2012 Independent Storage Survey: ARA is better in Rotterdam
The Rotterdam oil storage business has strengthened on the growth in long-distance trade
Business conditions for independent oil storage operators in western Europe’s Amsterdam-Rotterdam-Antwerp (ARA) supply hub are diverging. While Rotterdam operators are benefiting from growth in oil volumes through the port, business in Amsterdam and Antwerp has become increasingly competitive over the past two years.
Overall, there has been a substantial upturn in flows through the ARA ports, led by a strong increase in Rotterdam. Imports and exports of crude oil and refined products through the three ports were up by 7.3% in the first nine months of 2012, compared with the same period the previous year (see Table 1). The decline in Antwerp flows is attributed to the shutdown in the early months of the year of the former-Petroplus Antwerp refinery, which was subsequently re-started by its new owner, Gunvor.
Behind the investment are Russia’s ambitions for Urals crude. TEW is envisaged as an open-access trading hub, which could allow Urals to challenge Dated Brent as the price reference for much of the world’s crude production – Urals production is greater than Dated Brent and the crude is more consistent, since Dated Brent contracts can be satisfied by the delivery of Brent, Forties, Oseberg or Ekofisk streams. Urals crude is to be delivered reliably from Primorsk to TEW in ice-class shuttle tankers, for onward supply to the large volume of refining capacity close by.Rotterdam led the growth with a rise of 9.3% – an increment of more than 11 million tonnes over the nine months. The increase puts Rotterdam on-track for record oil movements of over 180m tonnes for the year. As Figure 1 shows, the decline of 2011 was just a blip in the otherwise consistent growth in Rotterdam oil movements in recent years, driven mainly by increased trade in refined products.
With growing geographical imbalances in supply and demand, long-distance trade in refined products is seen as a continuing feature of oil logistics. Vopak, in an assessment of the market in Europe, the Middle East and Africa, says "sufficient storage capacity still needs to be added [because] almost all capacity currently under construction has already been contracted". For the Rotterdam operators, the dominant long-distance flows are imports of fuel oil and gasoil from Russia, imports of jet-fuel from the Middle East, and exports of fuel oil and gasoil to Asia.
Amsterdam, without a refinery, has specialised in the international trade in gasoline, importing volumes from elsewhere in Europe, blending to specification, and exporting to the US and elsewhere. But, with the decline in US gasoline consumption, this trade has shrunk considerably: US imports of finished motor gasoline and motor gasoline blending components from the Netherlands peaked at 133,000 barrels a day (b/d) in 2006 and declined to 70,000 b/d in 2011, according to US Energy Information Administration statistics.
The flows across the Atlantic still point to good business, however. Over the main gasoline demand months of April to August, in 2012 an average of 103,900 b/d of finished gasoline and blending components was exported from the Netherlands to the US, up slightly from the 99,600 b/d of the same six months in 2011.
Antwerp also participated in the trade: exports of finished gasoline and blending components from Belgium to the US ran at 24,600 b/d over April-August 2012, up from 4,200 b/d in the same months the previous year. For both countries, exports are predominantly blending components to Rbob specification – reformulated blendstock for oxygen blending, to which the ethanol oxygenate is added in the US.
At Amsterdam, Oiltanking’s 1.576m cubic metres (cm) terminal leads in the gasoline business and in November the company said volumes in 2012 are likely to match its record figure of the previous year – although for other products, volumes have been reduced by price backwardation (futures prices lower than prompt). Gasoil, particularly, was in backwardation for most of the year after the usual contango (futures higher than prompt) in the early months. Most gasoline is being supplied to Africa and Mexico, now that the trade to the US has declined.
Oiltanking comments that, generally, blending activity has declined because product specifications worldwide have become more standardised. Limited availability of suitable blending components is another brake on the business. Accordingly, the profitability of blending operations has been significantly reduced, the firm says.
The ARA operators continue to be troubled by the biofuels business, with Vopak saying flows are "unpredictable" and Oiltanking saying some tanks were rented by traders but not used. Storage of biofuels is said to lead to many more legal disputes than other products, with buyers typically seeking redress for delayed arrivals and off-specification material – and the storage operator often being left with unwanted product in-tank.
Construction work is due to start in 2013 on Rotterdam’s Tank-terminal Europoort West (TEW) development, on Europoort’s only remaining large site with deep-water access. Shtandart, a 75:25 venture between Russia’s Summa group and VTTI (owned 50:50 by Vitol and Malaysia’s Misc) is to spend about $1bn constructing 3.0m cm of capacity for crude and products, aiming to open the new terminal in 2015.
ARA fee indications
Independent storage fees in the key Amsterdam-Rotterdam-Antwerp (ARA) locations have diverged over the past year, with the Rotterdam operators being generally able to hold their ground while others have come under pressure. Although demand for storage capacity, particularly in Rotterdam, has grown, more capacity has been added and some terminals have trimmed their fees to attract volumes.
More downward pressures have come from narrower trade margins, particularly for gasoline blending. Other products have been in price backwardation for much of the past year – when futures prices are lower than prompt prices, speculative storage by traders disappears and commercial stocks are cut to the minimum.
Following discussions with independent terminal operators and large users of tank-space in November, Petroleum Economist’s assessment is that ARA capacity for low-flashpoint products is renting in the range €3.10-3.30 a cubic metre (cm) per month. A year previously our assessment was €3.25-3.50/cm. There were indications that Antwerp capacity could be obtained for less than €3.10/cm. A Rotterdam operator said €3.50/cm was achievable, although a large user said it was not.
Sub-letting is a feature of the market, with trading companies keen to get a return on capacity they have retained under long-term contracts. There were indications that low-flashpoint capacity could be sub-let for about €3.00/cm for short periods – two weeks to a month.
Middle distillates capacity is assessed as attracting about €3.00/cm, unchanged from last year. An operator of Rotterdam jet-fuel capacity was said to be asking €3.10/cm.
Fees for fuel oil capacity have a considerable range, reflecting location and the facilities available – jetties to accommodate VLCC tankers, used in the trade to Singapore, and the pumps to load them quickly can attract a premium. Fuel oil capacity in Rotterdam is assessed as attracting €3.75-4.25/cm – the same range as a year previously. Fuel oil is not a large product at Amsterdam. At Antwerp, fuel oil capacity is available for less than €3.00/cm, and lower fees are indicated for terminals further from the ARA hub.
Fees are for a month and include one fill and discharge per month.
Figure 1: Growth of oil movements through Rotterdam