Independent storage under pressure as volumes fall
Capacity expansions, coming at a time of trimmed volumes, have raised competition in the worldwide oil storage business
Oil-market trends have been testing for the independent oil storage operators. In Asia, growth in oil demand has slowed, while the US and Europe have seen reductions. Yet terminal capacity, particularly in the Singapore area and on the US Gulf coast, has been increasing, and is set to increase further over the coming few years. Trends point to a continuing competitive market for storage services, with some additional risks.
The risks are different in each of the world's main storage hubs. In Singapore, there is a risk that new refining capacity in Asia will depress the long-haul import trade, at a time when new storage capacity is being constructed in Malaysia and Indonesia. In the US, there is a risk that a move to free-up exports of crude and condensates will reduce the volumes being refined and exported through the Gulf coast terminals. In the Amsterdam-Rotterdam-Antwerp area, there is a risk of reduced refinery operations or closures.
But storage operators say long-term trends are in their favour. Worldwide, independent trade in refined products has been increasing since the 1970s, when the major companies lost their control of it, and independent trade cannot function without independent storage capacity. Meanwhile, the new super-refineries of Asia and the Middle East are winning distant export markets and the days are numbered for many small refineries, so the need for terminal capacity should grow.
The question is whether the planned capacity additions will be too much, too soon. The Netherlands' Vopak, the world's largest independent storage operator, is constructing 5.0 million cubic metres (cm) of new capacity worldwide, for completion between now and early-2017 - an increase of 15% over existing capacity of 33.0m cm.
Germany's Oiltanking, the second-largest independent storage operator, has 2.6m cm of new capacity under construction - an increase of 14% on its existing capacity of 19.2m cm. (Oiltanking's capacity declined to that figure in October with its sale of US terminals on the Houston Ship Channel and at Beaumont, Texas, to Enterprise Products Partners.)
Vopak, despite its expansion plans, seems to be having substantial problems with its operations in the Netherlands. The firm's financial figures for the first nine months of 2014 provide evidence: operating profit was down by 16% compared with the same period the previous year, to €344.9m ($431m). Third-quarter operating profit was down by 17.4%, so the problem evidently continues.
In his third-quarter results presentation, chairman and chief executive Eelco Hoekstra commented on pressures "on pricing, our contract portfolio and occupancy rates in some product market combinations" in the Netherlands - but neither he, nor the company, would respond to repeated requests for further explanation. The firm says its occupancy rate in the Netherlands over the first nine months was 87%; as its Amsterdam capacity is understood to be well-utilised, the figure points to considerable troubles in Rotterdam.
Oiltanking, together with oil trading company Mabanaft, is part of privately-owned Marquard & Bahls, which publishes limited financial information. Marquard & Bahls reported a net profit of €112.3m for 2013, up 4.6% from the previous year, with most of the good result attributed to Oiltanking. Terminal throughput increased very substantially, to 211.8m tonnes in 2013 from 170.7m tonnes the previous year.
Figure 1 - Independent storage - the largest operators