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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

Who are the biggest players in the tank terminal market?

In the global commercial tank storage industry thousands of terminal operators are active. Without taking a terminal operator’s specific function, it is interesting to learn who the biggest players are in the international tank terminal industry.

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

Looking on a global level the following top 10 terminal operators can be derived. See table 1.

Rank

10.

Head office

Sinopec

Vopak

CNPC

Kinder Morgan

PetroChina

Buckeye

Oiltanking

Marathon

Enterprise

Magellan

# of terminals

114

Capacity

44.1Mcbm

33.1Mcbm

25.7Mcbm

21.7Mcbm

19.8Mcbm

18.1Mcbm

17.6Mcbm

16.7Mcbm

13.2Mcbm

13.1Mcbm

As can be seen in this list, based on total capacity, the biggest players are located in China with Sinopec, CNPC and PetroChina, followed by US with Kinder Morgan, Buckeye, Marathon, Enterprise and Magellan and Europe with Vopak and Oiltanking. With a combined total capacity of 223Mcbm, the top 10 players cover around 21% of the total capacity globally.

A bit more details on the three biggest storage operators

Sinopec Group, Chinese dragon at the top of the food chain

Sinopec Group, China Petroleum and Chemical Corporation, is a Chinese energy company based in Beijing (China). It is the second largest oil producing company after PetroChina. Besides 50 terminals (with a total storage capacity of 44Mcbm, mostly located in China) and 30.000 petrol stations, this company operates dozens of refineries, around half of the Chinese refinery capacity. Sinopec has various listings on stocks exchanges but for the majority the shares remains in the hands of the Chinese government. In 2017, total revenues was around €300 billion.

Vopak, Dutch giant with a global storage print

Vopak is an independent storage player with a long history dating back to the early 16the century. Independent means it does not own the oil products its stores. It therefor holds an independent position in the market unlike for instance Sinopec and CNPC, the number 1 and 3 in the list. The 69 terminals of Vopak are scattered around the globe. It has locations in more than 20 countries with largest concentration of terminals in the Netherlands, followed by China and the US. In 2018, Vopak’s revenues lay at €1.25 billion.

China National Petroleum Corp, a powerful energy emperor

CNPC is a one of the biggest vertical integrated oil companies in the world. Its origins date back to 1949 when communist China was formed. The company rose from Ministry of Petroleum which secured and managed the country’s fuel. It operates oil assets in more than 30 countries, except for the 24 storage terminals (with a total capacity of 25.7Mcbm) which are mainly located in the Chinese homeland. In the downstream area it also operates more than 20.000 petrol stations.

Are storage capacity market shares equal across the globe’s regions?

Is the global division of market shares similar for the different regions? Absolutely not. Let us analyze the regions with the largest concentration of terminals. The regions with the most terminals are the United States (1.447), Europe (1,125) and Asia (1.057).

In the United States, the tank storage is dominated by publicly owned storage operators with US origins. The top three consist of 1) Kinder Morgan, 2) Magellan and 3) Buckeye. The remainder of the top 10 consists only out of US-born tank storage players.

In Europe, the top 3 biggest players are 1) Vopak, 2) Oiltanking and 3) CLH. These companies are also publicly owned and have a broad international coverage which means they have a global storage footprint. For instance Vopak is ranked number 6 in Asia and Oiltanking is ranked number 12 in Asia.

In Asia the top 3 consist solely of Chinese state-owned companies: 1) Sinopec, 2) CNPC and 3) PetroChina. Their number four is a Japanese company, JX Nippon Corporation and the number five as the Korean Gas Corporation. As mentioned before, ranked six is Vopak.

As can be concluded, the global players take a large piece of the pie. However, there is enough room for other tank terminal players to operate a sustainable business in specific regions, countries or ports. Furthermore, the competitive dynamics differ per region, so tank terminal players face different opponents in various regions.

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.

What You Should Know about IMO2020 (Part 2)

Click here to read part 1.

A Change for the ARA bunker markets

Insights Global structurally forecasts the future supply and demand of oil products in the ARA region and naturally incorporates IMO 2020 into its models. In our forecasting models we predict an annual growth rate for marine fuels that is adjusted for efficiency gains of ships, while the split between HSFO and MGO in bunker demand switches in 2020 and is submissive to price changes and upcoming alternative fuels. We predict a sharp decline in heavy fuel oil demand with simultaneously a jump in the demand for (marine) gasoil in 2020. The heavy fuel oil demand is expected to more than half in size, whereas MGO demand is predicted to quadruple. Our assumption for the post-2020 era is that the shipping industry will gradually switch back to fuel oil using scrubbers or 0.5% LSFO. Furthermore, LNG will take in a more dominant position, up to 11% in 2030. This will diminish the share of gasoil used and lead to a slight decline in gasoil demand between 2020 and 2030.

The transition from high sulphur fuel oil to marine gasoil and the changing demands for both products can be seen in the futures markets. The forward curve for HFO makes a steep dive towards the beginning of 2020 when the regulation comes into force. The gasoil prices show an inverted pattern: a small contango until the start of 2020 can be seen as demand for the product will be the largest when the legislation becomes active. After these initial price extremities of gasoil and HFO the markets settle down as HFO prices recover slightly while gasoil prices enter a backwardated situation. This is in line with our demand forecasts and resembles the extent to which alternatives such as scrubbers gain an increasingly larger share. We expect subsequent waves of investments in shipping but also in refining, as the production of 0.5% fuel oil becomes more profitable. For more complex refineries with a certain crude slate this will offer opportunities while for other, more simply configured refineries, their continuity is at stake.

A Change for the Tank Storage Business

The ARA region currently is a net-importer of gasoil and is the final destination for many of the world’s gasoil flows. Estimates are that in 2022 the deficit would increase by between +12% and +34% relative to 2018 values, primarily driven by IMO 2020. The changing imbalances of gasoil and fuel oil in the ARA region will have an impact on the ARA tank storage business. The lower fuel oil demand will increase the oversupply of fuel oil in the region and as such affect all tank terminals who lend their facility to this product. The changing environment for fuel oil tank storage will eventually lead to higher fuel oil storage rates in the region. Fuel oil storage rates are likely to remain depressed in 2019, but when the IMO regulation hits the markets in 2020 the oversupply of fuel oil is likely to switch the markets into a contango, supporting the storage business. This effect is expected to be reinforced when the crude markets switch to contango as well.

Higher storage rates for fuel oil are thus expected, but the current fuel oil tank storage business nevertheless faces a tough time from a logistical point of view. Terminals in ARA specialized in fuel oil are either busy in the bunkering market or in the transit business. In the first case these terminals will suffer from the reduced size of the HFO bunker market. In the second case the business is more related to the flow from Russia towards Far-East. This transit flow is also expected to be marginalized in the medium term and long term. Therefore tank terminal operators storing HFO will need to anticipate on these changes and explore options in order to cope with possible oversupply of fuel oil tanks. Less tanks for fuel oil storage will be needed, but opportunities lie in diversification. From 2020 onwards more grades of bunker fuel (a.o. ULSFO, 0.5% LSFO, 3.5% HSFO) will need to be stored, while smaller tanks as well as blending capabilities will become more important.

Running up to the bunker fuel spec change in 2020 the fundamentals for the gasoil storage market are likely to improve following more interest in middle distillate tanks and the need for more grades of gasoil. The contango that is developing in the gasoil markets supports the storage rates as well. In 2020 however we expect a halt to the growth of gasoil storage rates caused by a backwardated market structure following the higher spot prices. After 2020 we expect storage rates to improve with the gasoil markets following the contango formation in the crude markets, albeit to a smaller extent. More tanks are needed in this bunker market to store middle distillates which could increase competition, but occupancy rates in the medium term will remain high due to increased demand.

What you should know about IMO2020 (Part 1)

In 2020 the international marine bunker fuel markets are in for a big change. For environmental concerns the International Maritime Organization will implement a new policy that limits the sulphur content of fuels burnt in maritime traffic. High sulphur fuel oil has been historically the most widely used fuel for maritime transport, but will most likely lose this position to low sulphur fuels such as marine gasoil or LSFO when the new regulation comes into force. This article dives deeper into the subject, and shares our vision on how the ARA bunkering market and international oil markets will change under the new policy.

As of January 1^st 2020 the International Maritime Organization (IMO) requires all marine fuels to have a sulphur content of at most 0.5% of the total mass, down from the current maximum allowed 3.5%. With the exception of a few areas that already have special IMO requirements in place, the new IMO standard will hold globally. Traditionally the bunker fuel market has been a sink for refiners to unload their high sulphur refining resids into. In 2018 an average of seven million barrels of such heavy resids were produced every day, half of which was absorbed by ship bunkers. But the global refining system is not yet equipped to produce such quantities of fuel oil at a sulphur level of 0.5%. The impact of this new regulation is therefore big as most vessels will have to abandon their current fuel oil consumption, therewith completely changing the market dynamics for existing marine fuels and creating opportunities for alternatives.

An important decision for shipowners

The shipping industry faces an important decision for their fuel use under the IMO 2020 regulation, and several options exist for shipowners who need to replace their HSFO consumption.

The most likely scenario is that the majority of the shipping industry switches to using marine gasoil (MGO), which doesn’t require any technical modifications nor upfront investments.

Second, the shipping industry could switch to a new 0.5% low sulphur fuel oil (LSFO) grade. Current global LSFO production capacity is however insufficient to cover a transition from HSFO to LSFO in the bunkering industry, and this change would need vast refinery investments.

The third option is to install scrubbers on board of ships and continue to burn HSFO while the exhaust gasses are being filtered. This is an expensive and lengthy investment for the shipowner, as installation costs range between 2-3 million per vessel and the delivery time to install the scrubber will have the vessel out of operation for a long time.

The fourth option is that the shipping industry switches to burning LNG. Significant investments and concerns about the availability of LNG as a bunker fuel however challenge the implementation.

The fifth option is that the shipping industry switches to methanol. Methanol has a low energy density however and in addition requires a multi-million investment. Given the ease of the transition to marine gasoil compared to the other products the market will initially shift its bunker demand by using marine gasoil when the new regulation goes into effect.

Read part 2 of the article here.

If you have any questions, contact us at info@insights-global.com.

Market transparency in the Tank Terminal industry

The increasing of information stream due to digitalization and accessibility to information sources, has led to numerous debates in the oil markets. Refiners, traders, brokers, end-consumers and all other stakeholders within the industry need to cope with decision making on various levels and are therefore relying on certain proved sources in an industry which is full of closed doors and limited availability of information. Transparency in this market is therefore crucial to search and select the appropriate partners within the market and to make smarter business decisions.

Market transparency can be found in all different subjects within the oil and gas industry. Price setting agencies, transport and tank storage rates overviews and other statistical insights contribute to a level playing field, which can help the customer make the best decision possible. By obtaining instantly accurate information, one can reduce mainly costs, time and effort. Objective players in the oil and gas environment, help balance the markets by supplying vast amounts of data and information to all participants. Traders interpret the macro-economic data of NGOs, governmental institutions and central banks to weight their decisions and therefore depend on reliable information. Falsified or incorrect information can give individuals an edge and increases the costs involved for the other businesses.

Moreover, these objective market participants withhold fraudulent companies or individuals from entering and disbalancing the market. Associations such as, FERM Rotterdam (ferm-rotterdam.nl) provide insights over the fake suppliers of tank storage capacity, in order to limit the risks involved for other market participants. Individuals without proper knowledge of the markets, can easily become targets of these scams. Who is able to spot the differences when certain, legitimately looking, websites come across?

Websites about the same terminal in the port of Rotterdam, which one is legitimate?

For businesses entering the market, these organizations are key to a fruitful collaboration between suppliers and clients. In addition, these organizations show which websites, companies or individuals to bypass. Companies and terminals in the TankTerminals.com database are investigated by various database administrators before being added in the vast database of terminal details, characteristics, contacts and other relevant information. Data supplied by the terminals and the managers of the terminals is thoroughly checked before it is approved. The data is regularly updated and if possible expanded with more data to give a transparent overview on the tank terminals. This way, potential suppliers, customers and others interested have a quick go-to list which reduces the efforts of going through all kind of information. The completer the information in the terminal factsheets, the higher the reliability, legitimacy and opportunities to connect with the relevant contacts.

Market transparency is imperative in getting quickly the right information and with as little errors as possible. The oil and gas industry and its environment has been closed and constrained. However, it is rapidly changing in the digital age with the help of different organizations. The information, statistics and other relevant news can be supplied to the interested individuals and companies in order to get more insights, to make quicker and smarter decisions.

Author: Lars van Wageningen

Two-days Oil Academy

Increase Your Value with More Knowledge

Numbers from EY (2015) show that in the Netherlands around 16.000 people were active in the oil and gas industry. In the same year in the United States some 1.5 million people were employed in this sector. The service providing companies are not even taken into account. It is a massive industry!

It is not only big in size but also in complexity. A lot of companies that we meet only partly understand the logistical oil and gas chain in which they are active. They lack the knowledge to oversee the entire supply chain. Specifically these other parts of the value chain have a direct impact on their business.

Several companies have followed our two-days Oil Academy. After these days they are capable in understanding the functions of the oil and gas value chain. They understand better how the different market players work and how market fundamentals interact. More than 200 participants preceded you and rated this course with an 8!

For more information, request our Oil Academy brochure by registering in below’s form.

Agidens on leading in technology

Welcome to “GRIPPING THOUGHTS”, the space created by Insights Global where Clients, Partners and Friends are invited to share ideas and insights that help shedding light on the challenges that the Oil & Gas industry faces in the near and long future.

So join us, read and get inspired by our talk to Mr. Koen Algoet – Product Manager Terminal Solutions – and Mr. Kevin Pluvier – Project Manager Oil & Gas – at Agidens, a solutions provider with a workforce of over 600 people that for more than 70 years has been helping companies in various sectors to improve their operations in the areas of security, reliability, efficiency and sustainability.

Q: How would you describe the main market challenges at the present time?

In our view, the tank terminal market presents two main challenges.

The first is linked to Operational Excellence. Due to backwardation and the new capacity added in recent years, it is correct to expect a surplus of storage capacity that will increase the competition even more and leave profits under stress.

In this environment, there will be a high demand for improved, more efficient processes to guarantee full usage of the existing assets. A good example of how this can be realized is Agidens’ Axcel® smart slot booking solution. Due to increasingly bad traffic conditions, it is very common that trucks don’t make their schedules leaving terminals with empty slots and the necessity to reserve ‘late arrivals’ slots which reduce the normal asset capacity. Axcel® doesn’t use and thus ‘waste’ these empty slots but relies on the smart engine to recalculate updated planning scenarios keeping all available assets and resources into account.

The second challenge is linked to Human Resources. Nowadays there is a high workforce turnover in the industry, as a result of several reasons, among them the fact that young people don’t want to stay in the same job and activity for a long time anymore. The time and energy that is needed to train new employees into working with these manual procedures could be invested in automation. Furthermore, in order to attract and retain young people we can assume that automated terminals will have preference to manually operated terminals as an employer.

Q: And how do you see the industry evolving in a period of 5 to 10 years? What are the main challenges ahead of us?

As it was said before, due to the high competitiveness of the market there will be a growing pressure on the terminals in terms of operational excellence, but also to cope with the speed of innovation.

Even though there is a lot of interest in Artificial Intelligence, the focus in the next years will be on Big Data and in learning how to transform what is generated and collected by sensors – as a consequence of the development of the IoT – into knowledge.

Agidens understands the necessity to foster the development of specialists that can handle this new scenario that encompasses themes as cyber security, GDPR, new standards and regulations, and questions on how to communicate data between all the different networks, how to set up this data and how to do it in a secure, safe and controlled way.

Agidens embraces the proposition of sitting with the client to understand his problems and ‘pains’ in a consultative approach. So that the people involved in the project can take over and develop the product based solutions keeping a vision of the future time and not only the present.

At last, it is important to mention that no matter how much of a terminal’s management moves to the cloud, all that is related to safety must remain local.

Q: How is Agidens getting prepared for these future challenges?

Agidens understands that innovation is essential to offer competitive solutions to its clients, therefore we give special attention to this theme and how to accelerate its pace. We believe that if we expect to be ready for the challenges of the next ten years we must act today. First, by keeping a close relationship between our R&D department and universities as Leuven, Antwerp and Ghent. Second, by creating a culture and atmosphere that encourages our employees from different areas to voice their ideas and by granting time, budget and guidance from R&D for them to be developed.

As an example, at Agidens as soon as young engineers are hired they have the opportunity to be in direct contact with clients, especially with people who work on the field and experience the day to day challenges.

Agidens’ Atalk® solution is an excellent example of a product that was proposed by one of these young talents. While on the field, he noticed that there was a dangerous gap between the moment that a potentially dangerous event started – a fire, for instance – and the moment this information was passed to the personnel at the terminal. So he proposed a system that translates the usual text messages installed upon an existing operational control system such as SCADA or DCS into speech, in a way that now they can be transmitted by voice directly to the walkie talkies of all the employees around the terminal.

At last, it is important to give people time, support and a lot of training to be able to cope with the transformation speed of the industry.

PS: if you want to contribute to “Gripping Thoughts” please send an email to acavalcanti@insights-global.com

Find here other “Gripping Thoughts” articles:

Read now the interview with Bertrand Chupin, VP of the Loading Systems business unit of TechnipFMC, a global leader in subsea, onshore/offshore and surface projects, with about 37,000 employees.

Tank Terminal Market Model – Part 1

Last week was a short review of the profit drivers for physical traders, where we explained in short how traders make profit. There are a lot of different factors influencing the tank storage sector. Mostly the imbalances in the sector create opportunities for financial players. The market appears to be complex and demonstrating a lack of transparency. PJK International has developed a Tank Terminals Commercial Performance Model to quickly gain insight and a higher proficiency of the tank storage market. This is the first part related to the Tank Terminal Market Model, next week we will publish the second part for you to be able to connect the dots.

MARKET FUNDAMENTALS

First we describe the market fundamentals as shown in the image below. Relevant market fundamentals for the oil storage business are the shape of the forward curve, the competitive market structure and the logistical factors supply, demand, imbalances and trade flows. The shape of the forward curve is determined on oil futures markets. The oil price forward curve can be upward sloping (contango) or downward sloping (backwardation). In a backwardated market is less demand for tank storage than in case of a contango. Inventory levels are also lower in a backwardation compared to a contango. Both demand and tank availability are therefore affected and this influences the commercial setting.

Furthermore the competitive market structure consists of a supply-side and demand-side market structure. Tank capacity and market shares of various terminal operators are key factors that determine the supply-side competition. The number of players, their size and diversity are key factors on the demand-side of the market. Both demand- and supply-side competition influence commercial performance of the terminals. And also Tank terminals are part of the oil products supply chain and therefore logistical factors such as local product demand, regional refinery output, imbalances and trade flows are very relevant. Developments in these factors influence the demand and requirements for tank terminal capacity.

MARKET DYNAMICS

Besides the market fundamentals we have to take into consideration the market dynamics. Relevant market dynamics are inventory levels, arbitrage and trade flows, changes in product specifications and variation in vessel sizes. These market dynamics have a direct influence on operations and on terminal requirements. A terminal that can accommodate and can adapt better and faster to these dynamics compared to competitors will likely show superior commercial performance. From the previous section you could already see that market dynamics are linked to market fundamentals.

CONCLUSION

The market fundamentals and the market dynamics are important building blocks for Insights-Global’s commercial performance model. If you have any questions regarding the above mentioned subject please do not hesitate to us.