Tank Storage Magazine v13 i05


Volume: 13
Issue: 5
Date Published: September 13, 2017



Investing in a flourishing market

As the chemical industry experiences a resurgence in the US, Stolthaven Houston is positioning itself to meet growing demand for infrastructure The shale oil revolution has led to a revival in the US chemical sector as significant investments are made in production capacity, generating more demand for more supply chain infrastructure.This renewed faith in the industry has resulted in greater demand for storage capacity and associated infrastructure, as the US enhances its position as a global energy producer.Growing product exports, such as methanol and oil, coupled with increasing demand for propylene-based derivatives, which the country is short of, are creating a demand for storage.These positive market fundamentals have driven Stolthaven Terminals to construct a new ship dock at its Houston facility, located on the Houston Ship Channel. The dock, which will be capable of handling tankers and barges, will increase access to the terminal and will minimise waiting and turnaround times.Dredging work has already started and construction on the dock is expected to begin in the third quarter of 2017, with operations expected to start in the fourth quarter of 2018.

Fulfilling Houston's storage potential

Following the completion of 7.5 million barrels of underground cavern storage capacity, Fairway Energy is focusing on creating an extensive distribution network to support Houston’s thriving crude oil market Fairway Energy’s underground cavern storage is addressing a need in Houston for a more efficient crude oil marketas production continues to drive demand for logistics infrastructure.Commercial operations for Phase 1A have started at the Fairway Energy crude oil storage facility, which comprises 7.5 million barrels of underground storage caverns. This capacity is served by two separate bi-directional 24 inch pipelines, which are currently connected to the Genoa Junction hub and with potential access to the Speed Junction hub.These pipelines will allow the company to receive inbound crude oil from the Permian and Eagle Ford Basins, the Mid-Continent and Canadian regions as well as the Gulf of Mexico.The facility will address the region’s storage needs, which have been driven higher by the significant growth of pipeline-delivered crude oil into and through the Houston market. Currently, the facility comprises three segregatedunderground caverns, supported by central pumping and metering facilities and by 6.5 million barrels of brine pond.

The storage and transport games

A lack of refining capacity in Mexico means that oil product imports will continue to increase, and infrastructure investments are now being made to capitalise on these market dynamics The storage and transport games started long ago, back in 2013, when several investors saw the potential demand for refined imported products from Tuxpan Veracruz.According to the Oil Prospective 2015-2029 report, during this period oil national production will increase by 24.1%, while demand will also increase by 35.9%. This means that due to a lack of Mexican refining capacity, at leastfor the next 12 years, Mexico will continue to increase its imports of oil products. So far, imports have already increased by 25% from 2014 to 2016, and the US has played an important role, providing 83% of imports.In order to support the new demand, investments in infrastructure are now being made. Currently, there are three important pipeline investments for oil products storage and transportation.The first is in Tuxpan, Veracruz, one of the most important ports, receiving 36% of the oil products imports in central Mexico. There, Sierra Oil & Gas, TransCanada and Grupo TMM are building an $800 million project that includes a marine terminal near Tuxpan, a 265 km pipeline with a capacity of approximately 100 thousand barrels per day from Tuxpan to central Mexico, and an inland storage and distribution hub in central Mexico with storage capacity of 1.2 million barrels.

The rupture ripple effect

Analysing the impact of crude pipeline outages on the supply chain The network of crude pipelines in North America serves as the circulatory system for the oil supply chain.Pipelines are the primary mode of land transportation for crude barrels, deeming their seamless operation a criticality for delivering barrels to storage terminals and refinery markets. However, the importance of the infrastructure grid does not make it invulnerable to accidents.Pipeline outages are unavoidable. Whether they are caused by leaks, natural catastrophes, or even vandalism, supply disruptions are an undesirable reality that can send ripples throughout the North American crude markets. Outages can cause bottlenecks in distribution, impact inventories at associated storage terminals, hinder barrels from getting to downstream markets, and significantly alter crude prices. Perhaps the best way to prepare for the inevitable impact of future supply disruptions is to examine previous incidents.

From demand pull to supply push

Altered supply chain dynamics, which has seen the US move from peak oil to a supply glut, have created attractive conditions for storage operators The resurgence in US crude production over the past several years has generated a myriad of market and structuralchanges, including upending world trade flows while pressing and holding refined fuel prices at low levels that has incentivised demand.Of the many industry responses from upstream to downstream amid this paradigm shift, one has been a buildout in new storage tankage – a trend that continues.CHANGING SUPPLY CHAIN LOGISTICSOver a 10 year period, the country went from peak oil to a supply glut, and in many ways flipped supply chain logistics from demand pull to supply push. As drilling activity surged and US crude production reached rates last seen in the early 1970s, new pipelines were built and others expanded, refineries added capacity, new storage tanks were erected, and growth in exports exploded.The US consumer has welcomed the new environment, driving more than ever, while the economic benefit has steadily boosted industrial and commercial output, albeit at a sluggish pace. Moreover, the advantages for US businesses do not stop at the border, with climbing fuel exports to Mexico also prompting spending on infrastructure to support operations.

Turbulent times

How sanctions on Venezuelan crude, Mexico’s energy liberalisation and President Trump’s ‘America first’ energy stance are having an effect on trade flows across the US. By Nnamdi Anyadike. The US physical oil market over the last few months has been at its most volatile for some time. Prices, which had remained stubbornly low since the start of the year, began to show some signs of recovery on the back of oil supply tightness at the refineries. Since mid-year, US refiners have been processing at record rates, buoyed by stable demand from US motorists but also higher demand for petrol and diesel from Latin America. This demand has risen in response to a shortage of product supply from local refineries that have been dogged by numerous technical problems.All of this has coincided with a slowdown in oil exports from the Middle East Gulf that has reduced inventories at the US refineries. In mid-August, data from the API showed that crude oil reserves in the US fell by 9.2 million barrels in a single week – the seventh weekly decline in a row. This was more than double the projected drop anticipated bythe Energy Information Administration (EIA) in its official weekly report, which also showed the largest weekly decline in US crude supplies since September of last year.A number of factors are all playing their part in the ongoing turbulent mix that is the current North American oil market. These include: Mexico’s energy liberalisation; President Trump’s ‘America first’ energy stance; potential sanctions on sales of US light crude to Venezuela’s state owned PdVSA oil company – and on imports of Venezuelan heavy crude into the US; possible effects of a North Atlantic Free Trade Agreement (NAFTA) on the US energy sector; and OPEC cuts.Also looming on the horizon and less than three years away are the International Maritime Organization (IMO) regulations. Its low sulphur fuel oil requirement that is set to come into effect in January 2020, could yet impact massively on the US refining sector.