ethicsor morality would provide.