Related Articles
Forward article link
Share PDF with colleagues

Business strengthens on oil trends

Independent storage-terminal operators in the world's big supply and refining centres are benefiting from oil's robust fundamentals, Martin Quinlan writes

WITH business last year building on the strong upturn noted in 2005, it is good to be in storage once again. Demand for terminal services is rising, prompting operators in the main supply hubs to re-visit plans for squeezing more tank-capacity into the often-limited space at the busiest locations. The optimists say the upturn is structural.

Rising demand for refined products and high refinery utilisation clearly help. As – over the past year or two – capacity in the main refining centres has become strained, long-distance transfers of finished and semi-finished products have accelerated. Refining centres that once balanced regional supply and demand now interact with other centres worldwide. Long-distance price differences are large enough to interest traders – and traders need independent tank capacity.

They need it so much that traders are becoming owners of storage terminals, merging the two businesses. In Singapore, Kuo, Horizon Singapore Terminals and Hin Leong have bought or are constructing storage terminals, and will use much of their capacity for their own trading operations. Oiltanking, the world's number-two internationally operating provider of tank space, is a sister-company of the trading firm Mabanaft, but the two businesses have always operated separately.

The growing long-distance trade in physical products is far more beneficial to the independent terminal operators than the contango trade (in which products are held speculatively to benefit from futures prices being higher than prompt). They have done well out of the latter in the past, but the trade disappears when price trends are unfavourable – and contango storage involves minimal throughputs. Because of the way fees are structured, the operators want high occupancy and high throughputs.

The growth in long-distance transfers is providing both, for the terminals able to benefit from it. It also provides opportunities for taking on logistical functions for the oil companies – business the terminal operators prize because it becomes long-term. Better still, logistical operations can lead to physical assets being merged, with pipeline links into refineries and other firms' installations constructed at the storage operators' sites.

Good business conditions are reflected in the big operators' financial figures. The Netherlands' Vopak, the world's largest internationally operating terminal firm, says its operating profit for the first three quarters of 2006 (excluding exceptional items) was up by 25.8% compared with the same period the previous year. It forecasts a 22% rise for the year.

Profits up

For full-year 2005, Vopak reported a net profit of Euro93.2m, up by 6.4% from the previous year's Euro87.6m and ending a three-year decline. (The firm admitted that the 1999 merger through which it was created "had not resulted in the expected added value" and had left it with a debt burden "considerably higher" than normal for the business.) Vopak operates 75 terminals with a combined capacity of over 20m cubic metres (cm) and forecasts its construction programme will raise this to 22.5m cm by the end of 2008.

Oiltanking is, with Mabanaft, owned by Germany's Marquard & Bahls, which reported a near-tripling of its net profit in 2005 – to Euro53.2m, up from Euro18.2m the previous year, although how much is from tank-storage and how much from trading is impossible to say. The firm operates 71 terminals with a total capacity of 11.1m cm, and says its throughput in 2005 totalled 108.5m tonnes – up from 102.7m tonnes in 2004.

Also in this section
Plastics recycling technologies compete in circular economy
14 March 2019
A backlash against single-use plastics is encouraging recycling into intermediate products and fuels, complicating world oil demand forecasts
Tankers steered back from the brink
8 March 2019
A recent spike in rates has rescued tanker owners, but the reprieve could be short-lived
Shipping’s surge and splurge
7 March 2019
Spot rates should stay below 2018 peaks as more newbuilds come into service