Category: Blogs

Oil derivatives market and tank storage markets

DOWNLOAD e-book

Tank terminals play a vital role in daily oil trading by enabling break and making bulk operations and balancing short term variations in supply and demand. Oil trading companies have an interest in renting tank storage capacity as the oil derivatives market is related to physical oil markets. For ARA oil products ICE gasoil futures are one of the most important trading tools to manage risk. In the image below you can see the ICE LS Go Futures graph.

The backwardation at the beginning of the gasoil curve decreased to to +$0.00 despite far higher spot prices, while the contango in the middle decreased substantially. Trading opportunities have therefore become harder to find.

As gasoil inventories in the region are higher pressure is put on local gasoil prices, while higher crude prices make refinery input more expensive. As a result, Brent crude crack spreads are weak and this could lead to lower output of local refiners. Currently the tank storage market is in backwardation, traders have no incentive to store gasoil and will minimize inventory levels. That is why the demand for storage capacity will decrease when the market is in backwardation.

Would you like to have a weekly update about the tank storage market ? Or get a better insight about the ARA region ? Contact us for more information and become familiar with our diverse services.

Access more than 4,900 independent tank terminals on our newly released platform. See for yourself by registering for our free trial.

Free Pro Trial

Quick insight ARA Tank Terminal capacity expansion

The ARA region is an important trading hub in Northwest Europe due to its infrastructure and fundamentals to serve the physical market for liquid trade. Location is key and ARA’s location is exceptional due to the Rhine river that connects with the Benelux countries, Switzerland, France and Germany. Also the ARA region provides refining facilities, tank storage and is seen as oil pricing center.

In the first image you can view the evolution of the tank terminal capacity in the greater ARA region. Important capacity additions in the past two years were done by Botlek Tank Terminals, Koole Tank Storage Minerals and NoordNatie Antwerp. At the same time we can observe various expansion activities in the ARA region, which will increase the current tank storage capacity further.

Secondly in the image below you can see the capacity under construction. Various players will also be adding capacity to their current storage capacity. The total amount of storage capacity under construction will be about 2.3% of current installed capacity and will be accessible in the coming years. Besides expansions , new terminals are expected to be built as well in various ports, focusing on liquid bulk like mineral oil products & petrochemicals.

We do expect some changes that might alter the ARA fuel oil market and petrochemical market and may therefor influence the tank storage market in those segments. Are you interested to get more information contact us at the headquarters in the Netherlands at +31 (0) 850 66 25 22.

A brief observation of the Northwest European markets and its place in the global naphtha supply chain.

Download e-booK

Tank terminals play a vital role in current global markets. Their primary function is to physically balance supply and demand along the supply chain and to facilitate opportunities. The ARA region is the main trading hub within Northwest Europe due to its outstanding infrastructure, its network with many active market players and its place within the overall supply chain. We will take a closer look at the naphtha markets in this region and its importance for the international oil markets. Naphtha is retrieved from various sources like condensate gas, petroleum distillates or the distillation of tar and is mostly used in the gasoline blending and petrochemical markets.

Within ARA, with the Port of Amsterdam being a gasoline blending hub, demand for naphtha is fairly high and it makes North West Europe net-importer for the product.Other regions like the Middle East , the Mediterranean and India are net-exporters which provide global trade flows of the product. Competition for import to North West Europe comes from petrochemical markets in East Asia, which are also big net-importers as seen in the top graph to the right. The imbalance between the supply and demand in the different regions provides trading opportunities in various ways.

The ARA naphtha import is headed by Russia, having the biggest volume compared to the other countries with UK, Germany, Algeria, France and Spain as well in the top six sources list, as seen in the graph. This shows the reliance on near as well as less local markets of the various market participants. A shrinking imbalance is negative for the ARA tank storage sector. However, considering the market size and the option to switch to the gasoline segment the impact seems small.

PJK International provides direct insight in the market by not only its annual Tank Terminal reports, but also with weekly reports on stock levels of various products (including naphtha) stored at independent tank terminals in the ARA region, a weekly report on the trade flows up and down the Rhine river and daily barge freight rates for transport within ARA and up the Rhine. This way, we provide tools for better and quicker decision making processes.

Would you like more information ?For more information contact us at Insights Global HQ in the Netherlands.+31 (0)850 662500

Insights from our analysts

This weeks insight from Lars van Wageningen, our Operations Manager at Insights Global, also quoted by Bill Lehane (Bloomberg) considers the market is getting tight. The inland stockpiles haven’t been replenished over summer because Rhine barges haven’t been able to operate at full capacity. Furthermore even as the water levels start to recover, the Rhine barge rates remain high; also barge traffic has risen on the main river. In addition the Bayernoil Vohburg refinery outage is also adding to tightness, with suppliers in that region looking further north for supply than usual.

A quick Insight in the ARA petrochemical tank storage market.

In Northwest Europe the oil and the petrochemical sectors are leading sectors that employ thousands of people directly and indirectly within the region. The main European production cluster for liquid bulk products is made up of the Benelux countries, Switzerland and the German and French regions that are connected to the Rhine river.

The Amsterdam, Rotterdam, Antwerp region or ARA is the main trade hub that connects Europe to global markets. The petrochemical sector is responsible for producing various materials such as plastics, paints, solvents, fibres and raw materials for pharmaceutical and cosmetics sector. Taking a closer look at the petrochemical side of the cluster and the different market participants in it, many of the companies produce goods in high-volume or ‘bulk’ quantities.

Companies in this cluster have been getting more exposed to severe competitive pressure. This has been Leading to the closure of for example La Mede refinery, Reichstett refinery, Petit Couronne refinery and the Wilhemshafen refinery. Also the decision made by Gunvor to not go ahead with their investment in upgrading the GPR site is a sign of high uncertainty amongst players about what the future will bring. Despite this at the same time there are others planning expansion like Ineos, one of the leading chemical companies with sales of around 60 billion dollars and their production network spans 171 sites and 24 countries. Ineos announced that their plan will have 2.7 billion capital investment in Northern Europe.

One of the things to watch in the future and the question for all is; where will the new Ineos plant be built. According to news articles both Rotterdam and Antwerp are being considered. As Ineos already has production sites in Antwerp we give Antwerp a slightly bigger chance, but you never know what the outcome will be. Either way it is likely to boost trade in ARA, as Ethane and propane imports will increase and most likely chemicals and intermediates trade will also increase.

Bertrand Chupin on The Challenges Ahead

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 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.

Q:Bertrand, how would you describe the main market challenges at the present time?

The market has drastically and irreversibly changed over the last 5 years. Terminal owners are expecting vendors to significantly reduce equipment CAPEX. In addition, with fewer investments moving forward during this period of time. Competition has been and remains highly aggressive, pushing vendors to find innovative solutions to reduce costs. Also, once the investment decision is made, clients want their projects faster demanding shorter lead times. Finally, buyers are looking for first-class service, fast availability of spare parts, fast mobilization of site engineers and lower OPEX.

Q:And how do you see it evolving in a period of 5 to 10 years? What are the trends and challenges ahead of us?

Although the market and our clients significantly reduced investments during the last five years, we have observed signs of recovery in the last few months. Deep cost reductions have enabled projects that were otherwise unprofitable without compromising safety and quality standards.

It is also likely that automation and unmanned operations will be further developed in the future to address OPEX challenges. In addition, operational and maintenance are currently being studied and implemented.

Finally, a few new market segments are coming along, specifically those linked to the usage diversification of LNG (Liquefied Natural Gas). New regulations imposing significant reductions of CO2 and NOx emissions for maritime transportation are opening new opportunities to LNG by replacing conventional HFO (Heavy Fuel Oil) and maritime diesel. New infrastructure and value chains are being developed to allow this conversion providing new applications to loading systems manufacturers.

Q:At last, how is TechnipFMC getting prepared to these challenges that the future post?

TechnipFMC has reduced costs through improved execution and standardization. Always thinking about the future, TechnipFMC’s Loading Systems division maintained the same level of investment in R&D over the last few years to provide the industry with breakthrough technologies such as a full electric loading arm that replaces the conventional hydraulically-powered one and significantly reduces OPEX to provide our clients with greener offloading solutions.

Services is also an area of focus: reducing inspection and maintenance cost by using drones is, for instance, one of the new services offered by TechnipFMC. A new strategy on spare parts management has also been implemented to provide our clients with critical spare parts in a shorter delivery time.

Finally, the recent merger opens doors to the flexible hose technology through Coflexip™. The adoption of flexible solutions is expanding within offloading applications and make TechnipFMC the sole loading systems manufacturer with the ability to provide both rigid articulated pipe and flexible hose solutions.

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 Mr. Koen Algoet – Product Manager Terminal Solutions – and Mr. Kevin Pluvier – Project Manager Oil & Gas – at Agidens, a solutions provider in the areas of security, reliability, efficiency and sustainability.

Importance of Tank Terminals in Tanker Shipping

Businesses and traders of bulk liquid cargoes and gasses select ports because of their location, maritime access, hinterland connectivity, value-added services, economies of scale, and the availability of independent tank terminals.

Tanker owners prefer to sail to ports with high throughput volumes, fast turnarounds and low demurrage risks. The availability of tankers is a critical factor in the success of ports.

Ship Owners also look at reducing costs through vessel design, slow steaming between locations and reducing time spent in ports by optimizing loading and discharging.

The ship-shore interface involves tankers loading and discharging at regularly visited shore terminals, but with spot activity, vessels also need to call at many terminals they are not familiar with. This comes together with an increased risk for tanker owners. Similarly, each tank terminal now handles more tankers of different types and sizes than ever before.

The above indicates that the relation and coordination between vessel owners and tank terminals could be of great importance and a clear game changer. Better cooperation will not only help optimize operations and reduce cost but also support better risk management.

The importance of tank terminals in what-if scenarios

A tanker owner may need to discharge a cargo due to an emergency or because missing a loading or discharge window. In the chemical trade, for example, there is an agreed laycan or in other words an agreed loading time range at the end of which comes the time when the charterers are entitled to exercise their option and cancel the charter party for non-arrival of the owners’ vessel.

Being stuck in a port or being cancelled by the charterer has an impact on not just the current voyage, but all future voyages and fleet planning. This can have a huge negative impact on the owners’ financial performance.

So, in case of an emergency, delay or cancellation, good relations and communications between tanker owners and tank terminals may help mitigate risks. Finding a tank terminal to discharge cargoes during an accident or hazard may also be required from time to time.

New opportunities

Tank terminal projects are very good market indicators since projects are often announced early and set the stage for future product flows. Bulk liquid terminals play an important role when trading centers are shifting and new hubs are being developed.

Demand and production swings are taking place all the time resulting in shifts between long and short haul shipments. Short haul shipments tend to have smaller volumes and therefore require smaller vessels. Such changes have an impact on loading and discharge operations at tank terminals, including jetty capabilities and tank sizes.

As Owners are looking for economies of scale, ships are however getting bigger and ship owners need to make sure that tank terminals can handle such larger vessels and large quantities of cargo. A good example is the Bow Pioneer, the largest IMO II chemical tanker with a deadweight of 75000, measuring 288 meters long and 37 meters wide. The use of larger tankers in any market segment may result in the development of more hub terminals to receive larger vessels and support regional distribution and transshipment activity.

Tank terminals may also be an interesting investment opportunity for ship owners to diversify and create a more balanced business portfolio. While freight rate and volume levels may be low during an economic downturn, inventories at terminals may be high during such times. Some storage contracts are negotiated on a take or pay basis which means the client pays even if they don’t use the tank. This provides a level of guaranteed income. And if not invest, why not develop a strategic tank terminal tanker owner alliance for a specific project.