Winds of change

Terminals have been buffeted by weather events, but operators are taking steps to make a difference in the achievement of sustainability goals, writes Peter Mackay, Principal Consultant, Meredith & Company.

Operators of bulk liquids terminals in the US Gulf Coast region are well accustomed to dealing with hurricanes, keeping a close eye on weather patterns from June to November and standing ready to put in place practised shutdowns in good time ahead of any major weather event. But the winter storms that struck much of North America during mid-February this year were something else. In place of high winds and torrential rain, terminals had to deal with freezing temperatures and power blackouts.

Those terminal operators were not alone; winter storm Uri caused blackouts for nearly 10mn people in the US and Mexico, the largest such disruption in the US since 2003, and resulting damages estimated at $195bn or more. Also badly affected were US refiners, with throughput in the US Gulf Coast region falling to 3.9mn b/d, lower than the level recorded during Hurricane Harvey in 2017. Indeed, the US Department of Energy estimates that 20% of US refining capacity was put out of action as a result of external power outages, constrained natural gas supplies, logistical disruptions or damage to process units caused by sub-zero temperatures.

Those storms, says Odfjell Terminals, ‘caused widespread impacts throughout the entire Houston petrochemical supply chain’. As an illustration of the extent of the disruption, Navigator Holdings, which has a 50% shareholding in the Morgan’s Point ethylene export terminal alongside Enterprise Product Partners, notes that the freeze shut down 80% of all US ethylene production and that virtually all the production plants in Texas and Louisiana had to ‘abruptly cease operations’ as they were not designed for sub-zero temperatures and lacked winterisation contingencies. Inventories were rapidly drawn down and what little production remained was going directly into domestic downstream processing; terminal export volumes were near capacity in January but fell off dramatically in February and March. While operations returned to normal within weeks, it took until June before export volumes came back close to those of January.

NuStar Energy, which operates a network of refined product pipelines and terminals along the Texas coast, also noted that the extreme temperatures in February caused outages or downtime among some of its customers during and after the storm. It puts the impact on its earnings for the period at some $11mn, at a time when refined product demand had begun to return towards pre-pandemic levels.

Weather forecast

The severity of the climatic conditions in the US Gulf area during February has been identified as a symptom of global climate change. Arctic air has been warming twice as fast as the global average, disrupting long-established patterns and shifting the jet stream, allowing the polar vortex to extend its range southwards. If that is true, then more such extreme weather events are likely in years to come and operators of industrial facilities, including storage terminals, will need to learn from this year’s storms and be prepared.

That is certainly the case with hurricanes, which arrive each year in the Caribbean and regularly impact facilities in the US Gulf. Indeed, so regular are they that most terminal operators conduct routine drills and exercises so that they are ready to respond to the possible contingencies. According to the International Liquid Terminal Association (ILTA), which represents the sector, its members work with federal, state and local first responders and government officials to promote safety before, during and after extreme storm events. Post-storm checklists help assess potential damage, alert local, state and federal authorities of damage, and allow operations to resume. If damage is severe, alternative sources can be assigned.

The ILTA notes that the National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center has forecast a 60% chance of a more active than normal Atlantic hurricane season this year, having already announced an increase in what it deems an ‘average’ hurricane season, with the number rising from six to seven.

This forecast suggests that the US Gulf is likely to face more hurricanes of the severity of Katrina (in 2005) and Harvey (in 2017), the second of which had a massive impact on the Texas coast, with significant flooding and wind damage affecting industry and homes alike. Hurricane Katrina raised serious questions about the ability of the refining and terminal industry to keep supplies moving during such events, when fuels are sorely needed.

Here comes the flood

Flooding has also been on the agenda at the UK Health & Safety Executive (HSE), which in 2018 published a delivery guide on flood preparedness inspections. In the document, HSE noted that recent flooding events affecting a number of major hazard establishments that were subject to the Control of Major Accident Hazards (COMAH) regulations had the potential to disrupt critical infrastructure and interrupt business continuity. As a result, the COMAH Competent Authority has been undertaking targeted inspections on flood preparedness since 2017 and will continue to do so through to next year.

That inspection programme also leans on guidance and best practice developed by the Chemical and Downstream Oil Industries Forum (CDOIF). This document identified a number of issues that can emerge during a flooding event, including the loss of power, communications and other utilities (which may also impact emergency services), including effluent treatment; inaccessibility of a site for emergency responders; sudden and unplanned production interruptions, damage to process equipment and loss of containment; the welfare of any staff stranded on the site; and the management of floodwater, particularly when it has been contaminated by oils or chemicals.

In particular, HSE noted that flooding at a storage terminal site has the potential to lift tanks off their foundations, and erode pipe supports or other steel and concrete components (including bund walls). Debris being washed around in flood water may also cause damage. These effects are possibly hard to picture for anyone who has not experienced them before, so training and drills are vital to prepare personnel to deal with a sudden inundation.

Turning back the tide

Bulk liquids storage terminals are often sited on or near the coast and, as such, are largely unprotected from the elements and at risk of damage and disruptions caused by wind and water. If climate change is responsible for an increase in such threats, then terminals are also well placed to take a lead in some of the measures being developed to help mitigate those threats or turn back the tide of climate change.

This has been evident for some years now, with many operators taking the opportunity to leverage their assets and capabilities to help promote environmentally friendly alternatives. For example, in 2019 the ADPO site in Antwerp installed a concentrated solar thermal (CST) energy array, which uses parabolic mirrors to concentrate the sun’s rays to generate heat. CST is said to be three times more efficient than photovoltaic (PV) technology, generating up to 400˚C for use in tank cleaning and heating. The array, developed by Azteq, was installed above the company’s car park, above a railway line and underneath a high voltage power line, providing double use of the ground area.

Leading international terminal operator Vopak has put in place a range of measures aimed at improving energy efficiency, both for itself, its customers and other parties. In May this year it signed a memorandum of understanding with Keppel Data Centres, Kawasaki Heavy Industries, Linde Gas Singapore and Mitsui OSK Lines to explore the development of a concept for supply infrastructure to deliver liquefied hydrogen to Singapore, to power Keppel’s data centres, including a floating data park project that is currently under development. The scope of the project includes a production, liquefaction and export site, transport via oceangoing tankers, and an import, storage and regasification facility in Singapore. The study is expected to run to the end of this year, after which a decision will be taken on the next steps.

‘A hydrogen import terminal has the potential to transform industries like the data centre sector,’ says Kees van Seventer, President of Vopak LNG. ‘It will also support long-term emissions reduction in Singapore. Vopak is committed to support the energy transition through development of infrastructure for sustainable energy solutions, underpinned by our New Energy strategy.’ That strategy involves reducing Vopak’s activity in the traditional crude oil and refined products sectors and refocusing on new energies and gases, while maintaining its presence in the chemicals and industrial sectors (see p18).

Play together

Vopak clearly understands that, as the process of decarbonisation and the energy transition continues, it will have to redefine its sphere of activity. It is far from alone in that, with terminal operators around the world looking at how they will have to adapt to handle new fuels and new technologies.

One salient feature of this new energy environment, at least in the near to medium term, is the need for collaboration. There are many paths to a decarbonised future and different technologies will need to be deployed. But whatever the nature of successful future fuels, storage terminals will continue to play a fundamental role in their supply chains.

Port authorities continue to be well placed to foster that collaboration, bringing together the different abilities of their varied tenants. The Port of Rotterdam, for example, has been highly active in playing its part in helping the Netherlands meet its obligations on climate change, notably in the area of hydrogen, where it is looking at establishing a transparent hydrogen exchange market, ‘HyXchange’, in partnership with Gasunie, other regional ports and market players. In the meantime, it has also completed a pre-feasibility study looking at importing green hydrogen from Iceland, which indicates that such a project could be technically feasible, financially viable and would have a significant contribution to the fight against climate change.

Activities such as this show that the terminal sector is stepping up and making a contribution to the fight against climate change, not least in its own interests to head off further disruption and damage caused by extreme weather events.