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2012 Independent Storage Survey: Capacity growth driven by refining trends

Independent oil storage operators are adding new capacity at the world’s key refining and trading hubs to accommodate growth in long-distance flows

The world is relying on fewer but larger refineries, leading to growth in the long-distance products trade between them. Traders need storage capacity, so this trend pleases the independent terminal operators. Vopak and Oiltanking, the world’s largest international storage operators, are both constructing substantial new capacity, with the additions due to increase their combined existing capacity by nearly 15% over the coming two years.

Most refining specialists say the trend towards reliance on large newly-built refineries has a long way to run. Small facilities, particularly in Europe, are only marginally profitable yet need reinvestment to meet present market requirements. In contrast, the new facilities of Asia and the Middle East are designed to produce fuels to the latest specifications, and have lower costs.

Long-distance trade in products has already become a business-driver for the independent storage operators. Large volumes of heavy fuel oil flow from Rotterdam to Singapore, gasoline flows from Amsterdam to the US, jet-fuel flows from the Middle East to Europe.

But, as uneconomic refineries close, the long-distance trade is likely in future to cover more products and more destinations. Storage operators point to the closure of the UK’s Coryton refinery in June, and the immediate purchase of the site, on the Thames estuary, by a venture between Vopak, Shell and Greenergy. The site will be converted into the UK’s first deep-water import terminal, Thames Oil Port, capable of accepting the largest products tankers.

Thames Oil Port and other expansions are due to add 4.7m cubic metres (cm) to Vopak’s worldwide capacity by end-2014, an increase of 15.7%. Oiltanking has about 2.4m cm of capacity under construction, an increase of 12.2%. Vopak says its capacity utilisation rate was 91% over the first nine months of 2012, down slightly from the 93% of the same period in 2011. Oiltanking says its terminals handled 148.5m tonnes of liquids in 2011, an increase of 1.8% from the previous year and the fifth consecutive year of growth.

Vopak’s financials appear to support its expansion plans. The company reported operating profits, excluding exceptional items, for the first nine months of 2012 of €423.9m ($541.4m) – up 25.0% from the same period the previous year. The figures confirm the importance of Asian operations in the storage business now: Asia accounted for 38.6% of Vopak’s operating profits in the first nine months of 2012.

Oiltanking is, with trading company Mabanaft, part of privately-owned Marquard & Bahls, which publishes only limited financial data. The company reported a sharp fall in net income to €66.5m for 2011, down from €150.2m in 2010 and €133.6m the previous year. Trading operations, rather than storage, were responsible for the decline. Accordingly, in 2012 Mabanaft withdrew from international trading in Houston and Rotterdam (but not Singapore), to focus on consumer-orientated physical trading.

Figure 1: Independent storage - the largest operators
Figure 1: Independent storage - the largest operators
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