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.
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.
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.
In the world, there are considered to be four major oil trading hubs: ARA, Singapore, Fujairah. These four port areas have their own different identity and their own local trading dynamics. In this high level research, we will compare investment intensity in these locations. For comparison purposes in ARA, we have split ARA in only Rotterdam and Antwerp.
In these 5 ports combined there are 146 terminal companies active. Most of the companies are situated in Houston (53), followed by Rotterdam (31), Antwerp (24), Singapore (21) and Fujairah (17). Looking at the capacity, these ports sum up to 76.35Mcbm. Most capacity is available in Houston (25Mcbm), followed by Rotterdam (19Mcbm), Singapore (15.28Mcbm), Fujairah (9.35Mcbm) and Antwerp (7.65Mcbm).
When we divided total storage capacity with the number of terminals we can calculate the average capacity per terminal. Biggest average tank size is in Singapore (0.73Mcbm), followed by Rotterdam (0.62Mcbm), Fujairah (0.55Mcbm), Houston (0.47Mcbm) and Antwerp (0.32Mcbm).
This
calculation says something about the local storage footprint and the port’s specialty.
For instance, Singapore is an Asian bunker hub which facilitates fuel oil
storage. There are a number of big underground caverns there. Antwerp is
focused on specialty chemical storage which need smaller tank sizes and lower
average storage capacity per terminal.
For these
five port areas, it is believed that around 22 expansions projects (existing
greenfield, brownfield and planned additions) will add almost 8kcbm to current
capacity. Fujairah has 7 projects, followed by Houston (6), Antwerp (5), Singapore
(3) and Rotterdam. Looking at the growth per capacity, port that shows the largest
storage additions is Fujairah (29%), Antwerp (11%), Houston (9%), Rotterdam
(7%) and Singapore (5%).
The
conclusion of these statistics is that the major oil trading hubs have
different strengths, serve a different purpose and show their own investment
dynamics. Insights Global has presence at all these ports. We have the
statistics and local knowledge to help investment companies value storage
assets they would like to include in their investment portfolio.
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 and get inspired by IVAR BERNTZ, Research Analyst in the Cross-Industry and Advanced Manufacturing Group at GARTNER :
“Gartner recently released the results of their 2019 CIO Survey Oil and Gast Industry insights
, based on 84 responses out of the 3,102 overall respondents from 89
countries. Let us discuss two of the questions posed, namely: 1) What is
your organization’s top priority for 2018/2019? and 2) What technology
area do you expect to be a game-changer for your organization?
Through 2018 oil and gas firms have made continued significant
progress improving efficiency. With improving balance sheets and leaner
operations, it is unsurprising that oil and gas executives are strongly
focused on revenue and business growth as their top priority, as stated
by 28% of the respondents. Caution, however, is still in evidence since
the recovery is recent and market conditions remain volatile.
Operational excellence provides a relatively low-risk route to growth
and profitability and is the priority for 26% of respondents.
Oil and gas company executives, senior leaders and functional
managers are embracing digital. This year 22% of survey respondents
rated it as top priority, compared with only 8% last year. Recognition
of the capacity of digital innovation to both optimize and transform
business models has crossed a tipping point in the industry,
significantly elevating digital as a priority. Nevertheless, companies
in most other industries are more likely to prioritize digital, a sign
that traditional oil and gas industry inertia has not disappeared.
Progress may be rapid by oil and gas standards but is only just keeping
pace with trends outside the industry.
The oil and gas industry’s striking enthusiasm for analytics
continues unabated, with 44% of oil and gas CIOs expecting data
analytics to be the top game-changing technology for the industry this
year — double the percentage across industries. Despite occasional
mixed results and scepticism of vendor promises, analytics has gained
widespread acceptance based on multiplying use cases and demonstrated
value. As digital ambitions intensify, analytics is consistently
prioritized by oil and gas leadership seeking proven ways to derive
business value from digital technologies.
The greatly elevated priority of the IoT is new, with 24% of
respondents now identifying it as a game-changing technology compared to
8% last year. As companies deal with existing inefficiencies, continued
pursuit of operational excellence demands new strategies to improve
asset performance, driving greater use of analytics for simulation and
prediction of future behaviour. Analytics’ focus also shifts from
reactive modelling offline to nearer real time. IoT offers advantages in
data collection and system responsiveness over legacy systems to
support this. However, cost-benefit considerations have so far acted as a
brake on adoption, especially on mature assets. With renewed business
growth the comparative advantages (and increasing cost-effectiveness) of
IoT promise performance differentiation that will accelerate take-up.
A stark difference between oil and gas and all industries is apparent
in artificial intelligence/machine learning. Across all industries,
artificial intelligence/machine learning is ranked as the No. 1
game-changing technology across all three categories of performers, with
40% of top performers placing it at the top. While it is the
third-most-cited, game-changing technology in oil and gas, only 21% of
industry CIOs rate it as the top technology.
In part, this reflects the natural mistrust of the industry to hyped
technology. Many oil and gas operators are still exploring ML and AI use
cases and have yet to operationalize it. Understanding is more concrete
for other technologies today, which — given the asset-centric nature of
the business — are also expected to deliver significant value leading
to a more even spread of expectation. Nevertheless, the growth of AI and
ML, along with the elevation of IoT, indicates a shift in focus in the
industry toward greater real-time connectivity and prediction for asset
optimization.
Given this background, what do you believe will be your
organization’s top priority for 2019 and what technology will be a game
changer to accomplish it?”
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.
This is the second blog article of our series of 5 blog articles made for you to be able to better understand the drivers and the complexity of the tank storage industry. In the first article we took a closer look at the functions of a tank terminal.
HOW DO TRADERS MAKE MONEY?
Traders can take a physical (&paper) position and ‘buy low / sell
high’ to be able to make profit. There are several strategies to profit
from trading physical commodities. We can distinguish three main
strategies:
1.
Arbitrage
2.
Speculation
3.
Optionality
ARBITRAGE
Arbitrage is a very simple idea, it is really taking advantage in the
difference of price on essentially the same product, to make profit.
For example if you would have the price of gasoline in two different
geographical markets. These different markets can be the Netherlands (A)
and the US (B). If in market A the price would 1 dollar and in market B
the price would be 2 dollars, then you can profit from the difference
in price. The three main types of arbitrage are:
1.
Geographical arbitrage
2.
Time arbitrage
3.
Technical arbitrage (blending)
SPECULATION
The U.S. Commodities Future Trading Commission defines a speculator
as a trader who does not hedge, but who trades with the objective of
achieving profits through the successful anticipation of price
movements. Traders take a position in anticipation of moves in
prices/spreads. For example with the gasoil price as is shown in the
chart below:
OPTIONALITY
As for speculation, also for optionality volatility is key. Profit
can come from market opportunities, where traders can limit losses if
market turns against position. Three examples are:
Optionality during geographic arbitrage trade. For example divert ship if there is a better deal and reduce costs
Optionality during contango storage. Contango means that the spot price of oil is lower than future contract for oil
Optionality in transport mode. Can be applied when transport costs are market driven and volatile
CONCLUSION
More familiarity within this complex market can provide you with
quick insights derived from the financial markets. By watching and
following oil prices spreads and market volatility can provide you with a
better picture of the market. Other trends like backwardation and
contango are also important to understand and analyse, to be able to
make intelligent decisions. More to come in the next blog article next
week, meanwhile feel free to download last week’s tank terminal report.
And try to test your comprehension of the subjects discussed.
For more information or any questions please do not hesitate to contact us.
During the coming weeks we will
provide you with relevant information regarding the tank storage market
and its influences and opportunities. This week we will focus on the
different functions a tank terminal. It is the first of 5 blog articles
for you to be able to better understand the drivers of this sector and
help you with your commercial decisions.
Functions of a terminal
Tank terminals can have various functions, although commercial
clients’ operational requirements tend to focus on the logistics/hub and
trading platform functions. These three main functions are:
Logistics/hub – function
Trading platform
Strategic storage
Logistics/hub function
The logistics/hub function is firstly related to the make/break and
bulk of the product(s). In addition we can observe an integrated
approach between transport modalities such as sea, rail, road and
pipeline. Also the correct integration with an industrial complex and
buffer stock(s) are considered to be part of the logistical chain of a
tank terminal.
Trading platform & Strategic storage
The tank storage activities can also be influenced by the financial
markets, as investors, traders and other financial intermediates are
active on various trading platforms. How do traders make money and why
are they interested in the tank storage industry? Mainly by taking a
physical (&paper) position(s), traders take advantage of a price
differences between two or more instruments. They will make profit if
there is a combination of matching deals that capitalize upon the
imbalance. As a trading platform four important factors can be
described:
Physical arbitrage
Blending
Contango storage
Optionality
How does physical arbitrage work? During arbitrage the global
commodity traders seek to identify and respond to supply and demand
differentials between linked markets. Trading firms are essentially in
the business of transforming commodities in space (logistics), in time
(storage) and in form (processing). Traders with access to physical oil
and storage can profit in a contango market, as the futures price of a
commodity is above the expected spot price, and people are willing to
pay more for a commodity at some point in the future than the actual
expected price of the commodity. Besides this also optionality is very
important as it builds in flexibility to profit from market
opportunities and limits losses if the market turns against positions.
Conclusion
By focussing on the things that matter we can understand better how our clients are making money. As a result it can help shape your business, to have a better insight and to be able to make better operational and commercial decisions. By watching market indicators like the oil price level, market volatility and the forward curves it will provide a better picture of the market. This directly provides in-depth insights into the tank storage market developments. Our weekly report is specifically designed to clarify the mentioned above, and to provide a weekly market snapshot. If you would like more information please do not hesitate to contact me.
Click here if you missed Part 1 of the article “Greater Singapore Tank Storage Market Outlook 2018”.
Singapore naturally has a vast deficit of fuel oil as local
production is only modest while demand is of unparalleled size. Large
imports of fuel oil allow Singapore to fulfill its hub function.
THE IMPACT OF IMO 2020 – A GAME CHANGER
Fuel oil demand primarily comes from marine bunker activity and is
therefore submissive to a large change following the IMO 2020
regulations, which require lower sulphur contents to be used in marine
fuel.
Fuel oil generally is high on sulphur and will thus see a sharp
decline in demand from 2020 onwards when high-sulphur fuel oil is
replaced by, among other alternatives, diesel oil. After 2020 demand
will gradually pick up as a result of growing economies and populations,
but its share in marine bunkering will remain low.
The immediate switch from fuel oil to alternatives will provoke a
surplus of the product for most countries in the region, while Singapore
will continue to have a deficit, be it smaller than before. The region
in whole will have a surplus in the short run, lowering fuel oil trade
flows from other continents to Asia.
TRADE IMBALANCES WILL CONTINUE INTENSIFYING TANK STORAGE USAGE
Diesel is Far East and the ISC’s largest refinery output category and
together account for roughly 50% of the total. The main drivers for
diesel demand are passenger cars with diesel engines, marine bunkers,
building heating and industry. Passenger car fleet developments are of
great importance to the demand for diesel. Since diesel does not propel
the majority of cars in Far East and the ISC, the impact of car
emissions regulations on diesel demand is limited. With growing
populations and developing economies, the number of diesel-powered
passenger cars is set to further increase in the future, despite more
efficient engines, the increasing share of electric vehicles in the
passenger car fleet and other environmental initiatives. IMO 2020
regulations, will increase the demand for diesel in the maritime sector.
As of 2017 most of the region’s major producers and consumers of diesel
have surplusses with the largest ones in China, India and South Korea.
Australia, on the other hand, has quite a substantial deficit, meeting
most of its diesel demand with imports.
China is the region’s largest producer of gasoline, followed by India
and Japan. India and China have seen tremendous growth in their
gasoline productions, both having doubled their output since 2009. The
primary demand driver for gasoline is passenger cars, accounting for
virtually the entire gasoline consumption. Passenger car fleet
developments are therefore of even greater importance to gasoline than
for diesel. Chinese demand for gasoline has more than doubled over the
last decade despite strict emissions regulations but hasn’t outgrown
production yet. Demand for gasoline is very sensitive to changes in car
fuel usage, but the growing Chinese economy offsets the strict fuel
policies of the country. India’s demand is still relatively low but
growing rapidly, while Japanese demand naturally seems to be in decline.
As for diesel, most of the major producers/consumers of gasoline had
surplusses of the product in 2017.
Fuel oil has historically been Far East and the ISC’s third largest
oil product in terms of demand. Simultaneously it’s Singapore’s largest
product in terms of demand and trade volumes, since the country acts as
the region’s largest marine bunker fuel hub. Local production is
negligible, however, and Singapore fulfils demand through imports. The
region has a deficit of the product despite increasing local production.
Most fuel oil is produced by China and Japan, with China increasing its
production while Japanese production is in decline. South Korean and
Indian production is likewise in decline. Due to its hub function
Singapore has the largest demand for fuel oil in the region, as a
variety of ships from many different countries come to Singapore in
search for the right propellant. China comes second in terms of demand,
while Japanese fuel oil demand is only a third of what is was half a
decade ago.
CONCLUSION
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. 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, as well as new regulations influence the demand and
requirements for tank terminal capacity.
SINGAPORE TANK TERMINAL MARKET STUDY 2018
Based on extensive market research, Insights Global – in partnership with Ener8 Limited – has produced a +75 pages report providing insights into the Tank Terminal Market in both Singapore and the greater Singapore area.
Naphtha
is an intermediate hydrocarbon liquid stream derived from the refining
of crude oil. It is in the ARA region mostly used as a gasoline blending
component as feedstock within the petrochemical sector. Other important
feedstocks for the petrochemical sector include ethane, propane and
methane. The petrochemical sector is responsible for producing various
materials such as plastic, paints, solvents, fibres and raw materials
for pharmaceutical and cosmetics sectors.
The ARA-region, or Amsterdam –
Rotterdam – Antwerp region is an area in The Netherlands and Belgium
where various coastal and inland ports are interconnected and act as a
global hub. Apart from the large ports Amsterdam, Rotterdam and Antwerp
it includes Flushing, Ghent, Terneuzen and Moerdijk as other relevant
ports. All these ports lie in the delta of various rivers, like the
Rhine, Meuse and Scheldt, which flow into the North Sea and could be
seen as gateway of the European continent. Hinterland markets are
connected to global markets via these seaports, in particular the vast
hinterland of German industrial centres and population. The river Rhine,
Scheldt and Meuse enable barge transport to and from these ports to
inland markets, which give the market its unique attractiveness and
improves the position of the hub in the worldwide trade flows.
When we take a closer look at the feedstock prices we can observe
that naphtha is the most expensive feedstock. In the image below you can
see the historical monthly petrochemical feedstock prices from 2013
till 2018.
Although naphtha is the most expensive feedstock, it is the most used
feedstock in the ARA region of all the substitutes mentioned above.
There are various factors influencing this, but in this article we focus
solely on the barge transport. As we have established earlier the Rhine
has a unique position as being an important route for the transport of
liquid bulk across different Western European countries. It is one of
the world’s most frequented inland waterways. In Europe, there are more
than 13.500 vessels offering inland freight transport services (dry
cargo, tanker cargo and push & tug vessels) with a total loading
capacity of 17 Mio tonnes. About 76% of the European fleet comes from
Rhine countries. Source : Inland Navigation Europe. Tankers account for
+- 15% of the total inland fleet.
Of the liquid bulk market, according to PJK’s interntional numbers
you can see in the image below a comparison of the number of inland
tankers showing that the clean (including chemical) tankers are far more
dominant compared to gas tankers. While there are currently more gas
tankers under construction, the same accounts for clean tankers. Clean
tankers under construction are also bigger in terms of DWT, up to 10,000
DWT.
As
mentioned before, naphtha is a liquid hydrocarbon mixture, which means
it should be transported in double hull tanker, mainly to prevent cargo
from leaking due to its hazardous nature. With regard to ethane and
propane it is different as these are gases, and therefore have to be
transported in special gas tankers, which are often fabricated with
triple hulls and equipped with circular tanks. At the moment there are
far more double hull tankers available in the market compared to the gas
tankers, increasing supply of transport possibilities. Therefor the
transport of naphtha is economically more feasible and accessible,
despite the higher product costs. Another reason for the high usage of
naphtha in the region is the excess components received after cracking
naphtha. These residues are used in the gasoline blending market, which
holds a key position in the ARA and provide more usages of the excess
valuable components like for example isomerate, raffinate, toluene and
xylene.
As you can see a lot of factors influence the petrochemical market.
Are you struggling to connect the dots of the petrochemical side of the
cluster? We can then provide you with our ARA Petrochemical Tank Storage
report, where we aim to shed some light on complex subjects by
unravelling trends and themes that underlie current markets relevant for
the ARA cluster and by giving an outlook for future states of these
petrochemical markets.
Contact us at our headquarters in the Netherlands at +31 (0) 850 66 25 22
The contents of this article from Insights Global has been written with the greatest possible care. However, Insights Global cannot guarantee the accuracy or completeness of the information. The content of Insights Global blog publications therefore are not legally binding. Insights Global accepts no liability which might arise from the content of its blog.
As one of the most crucial tank storage hubs in the world, Singapore
and nowadays the greater Singapore region play a fundamental role in
global trade.
Far East and the ISC countries have experienced tremendous economic
growth over the past decades, and this upward trend even has had an
impulse after the global financial crisis in 2008. Going forward, trade
imbalances, regulations and newly build capacity will continue to
influence opportunities in the tank terminal industry in the greater
Singapore region.
REGIONAL DEMAND FOR OIL PRODUCTS REMAINS STRONG
The continuously growing economies have driven supply and demand for
oil products in Asia, with the Indian and especially Chinese economy
increasing their production substantially. China, India, Japan and South
Korea are the region’s largest suppliers of oil products, with China
more than doubling any other country’s output in 2017.
Far East and the ISC refinery output primarily consists of diesel and
gasoline, accounting for 44% and 26% of the region’s total output in
2017 respectively. The productions of both products grew rapid over the
past decade, more than any other main refinery output, while demand for
both products in the region has increased gradually over the last
decade.
Far East and the ISC has surplussus of diesel, gasoline and
jet-kerosene, meaning it produces more than it consumes of these
products. A higher surpluss generally leads to higher exports of a
product, implying an increased demand for temporary tank storage
capacity. Deficits exist for fuel oil, naphtha and LPG, meaning Far East
and the ISC has to import these products from outside of the region.
Singapore’s tank terminal industry has been benefiting from this
situation for a long time.
SINGAPORE ON ALERT AS NEIGHBORS’ TANK STORAGE MARKET SHARE INCREASES
Malaysia and Indonesia aim at increasing their market share both
approaching Singapore’ total tank storage capacity, while Singapore
stays on alert with only minor expansions.
Singapore has been the largest provider of tank capacity in the
Greater Singapore area and has roughly tripled its capacity since 2005,
especially during the prolonged period of contango between 2005 and
2011, which supported demand for tank capacity. Market circumstances
were less favorable after 2011, but the construction of new capacity had
already begun adding new storage tanks after this date.
Malaysia is expected to almost double its capacity in 2018 with
4,900,000m3, while in Singapore a total of 370,000 m3 or a mere 2% of
its total capacity is being constructed as of 2018. Indonesia has no
capacity that is noteworthy under construction but has plans to add more
than 7 million m3 in the future. This expansion would more than double
the country’s total capacity, but whether these plans will be executed
is uncertain.
Singapore will therefore primarily see increased competition from Malaysian tank storage operators.
PREPARING FOR A NEW SET OF CHALLENGES
The Tank Terminal industry in the Greater Singapore area is facing
some new challenges, such as new restrictions on emissions, IMO 2020’s
new bunker fuel specifications and logistical developments in Asia.
Environmental regulations will have a downforce to gasoline and
diesel demand in the region, changing national imbalances and thus trade
flows. A sharp decline in fuel oil demand as of 2020 on the other
hand, will increase marine gasoil demand, which will result in less
temporary storage of fuel oil in Singapore and increase the demand for
temporary storage of marine gasoil.
There may also be pressure on demand for marine bunkering and
temporary oil products storage in Singapore when alternative cargo
routes replace the Strait of Malacca. These could include new One Belt
One Road trade routes and China’s two Ocean’s strategy via pipelines
through Myanmar.
Click here to read Part 2 of the article “Greater Singapore Tank Storage Market Outlook 2018”.
SINGAPORE TANK TERMINAL MARKET STUDY 2018
Based on extensive market research, Insights Global – in partnership with Ener8 Limited – has produced a +75 pages report providing insights into the Tank Terminal Market in both Singapore and the greater Singapore area.
