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Six renewable energy commodities that may someday replace oil & gas

Local generation of wind, solar, hydro and nuclear power, renewable heat and energy conservation together will greatly reduce our dependence on oil, gas and coal exporting countries. Will the energy transition put an end to energy trade?

For most countries, energy independence is just a dream

For nations that never had the luxury of natural resources, renewable energy provides a great opportunity to lessen the dependance on international energy trade. The same goes for nations that already depleted all economically viable reservoirs.

Consequentially, national energy self sufficiency often has been mentioned in support of the energy transition. Self sufficiency however should not be a goal in itself. Costs minimization has been the reason that energy trade has surged over the last decades. Imported coal, oil and gas often simply provide cheaper energy than can be sourced locally.

Costs will of course still be relevant in a carbon constrained world. Regions with favorable climate, favorable geography, low population density, a fleet of operational nuclear power plants or a pragmatic stance on carbon capture will be able to produce low carbon energy far cheaper than less advantageous parts of the world.

It would be naive to suggest that clean energy will not be traded

If the whole world strives to reduce carbon emissions, front runner countries will reach carbon neutral self sufficiency faster than others. From that point on, some countries will almost certainly be able to reduce emissions faster and cheaper via trade than by continuing to strive for total self sufficiency. If part of a country’s energy demand can be met cheaper via imported low carbon energy, low carbon energy will be traded. There is no sound reason not to.

The challenge now is to predict in what forms renewable or low carbon energy will be traded. What will be the commodities of the future? Six likely contenders:

Electricity

Electricity is the fastest growing form of low carbon energy. As a commodity, low carbon electricity is indistinguishable from electricity generated in conventional power plants. Low carbon electricity is fully compatible with existing infrastructure for power transport and distribution. New high capacity power lines enable power trade not just between neighbouring countries but also across whole continents. The problem with electricity is that long term storage is complicated and expensive due to the relatively low energy density of batteries.

Hydrogen

Hydrogen is an energy carrier that can be produced practically carbon neutral. From fossil fuels with carbon capture or via electrolysis using low carbon electricity. As a gas, hydrogen can be transported in bulk via pipelines. Some existing natural gas infrastructure might be repurposed for hydrogen. Below -253 degrees centigrade, hydrogen becomes an energy dense liquid that can be shipped or stored in cryo tanks

Methane, methanol and other hydrocarbons

Methane is a fossil commodity but can also be produced from biomass. Using hydrogen and (non fossil) carbon dioxide, methane can also be synthesized carbon neutral. The same goes for methanol, various oils, lactic acid and almost all useful hydrocarbons that currently are produced at scale from fossil oil. Low carbon variants are chemically identical to current commodities and can make use of existing infrastructure.

Ammonia

Ammonia is a commodity currently produced and traded in bulk for the production of fertilizers and other chemicals. Ammonia nowadays is made mostly from fossil methane but it can be produced carbon neutral using hydrogen and nitrogen. Low carbon ammonia can replace current industrial ammonia consumption. Ammonia itself can also be used as a fuel or as an easily liquefied carrier for transport of hydrogen.

Metal powders

Metal oxidation is a natural process that can be sped up by increasing temperature and exposed metal surface. Metal powder in a flame burns at high temperature. Oxidized metal powder can be regenerated using low carbon electricity or hydrogen. Iron, alumina and other metals are already global commodities. Creating metal powder might be done before transport or on site where stored energy is consumed.

Biomass

Biomass is a low carbon commodity that already has some traction as renewable commodity. Wood chips, pellets, bio-ethanol, biodiesel are the only carbon neutral energy carriers that are already traded at scale between continents. Further scaling however is bound by natural growth rates. Biomass is only carbon neutral if the regrowth of trees and energy crops is in balance with bioenergy consumption.

No clear winner, potential for all

In non carbon neutral form, all potential global energy commodities mentioned above already have their applications in our current carbon intensive economy. Most of those industries will stay just as relevant in a carbon constrained world. For all mentioned carbon neutral commodities therefore it is reasonable to at least meet current consumption without carbon emissions.

Carbon neutral electricity has a head start in replacing its fossil counterpart. Electrification of mobility, heating and some industrial processes furthermore assures that the relevance of electricity will grow in a carbon constrained economy. Except for biomass, all other proposed commodities will also be produced mainly using low carbon electricity.

Which future commodity eventually will replace fossil oil as the world’s main energy carrier, will be decided by energy losses in conversion, practicalities in handling, storage and transport, geopolitics and of course first mover advantages. The transition has started, it’s time to place your bets.

Tank Storage Demand Drivers – Arbitrage

Geographical price differences will lead to increased trade! In this article we would like to highlight the subject arbitrage and what this theme has for impact on the tank storage market.

Introduction arbitrage economics

In theory (Investopedia), arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar positions on different markets or in different forms. Arbitrage exists as a result of market inefficiencies.

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But how does this work in practice? As commodity trading firm Trafigura describes on their website, they apply three forms of physical arbitrage:

1 – Geographical arbitrage identifies temporary price anomalies between different locations;

2 – Time arbitrage seeks to benefit from the shape of the forward curve for physical delivery (see our article on market structure); and

3 – Technical arbitrage seeks to benefit from the different pricing perceptions for particular commodity grades and specifications

In this article and to make things clear we will focus solely on geographical arbitrage and in particular the Northwest European Singapore arb for heavy fuel oil. 

In order to calculate heavy fuel oil’s price difference between Northwest Europe or ARA and Singapore, we compare the FOB ARA spot price with FOB Singapore swap price, second month due to the duration of the voyage. The difference between these values is the spread and should be large enough to cover the trade costs.

On most occasions heavy fuel oil is shipped to Singapore in a VLCC (Very Large Crude Carrier/310 kt DWT) and loads approximately 270 kt of product. We therefore sum the VLCC freight rate, finance costs, port costs, inspection costs and demurrage to come to total trade costs. Should the spread be more than the trade costs the arb between both regions is open. When the spread is less than the trade costs the arbs is closed.
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Importance of arbitrage for tank storage companies

So monitoring if arbs are open (or closed) is a good indication, to understand if trade between two regions is likely to increase. A positive trading environment, ultimately will influence tank storage dynamics.

Please note that arbitrage cannot be seen as a single indicator for business opportunities for tank storage companies. Other indicators that should be taken into account are: price volatility, market structure, and more. These subjects have been highlighted in other articles.

Source: www.trafigura.com

Tank Storage Demand Drivers – Market Structure

The market structure stimulates traders to buy now and sell late. In this article we would like to highlight the themes contango and backwardation and what market structure means for tank storage operators.

Market structure – Introduction to contango and backwardation

An oil price for immediate delivery is called spot price or cash price while an oil price for delivery at a specified date in the future is called a forward price. When we plot these various prices and order them from short to long term delivery, a forward curve is created.

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When a futures price (second month) is below a futures spot price (first or front month), the market structure is in backwardation. In this case, the forward curve is downward sloping. When the futures spot price is below the futures price, the market structure is known as contango. In this case, the forward curve is upward sloping.


Figure 1: Forward curve ICE Brent crude futures

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A contango usually occurs when supply is higher relative to demand (supply glut) while in a backwardation demand is higher relative to supply (shortage). As time evolves, an oil forward curve can switch from backwardation into contango as in the case of the NYMEX RBOB futures forward curve. When a cyclical pattern is visible, this is called seasonality.

With respect to NYMEX RBOB futures, US gasoline prices tend to rise towards summer driving season during the period June and September. In the period before peak demand, oil traders tend to buy and store products to have product available in times of high consumption.

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Importance of market structure for tank storage companies

In a period of contango, oil traders are encouraged to buy oil products today and sell in the future when the spread between two months covers storage, shipping and finance costs. When this opportunity presents itself, product is being sold, shipped and stored, resulting in more business for tank storage companies. This play is known as a ‘contango storage play’ but is limited by the maximum tank storage capacity available.

In some rare occasions, when the time spread is large enough even tanker vessels are chartered by trading companies to store oil products. This is known as floating storage. In this rare environment demand for tank storage is high and pushes storage rates for spot availability. Backwardation discourages storing oil products as a trader can sell oil today at a better price than in the future.

Is market structure the only business opportunity indicator for tank storage companies?

There are other indicators that should be taken into account such as price volatility, arbitrage and more. These topics and Insights Global’s market model will be covered in upcoming weeks.

Learn what drives tank storage demand. Join the FREE Webinar: Insights Global Tank Terminal Commercial Performance Model upcoming March 18th 2020.

Tank Storage Demand Drivers – Price Volatility

Volatility is applied to describe fluctuations of oil prices and it relates to the level of uncertainty in the market. Historic volatility is calculated by the standard deviation of an oil price return series, measured during a certain time frame

Introduction to Price Volatility

Price volatility will stimulate traders to buy low and sell high. In this article you will learn about it and how it influences demand for tank storage.

There are other ways to calculate volatility i.e. looking at the daily high and low range of oil prices during a trading session or the estimated volatility of an option (implied volatility). Implied volatility offers an outlook on the expected volatility and is the opposite to historic volatility that looks back into recent history. It is important to understand that there are events that can impact the level of price volatility.

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Figure 1 Brent crude price and price volatility

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When analyzing the Brent crude price and periods of high volatility there are a number of time frames when crude futures prices dropped while volatility expanded. Like on January 8 (weaker geopolitical risk premium), and February 3 (worries of Corona to demand for oil).

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Importance of price volatility to tank storage companies

Important for tank storage companies to understand is that in times of high volatility, such as described in these three cases, trading volumes on the paper market are very high. As traders are able to make bigger profits in a high volatile regime when an old saying become reality: ‘buy low and sell high’. 

Taking into account that every paper position is squared by a physical position, one can understand that also physical trade will increase. More physical trade will eventually lead to more demand for tank storage capacity. 

Is price volatility the only business opportunity indicator for tank storage companies?

There are other indicators that should be taken into account such as market structure, arbitrage and more. These topics and Insights Global’s market model will be covered in upcoming weeks.

Learn what drives tank storage demand. Join the FREE Webinar: Insights Global Tank Terminal Commercial Performance Model upcoming March 18th 2020.

Source: Grimes, A.H., Trading Volatility Compression, 2014

Seven promising routes that reduce the carbon impact of oil and gas

The use of crude oil, natural gas and coal has been a primary driver of human progress. Unfortunately, now we know that the use of fossil resources is also a primary driver of anthropogenic climate change. What can be done in the short term?

 

Every tonne of carbon emitted counts

In 2050 and thereafter, cheap and abundant energy will still be of utmost importance for human progress. The big difference is that this energy will also have to be carbon neutral.

Until all of our energy is sourced carbon neutral, every ton of carbon (not) emitted counts. In the coming decades, it will be fairly easy to do without our most carbon intensive energy source: coal. Substituting oil and gas will however be far more difficult. In the short run, the use of gas may very well increase because of climate policy. Gas fired power plants pollute substantially less than coal fired power plants. Trends in oil consumption for the coming decades will be defined by slow but steady reductions in the ‘old’ economies, balanced at first by growing demand in emerging and evolving economies.

Given that oil and gas production, refining and transport will be facts of life for the coming decades, reducing the carbon intensity of oil and gas consumed will be just as important as substituting oil and gas with carbon free alternatives. Here are seven routes that substantially reduce the climate impact of the oil and gas industry.

Electrification of offshore platforms

Using 11 floating windturbines, Equinor will electrify 5 of it’s production platforms. Reducing gasturbine utilization by 35%, the project will cut carbon emissions by ±200,000 tonnes annually. Besides wind power, providing onshore power to offshore projects may also help cut emissions.

Old fashioned plumbing

Leaks in production and transport result in loss of revenue but are nevertheless common. New satellite and drone imagery simplifies the recognition of leaks. Solving leaks, especially methane leaks, reduces the climate impact while increasing the yield of energy companies.

Carbon capture in production

Raw natural gas and oil may contain large amounts of CO2 which have to be removed in order to comply to standards. This is often done directly at the point of extraction. Storing the separated CO2 underground, instead of just venting it into the air, is an effective climate policy.

Utilization of concentrated solar hear

Most of the easily recoverable oil has already been extracted. The remaining, more viscous crudes have to be heat treated before extraction is possible. Normally, steam for this process is produced by burning gas or oil. GlassPoint Solar enables solar heat to replace this fossil fuel consumption.

CCS at refineries

Oil refineries consume large amounts of hydrogen for removing sulphur and other contaminants from crude oil and to convert crude into refined fuels. This hydrogen is produced from natural gas, with CO2 as byproduct. Capture and storage of this pure stream of CO2 is rather easy.

Reduction of gas flaring

Flaring of gas at oil wells in itself is a climate measure, as CO2 from burned methane has a far lower climate impact than the methane itself. Still, routinely burning away gas on site that could just as well be used productively elsewhere should be prohibited as much as possible.

Abandoning unconventional reservoirs

Extraction and refining of oil from tar sands, in the arctic or from shale reservoirs by nature is more carbon intensive than production from more conventional fields. Given most of fossil resources should be kept underground anyway, it’s best to abandon unconventional fields first.

License to operate

At sufficient scale, most of the options mentioned above are not extremely expensive. Given that almost all oil majors have come to terms with the fact that fossil carbon is the prime source of anthropogenic climate change, implementation of measures that greatly reduce the climate impact of operations should be a no brainer.

Furthermore, if oil and gas producers are not yet intrinsically motivated, exposure to cap and trade programs, carbon taxes, shareholder pressure and eventually consumer boycots should help enforce the utilization of renewable energy in production and refineries, the capture and storage of carbon and the minimization of leaks and flaring.

If you are active in oil and gas, now is the time to take action.

Auteur: Thijs ten Brink, Photo: Zbynek Burival via Unsplash Public Domain

Tweedaagse Oil Academy

20 en 27 maart, 2020

Vergroot Je Waarde met Meer Kennis

Uit cijfers van EY (2015) bleek dat in Nederland ongeveer 16.000 mensen werkzaam waren in de olie en gasindustrie. In hetzelfde jaar in Amerika waren dat zelfs bijna 1.5 miljoen mensen! Hierbij zijn nog niet eens de dienstverlenende bedrijven meegeteld. Het is dus een immense sector!

Het is niet alleen groot qua omvang maar ook qua complexiteit. Veel bedrijven die we tegenkomen begrijpen slechts het onderdeel van de logistieke keten waarin zij actief zijn. Zij missen kennis van de gehele logistieke keten. Juist die andere ketenonderdelen hebben vaak directe impact op de winstgevendheid van hun business.

Een aantal van deze organisaties hebben bij ons de tweedaagse Oil Academy gevolgd. Na de training zijn zij zich beter bewust van hoe de gehele olie -en gas waardeketen functioneert. Zij begrijpen beter hoe de verschillende marktspelers en fundamentals werken. Al bijna 200 deelnemers gingen u voor en waardeerden deze training met meer dan een 8!

Voor meer informatie, vraag onze Oil Academy brochure aan door het onderstaande formulier in te vullen.

Global tank terminal markets: current status and outlook

To say that the global tank terminal business is large is an understatement. There are more than 4900 tank terminals comprising more than 1 billion cubic meters of storage capacity. The business has grown at a compounded annual growth rate of 3% since 2005 and in coming years another 10% will be added to global tank capacity. Some might argue that capacity has grown too fast and that we are approaching a situation where markets are ‘over-tanked’. But is this really the case? This is a very relevant question for many players. For instance, if you are a business development manager at a terminal operator you need to understand this because it can guide you in determining if and where to invest. Another example are investors. If you are an investor in infrastructure assets you need to understand this in order to decide on investing or divesting in and valuating terminal assets.

So understanding the balance between supply and demand for terminal markets is very important for many people. One thing to keep in mind is that terminal markets are on the one hand very local in nature but on the other hand these markets are driven by global factors such as trade flows and commodity price dynamics. This makes these markets rather complex. Nevertheless in this article we will try to shed some light on this topic in order to unravel this complexity. We will take the approach to focus on how tank terminals are used by their clients and how this adds value to these clients. To support this approach we will use INSIGHTS© GLOBAL’s model on terminal functions.

  • Logistics/hub function
  • Trading platform
  • Strategic storage

Every terminal essentially has a logistics or hub function. This is the prime function. Some terminals are also used as a trading platform by its clients. Physical commodity traders require terminals for their business model. The last function a terminal can have is to store crude or oil products as part of a country’s strategic petroleum reserves. This last function is interesting for a specific terminal operator but from an economic analysis point of view less relevant because it is dependent on specific policies defined by governments. We therefore leave this function outside of the scope of this article.

So we will focus of the logistics and trading platform functions. After careful analysis of these functions and the value it can bring to clients of terminals we concluded that there are three key factors that act as business indicators for tank terminal markets:

  • Commodity price dynamics
  • Inventory levels
  • Trade flows

If you are analyzing business at a specific terminal you need to look at these factors in the local context. However, for the purpose of this article we have looked at these factors on a global scale and we have focused on oil markets.

Oil price dynamics

Current oil price levels are low and rather volatile. The low price levels stimulates demand and the increased volatility creates trading opportunities. The forward curve is downward sloping (backwardation) which weighs on arbitrage opportunities. However, some institutions like the EIA are forecasting a slight oversupplied global crude market, which could soften the backwardation or even flip it to a contango, which would be good news for the terminal sector.

Inventory levels

Global crude and oil product inventories are on the lower end. This is related to the backwardation price structure. So tanks are slightly underutilized right now.

Trade flows

Global crude and oil products trade flows have been increasing at a steady rate in the last decade. This rate resembles the growth rate in tank capacity and thus signals that the balance between tank capacity and tank demand is more or less balanced. This is a very positive sign.

The main conclusion from the above analysis is that the global market does not seem to be over-tanked and that the current situation is set to improve significantly after oil price dynamics change to fully support the terminal business. So the future is definitely bright for the terminal business!

About the author

Patrick Kulsen is Managing Director and Senior Consultant at INSIGHTS GLOBAL, a market research company specialized in oil and petrochemical markets. The company’s consultancy team has successfully helped clients with research and commercial due diligence projects for many years. For more information on our consultancy services please follow this link.

Tank Storage Assets Portfolio Analysis

Introduction

In the last decade the tank terminal markets has seen quite a large number of Merger & Acquisition deals. One of the main trends that has been witnessed is that investments funds are stepping in and in many cases are emerging as winners of these bids. As an investor or fund manager you might wonder “Is the tank terminal sector worthwhile getting into?” or “Is the opportunity at hand going to diversify my investment portfolio?”. This blog post will try to give guidance on this subject.

Infrastructure Asset Class

Tank storage assets, due to their resilient and stable revenue profile are considered infrastructure assets. Such assets are attractive investments if it fits the risk/return profile of your fund. Nevertheless there are some nuances that need to be made. Not all terminals are alike so a more detailed approach is needed to distinguish between various groups of terminals. From an investment portfolio perspective it is sensible to group terminal assets into different categories based upon their exposure to business risks.

1. Location, location, location…

One obvious characteristic is the location of the terminal. For one, country risk is associated with the location of the terminal. Is the terminal located in an OECD country or not might be a good way to look at this. However location of terminals has many more implications. It is the single largest factor driving value of terminal assets due to various reasons. Most likely if you ask experts the question “what is are the three most important terminal characteristics” they’ll answer “location, location and location”. So the conclusion is that a thorough analysis of the implications of terminal location is needed.

A rather simplistic but effective first order categorization is to group terminals into Hub Location and Non-Hub Location terminals. The hub location terminals are well positioned and are better able the weather downturns in business cycles. Additionally, these terminals are less sensitive to local and regional economic circumstances. Business activity at hub terminals is related to global trade, which is less volatile and thus has a lower risk profile.

Another categorization method is to distinguish between sea-access and inland terminals. This grouping has some overlap with the functional categorization that will be discussed in the next section. Nevertheless it gives additional insights into the risk profile because sea-access terminals offers more flexibility for its customers and has a larger operating region. On the other hand, inland terminals are more restrictive and are in most cases confined to the local area. This doesn’t mean that these assets are worthless, they can be very profitable. However, they do have a different risk profile.

2. Market Segment

After location the second question you need to ask is: what liquid products are stored at the terminal? Products can be categorized into the following main groups: crude oil, petroleum products, pressurized gasses (such as LPG), LNG, chemicals, vegetable oils, bio-fuels and others. For petroleum products and chemicals sub-categories apply, but let’s not overcomplicate matters here. The point is that for instance petroleum product markets have a different dynamic than chemical markets. This translates to a different risk profile for the terminal business. So market segments are a key characteristic.

3. Terminal Functions

A tank terminal can have one or more functions for its clients. These functions are driven by business environment and the infrastructure of the specific terminal. The main functions applicable to terminals are:

-Logistics / hub function:
o Make /break bulk hub
o Distribution & inter-modality hub
o Integration with industrial site
o Bufferstock

-Trading platform:
o Physical arbitrage
o Blending
o Contango storage
o Optionality

-Strategic storage

Uncovering dominant functions related to the specific terminal that is up for sale gives insights into its business and the related risks.

Putting it together: does it fit?

By combining the above mentioned locational, market segment and functional aspects the terminal asset can quickly be profiled to see if it contributes to the diversification of your portfolio. A diversified terminal asset portfolio should preferably have a variety of assets that ranges across different locations, markets segments and incorporates a varied set of functions. If too many assets are in the portfolio that have similar risk profiles the portfolio might be too exposed to a certain risk.

The above mentioned characteristics have the ability to frame the asset. But please keep in mind that a more detailed approach is required later on in the process as part of the commercial due diligence project.

Terminal Portfolio Compatibility Call (FREE)

The above described methodology gives an outline of an approach that can be applied to check if a terminal asset fits your investment portfolio. However, elaborating on all relevant details is outside the scope of this article. Additionally a lot of data is needed to profile terminals. So you might need help to fully implement this method. We can help you with this. Please contact me for a free and confidential terminal portfolio compatibility call. In this call, I will apply this method to your investment opportunity so you have instant insights into the risk profile.

About the author

Patrick Kulsen is Managing Director and Senior Consultant at INSIGHTS GLOBAL, a market research company specialized in amongst others commercial due diligence of tank terminals. The company’s consultancy team has successfully helped clients during M&A projects for many years. For more information on our consultancy services, please follow this link.

6 things terminal operators should know about their competitors

The tank storage industry is a very competitive market and it brings many challenges to its players. Tank terminal operators for liquid bulk are facing both internal and external factors that can affect the efficiency and the progress of their business.

A few internal factors involve the company’s organization, processes, availability and infrastructure, etc. Terminal operators can be also challenged by external factors, such as competition, regulations and the economy. With more than 7,040 tank storage facilities worldwide, it can be very tough for storage operators to position themselves in the market.

What exactly do terminal operators need to know in order to face their competition?

1 Location

Location for terminal operators is key for the success of their business. Before starting with any terminal construction project, a lot of thought is put into the geographical location of the terminal. In order to analyze the location, a storage operating company needs to have insights on all other players that are active in that area. Besides other factors, analyzing the competition in a certain area can indicate if it is viable to invest in a project.

If a terminal operator already has an existing terminal in a certain region, it is important to know the neighboring competition. Who are those terminal operators? What is their market share? What cargo types do they support? What is the infrastructure of those terminals? All these are a few crucial questions, that terminal operators should ask themselves.

2 Market share and total storage capacity

Another important factor for a terminal operator is to know the largest storage players in the region. This gives the ability for a terminal operator to analyze his/her position in the market and at the same time understand the power of their competition.

How can they easily determine the market share of their competitors? For example, if a terminal operator is interested in Barcelona Port or has an existing terminal in the port, they can look at the total storage capacity of all the terminal operators. In the image below it can be seen how insightful market share is when identifying the biggest players in the port (the market share is drawn from the total capacity of each terminal in the port).

3 Cargo types

For terminal operators it is important to know what cargo types their competitors are able to store. This gives an opportunity for them to create diversity and flexibility in product storage at their terminal. In today’s storage industry, the clients of storage operators see diversity and flexibility as an added value. Thus, there are a few important factors that a terminal operator needs to analyze:

  • Demand in that region
  • Production in that region
  • Import and export flows
  • Imbalances
  • Storage availability in that region

4 Different terminal functions and access modes

A tank terminal can have the following functions:

  • Strategic storage
  • Logistical storage
  • Import/Export
  • Trading hub

These four different terminal functions create different level of competition for terminal operators. Tank terminals that are located in the same trading hub and that are providing the same storage services are in direct competition. A strategic storage that is located next to a logistical storage might not be in direct competition, but terminal operators should still thoroughly analyze the level of competition.

The function of a terminal can also dictate the access modes for a terminal. Terminals can have the following access modes: sea, rail, road, pipeline and barge. A terminal with more access modes can be connected with different international trading markets and provides more options and flexibility for its potential clients.

5 Planned investments and expansions

Terminal operators need to know if there are any new projects or planned expansions in their region. A new terminal can mean stronger competition while a new expansion creates more power to an existing competitor. If terminal operators are aware of the new changes and are properly informed, they can better understand how to face the new challenges.

As the competition is significantly increasing, especially in port areas, terminal operators need to constantly evaluate their infrastructure system and consider expansion possibilities.

What should a terminal operator know about a new project/expansion:

  • Which company is it and what is their market share?
  • What will be the total added capacity for an expansion or what will be the total capacity of the new terminal?
  • When will the project be completed?
  • What products will the terminal be able to store?
  • What access modes will the terminal have? 
  •  

6 Logistical performance

A very important factor for marine terminal operators is to analyze the logistical performance of their competition. This includes the following operations:

  • Throughput
  • Berth occupancy
  • Average visit duration
  • Tank turns

 What does the logistical performance measure?

It determines the productivity and performance of a certain terminal. For a terminal operator, it is a good indicator if the competition is underperforming.

Conclusion:

The six factors mentioned in this article are very good indicators and analysis tools that a terminal operator can use in order to determine the efficiency of its terminal. And also to create a plan in order to improve the market share of the terminal. Nevertheless, besides these six factors there are many other factors that can help to evaluate the competition and were not mentioned in this article.

If you are a terminal operator have you thought about these factors?

  • Product handling efficiency
  • The performance of your equipment
  • Storage capacity
  • Multi-channel transportation system

The hottest terminal locations of 2020

In the world of international tank storage, thousands of terminals give access to commercial storage. These terminals are located all over the world. From large tank farms in oil trading hubs in ARA, USGC, Fujairah and Singapore to small depots on Guam or Greenland.

The tank storage sector is not a static industry but a dynamic one which grows every year. It is interesting to find out which regions have the most investments planned or are currently building new additions.

In picture 1 can be seen where the largest concentrations of tank terminals are.

The world’s hottest storage hotspots

Estimates are that global tank storage capacity will grow 8% to 1.03 billion cbm in 2020 and even 11.5% to 1.06 billion cbm in 2021.

When ranking the regions with the largest total tank capacity in 2019 the following list can be produced: 1) Asia (360Mcbm), 2) Europe (235Mcbm), 3) North America (191Mcbm), 4) Middle East (50.8Mcbm), 5) South America (45.5Mcbm), 6) Africa (43.6Mcbm), and 7) Oceania (4.4Mcbm).

In 2020 the ranking is as followed: 1) Asia (383.7Mcbm), 2) Europe (244Mcbm), 3) North America (207Mcbm), 4) Middle East (93.3Mcbm), 5) Africa (48.9Mcbm), 6) South America (47.8Mcbm), and 7) Oceania (4.7Mcbm).

Analyzing this list some remarkable conclusion can be taken:

-The Middle East will show the strongest growth rate with 84% in 2020 as capacity in this regions grows from 50.8Mcbm to 93.3Mcbm;

-Africa will leapfrog South America and take position 5. This continent shows a growth rate of 12%. Storage capacity increases from 43.6Mcbm to 48.9Mcbm.

-Europe will grow by 4% till 2020 and is the slowest growing region of all the 7 regions. Capacity in this region grows from 235Mcb to 244Mcbm

Although, looking at regions is sort of looking at it as from a macro-level perspective, we can well say that the Middle East will be the hottest tank terminal location in 2020. There are some interesting locations in the Middle East that have a substantial part in the additions in this region.

Fast growing areas in the Middle East

Oman Tank Terminal in Raz Markaz

In Oman storage of oil liquids is concentrated around the ports of Salalah, around Oman’s capital Muscat and Sohar’s industrial area. Oman’s government owned investment company OOC, Oman Oil Company announced a major investment in 2012 on building a massive 31Mcbm crude storage facility in Ras Markaz. Some 200 tanks will be added. Estimates are that this terminal will be operational as from June 2019. With this investment Oman is trying to develop its position as an important global trading and storage hub.

South Oil Company in Iraq

Roughly said, Iraq has storage facilities in its oil fields in the North, around Kirkuk, Al Anbar and Erbil and in the South, around Basrah. Most of these terminals are controlled by the Ministry of Oil of the Republic of Iraq. Government-owned South Oil Company will add 2.78Mcbm of crude capacity in Al Zubair and another 0.464Mcbm in Fao. For the first addition applies that some 489 crude tanks will be built. December 2019 has been pointed as data of operation. For the latter, applies that 5 tanks will be built and this expansion is planned to become operational in December 2020.

Jask Oil Terminal in Iran

In Iran, storage facilities are controlled by state-owned Iranian Oil Terminals CO. These terminals are mostly located at the Persian Gulf and the gulf of Oman, connected with each-other by the infamous Strait of Hormuz. Not in the 2019 and 2020 numbers but definitely worth mentioning is the 10Mcbm crude addition in Jask. Jask is peninsula that runs into the Gulf of Oman. The Jask Oil Terminal will include 20 tanks with floating roofs. he terminal will also include loading and unloading wharves, offshore facilities including three single-point mooring (SPM), and other infrastructure for import/export oil. Estimates are that this addition will be active in December 2021.

The data for this article was gathered with the support of tankterminals.com’s database platform. With only a few clicks and couple of seconds the information of the biggest market players in the various regions was obtained.

For more information, contact:
Jacob van den Berge, Head of Marketing & Sales Insights Global