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What’s happening in the market
TIME AND A PLACE
MARKET • DEMAND FOR STORAGE TERMINAL CAPACITY IS IN A STATE OF FLUX AS AN UNPRECEDENTED SERIES OF EXTERNAL INFLUENCES IMPACT CONSUMPTION AND TRADE
The construction and operation of bulk liquids storage terminals is a capital-intensive business; it is by nature based on long-term planning and market expectations, ideally underpinned by customer commitments. As such, it is difficult to respond quickly to changes in the market and, at a time of uncertainty and volatility around the world, terminal operators are facing difficult choices.
Those changes can come on quite suddenly; earlier this year, for instance, the Coronavirus outbreak in China prompted many in the country to avoid travelling, leading to a sharp reduction in transport fuel demand with its knock-on effect on domestic refiners, the tanker market and terminal operators.
The ‘IMO 2020’ rule mandating a reduction in sulphur oxide emissions from ships’ exhausts as from 1 January 2020 caused more issues, although at least this had been foreseen. It required terminal operators to make changes to their facilities in order to be able to handle and segregate different grades of fuel, which necessitated taking some tanks out of service for modification at those terminals handling bunker fuels. As a result, some terminal operators have reported a decline in overall occupancy rates for 2019 compared to 2018.
Other comparatively short-term impacts have been generated by growing geopolitical tensions and the imposition of tariffs and other sanctions, not least the trade war between the US and China but also US sanctions on Iran, Venezuela and other countries seen as hostile to US interests around the world. These have led to shifts in the pattern of trade for crude oil and refined products, as well as chemicals, and have had an impact on storage demand. They are one of the factors behind Vopak’s reports over the course of 2019 of weak demand at its major oil hub in Singapore.
THE BIG PICTURE Other factors impinging on the pattern of demand for tank storage capacity are associated with longer-term external influences, such as the shift in refinery capacity towards the east and rapid increases in end-user consumption in Asia and other emerging markets, at a time when the mature markets in Europe and North America are not showing any meaningful growth.
Terminal operators have had to find ways to deal with those structural changes; in some cases, as with Vopak, that has involved the disposal of sites that no longer fit the global strategy, even if local players can find a role for them. It has also led to investment in new, large-scale facilities both to handle the surge in local demand – as in Brazil, Mexico and China – and the new global flows of product, which is continuing in Malaysia (as an alternative to Singapore, where land is in short supply) and Panama.
Perhaps the most surprising aspect of this is that the rapid increase in the production of crude oil and natural gas in North America has had an impact limited largely to exports
ANTWERP IS THE FOCUS OF MUCH OF THE INTEREST
of crude oil, LNG and other relatively unprocessed liquids – notably ethane and ethylene. US crude oil exports have increased from around 100,000 b/d in early 2013 to more than 3m b/d in the final quarter of 2019, while US domestic production has more than doubled. It would seem that oil producers find greater value in exporting unrefined crude oil than in investing in domestic refining capacity: refinery throughput has over the same period increased from around 17m b/d to some 19m b/d.
North America’s midstream specialists have responded by investing heavily in new gathering systems, building pipelines across the continent and adding staging terminals, rail infrastructure and export terminals, primarily along the Gulf coast in Texas and Louisiana. (Next month’s HCB will have more information on these developments as part of our North America focus.) Unusually, perhaps, little interest has been shown in the sector by the international terminal community, although Odfjell has indicated that it sees Houston as the likely focus of its investment in the next few years, following a year in which tank utilisation was at or close to 100 per cent.
PORT TO ZERO The other trend underlying current terminal developments, particularly in Europe, is the oncoming need to manage the energy transition, which is also focusing attention on the need to decarbonise operations in ports and terminals. The ports of Antwerp and Rotterdam have been at the forefront of this effort, with port authorities in a good position to help lead developments.
At Antwerp, for instance, the port authority is providing shoreside electricity supplies, to enable vessels calling at its berths to use clean energy rather than running diesel-powered auxiliary engines, and helping develop a network for the supply of alternative fuels such as hydrogen and LNG. The Port of Antwerp has also placed an order for a hydrogen-powered harbour tug.
Speaking recently during a tour of the port by officials from the European Commission and other agencies, Jacques Vandermeiren, CEO of the Port of Antwerp, said: “Ports can make a significant contribution in the energy transition. As Europe’s largest integrated maritime chemical cluster and as a community builder, we commit ourselves to be a pioneer in port decarbonisation.
“Apart from our active participation in the Climate Action Programme with other major ports and the UN ‘Getting to Zero’ Coalition, we are working towards becoming a CO²-neutral port,” Vandermeiren added. “Together with our partners we prepare for a low-carbon future. We are in a constant search for innovative applications and opportunities.”
“Decarbonisation can only happen through the combined efforts of the whole maritime cluster,” said Martin Dorsman, secretarygeneral of the European Community Shipowners’ Association. “By working with the ports, such as the Port of Antwerp, and other maritime partners, the shipping industry and indeed the whole maritime sector can only benefit from the global regulation at the IMO, supported by the EU. It is the only way to make real progress and ensure a level playing field for our businesses.”
While some terminal owners, notably Vopak and ADPO, have made their own efforts to reduce their carbon emissions by leveraging the acreage at their disposal to generate power through solar panels, the Port of Antwerp has also signed a collaboration agreement with Air Liquide, BASF, Borealis, Ineos, ExxonMobil, Fluxys and Total as a first move towards the possible development of an infrastructure to allow the capture, utilisation and storage of carbon dioxide emissions. “Thanks to the presence of the largest energy and chemicals cluster in Europe, Port of Antwerp is the ideal location to foster collaboration between companies and take innovative steps towards CO² reduction. The new facilities will be available to the entire port community,” the port authority says. A detailed analysis is underway and expected to be complete in 2021.
Another significant initiative is already up and running in Antwerp – the ECLUSE steam network. This provides steam generated through the incineration of waste to six chemical companies located in the Waasland area of the port, meaning they no longer need to generate their own steam for their boilers; this could save up to 100,000 tonnes of CO² emissions per year.
WHERE TO BUILD? The focus on such developments by Antwerp is no coincidence. Its well established chemical
THE SHIFTING PRODUCT SLATE IS CALLING FOR MORE
TANK STORAGE CAPACITY FOR BIOFUELS (ABOVE) AND
cluster is proving to be a magnet for new investment in production capacity as well as the refining sector, in sharp contrast to many other parts of Europe. In October last year BASF announced plans to invest more than €500m in expanding ethylene oxide capacity at its Antwerp site by some 400,000 tpa.
Terminal operators are responding too, with a number of major projects in various stages of development. SEA-MOL, a joint venture between MOL Chemical Tankers and SEA-Invest, is building a 500,000-m³ terminal for base oils and chemicals at the Delwaide Dock, with startup scheduled for mid-2021. Standic is building a 95,000-m³ facility for chemicals, with completion slated for first quarter 2021; this will fit with Antwerp’s decarbonisation plans by including onshore power for ships, and it has the potential to increase to an ultimate size of 230,000 m³. Noord Natie Odfjell is also continuing to build out its terminal in the middle of Antwerp.
This is not to say that Antwerp is the only focus of activity; other operators are building in Rotterdam too, with LBC Tank Terminals recently announcing a 70,000 m³ expansion of its Botlek site to handle the growing market for the storage and transhipment of chemicals in the port. HES International is the ARA ports but across Germany, France and Italy. RVB notes that new tanks due onstream over the course of 2020 are generally targeted at ‘difficult’ products and that there is little availability for the storage of chlorinated products, light ends and liquefied gases.
RVB also raises the issue of another long-term trend: the increase in the consumption of biofuels, including hydrogenated vegetable oils (HVOs) and used cooking oils (UCOs). Demand is such that a number of terminals that have not so far been involved in the business are looking at opportunities, either through the conversion of existing diesel tanks or by building additional capacity, where land is available. With demand for diesel storage low, this offers a way for terminal operators to improve their utilisation rates. UCOs may be more difficult to handle, though, as they are generally traded in smaller parcels and terminals may need to be permitted to handle wastes.
These issues are, though, meat and drink to terminal operators. But with global economic and geopolitical pressures likely to continue into the foreseeable future, the broader headwinds that have been experienced over the past two years will need to be navigated for a while longer.
building a 1.3m-m³ terminal, HES Hartel Tank Terminal, for biofuels and petroleum products, with completion due late next year. As of February, 22 of the 54 tanks were under construction, with the remaining tank foundations being finalised.
MEETING A NEED All this new capacity is sorely needed. In its February 2020 market report, storage broker RVB Tank Storage Solutions reported that chemical storage is extremely tight, not only in
