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Pressure relief for Tanks and Terminals worldwide
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Palladian Publications Ltd 2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not
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Tanks & Terminals
CONTENTS
JOIN THECONVERSATION
ONTHE FRONT COVER
Autumn 2016 Volume 02 Number 02 ISSN 1468-9340
05 Comment07 World News14 Asia's storage surge
Ng Weng Hoong, Contributing Editor, discusses the Asian storage market's growing role in the volatile global oil sector.
21 Deep undergroundLiane Smith, Wood Group Intetech, UK, highlights the importance of integrity management for operators of underground gas storage wells.
24 Down to businessThe movement of information has to match the movement of product to ensure maximum profitability. Murali Krishnan, Emerson Process Management, Singapore, and Christopher Amstutz, Emerson Process Management, USA, explain how automating procedures and record keeping, and integrating them with automated operations, can improve performance.
31 Load it up!Michael Martens, Implico Group, Germany, explains how driver operated loading is taking terminal automation to a new level.
35 Compare and contrastAlan Hunt, ABB, UK & Ireland, outlines the benefits of using a contact level sensor compared to a non-contact sensor when monitoring tanks with low dielectric substances.
39 In demandWout Last, Hint, the Netherlands, provides an insight into the increased demand for process control and automation systems.
43 The wireless wayScott Keller, SignalFire Wireless Telemetry, USA, explains how operators can optimise tank farm operations using a wireless tank level monitoring system.
47 Going ultrasonicJörg Sacher, FLEXIM GmbH, Germany, outlines the benefits of non-invasive clamp-on ultrasonic flow measurement of crude oil for downstream storage and transport applications.
52 Creating capabilitiesJohn Hoben and Alex Bukhman, Gauging Systems, Inc., USA, examine the new inventory, safety, environmental and operational capabilities that can result from the employment of an advanced tank gauging system.
57 To close or not to close?The decision to keep roof tank drains open or closed is an operating dilemma faced by tank farms worldwide. Michael Sprung and Mark Rauch, EnviroEye, LLC, USA, and Chris Chase, InterOcean Systems, USA, outline a newly developed system that can help operators to safely and effectively monitor floating roof drainage.
64 Keeping you coveredJeff Heath, Matrix Applied Technologies, USA, examines floating roof technology and how to maximise safety, compliance and profit while minimising risks and operating costs.
71 The right analyser for the jobMeasuring emissions at a gasoline loading terminal can be extremely complicated. Devin Greenfield and Anne Himmelberg, John Zink Hamworthy Combustion, USA, explore the many points to consider when choosing a continuous emission monitoring system analyser for vapour recovery units.
76 Cracking down on emissionsMonica Jimenez and Annette Garcia, Tanks and Terminals Business Unit, SAGE ATC Environmental Consulting, LLC, USA, discuss the US Environmental Protection Agency's expanded enforcement initiative targeting emissions from storage tanks containing hazardous air pollutants.
81 Turn up the heatChance Carrick, Koch Heat Transfer Company, LP, USA, reviews the benefits of finned tube technology for a range of tank heating requirements.
88 15 facts on...This issue gives you 15 facts on storage and distribution!
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COMMENTROSALIE STARLINGEDITOR
It’s an interesting time for the oil and gas storage industry. Plans for new tank farms, terminals, as well as logistics and distribution infrastructure, are cropping up all over the globe as the demand for storage continues to mount. However, as
onshore inventories swell, offshore vessels or tankers, which can serve as practical temporary alternatives while permanent onshore facilities are being constructed, are becoming an
increasingly attractive option, particularly within the gas realm.The market for floating LNG (FLNG) and floating storage and regasification units (FSRUs) has grown
exponentially over the past few years – and it’s easy to see why. As well as offering an efficient storage solution, they provide a flexible, cost effective way to receive and process shipments of LNG. And more market growth is just around the corner – global capital expenditure on FLNG facilities is forecast to increase significantly over the 2016 - 2022 period. Capex will total US$41.6 billion to 2022, according to Douglas-Westwood (DW), compared to US$11.4 billion over the 2011 - 2015 period – a whopping 264% increase! Liquefaction vessels will account for approximately 59% of forecast expenditure, with the remaining 41% allocated to import and regasification terminals, according to DW’s research.
In keeping with this prediction, a number of project developments have come to light over the past couple of months. In July, Mitsui O.S.K. Lines (MOL) announced that its subsidiary Lakler S.A. had agreed to conclude a long term charter contract with Gas Sayago, a joint venture between Uruguay's state oil company ANCAP and state power company UTE, for a major FSRU project. The unit will be equipped with the largest LNG storage tank of any FSRU in the world (263 000 m3), and will supply gas to Uruguay and its neighbouring countries. It is currently under construction at Daewoo Shipbuilding & Marine Engineering Co., Ltd in South Korea. Following completion, it will enter a 20 year charter, starting in the first half of 2018.
Moving east to Asia, Excelerate Energy L.P., Petrobangla and the Government of Bangladesh established a terminal use agreement (TUA) and implementation agreement (IA) for Bangladesh's very first LNG import terminal – the Moheshkhali Floating LNG project – in July. Located offshore in the Bay of Bengal, it will be the world's first fully integrated turnkey floating LNG terminal, whereby all services will be provided under a single contract by a single provider, Excelerate Energy, which will operate the terminal for 15 years (after which ownership will tranfer to Petrobangla). The project includes the provision of one of Excelerate's existing FSRUs, the installation of a subsea buoy system, and the employment of port service vessels during operation. The unit will have 138 000 m3 of LNG storage capacity and a base regasification capacity of 500 million ft3/d – operations are expected to commence by 2018.
Heading south along the Indian subcontinent, in August reports surfaced that Krishna Godavari LNG Terminal, a holding company of US-based Vessel Gasification Solutions, Inc., had received the 'in principle' nod from Andhra Pradesh's Energy, Infrastructure & Investment Department for the setting up of a US$750 million, 7.2 million tpy floating LNG terminal offshore of Kakinada Deep Water Port.1 It is the first LNG project on India’s East Coast, and will allow for the full utilisation of some 7000 MW of near-idled power plants, laying the groundwork for an ‘industrial renaissance’ within the coastal region of Andhra Pradesh and Orissa.
Despite near term apprehensions – the oil price crash has impacted the authorisation of costly liquefaction units over the last couple of years – the long term possibilities of FLNG and FRSU technology are evident. Natural gas will continue to play an important role in the global energy mix, and, as DW asserts in its 'World FLNG Market Forecast 2017 - 2022', the rising cost of onshore development terminals and the shorter lead times for floating units makes the technology a viable option in the current market environment.
References1. 'Krishna Godavari floating LNG terminal gets in-principle nod', http://www.thehindubusinessline.com/economy/
logistics/krishna-godavari-floating-lng-terminal-gets-inprinciple-nod/article8928203.ece.
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WORLD NEWS
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Poland | Ensuring tank farm safety
AUMA has commissioned 77 actuators and four Modbus SIMA
master stations at a refinery in Płock, Poland. The system is used to isolate tanks containing flammable liquids in the event of fire. Płock is the headquarters of PKN Orlen, Poland’s largest refiner and retailer of gasoline and diesel.
PKN Orlen needed to improve the isolation system for tanks at its gasoline blending plant. Working with local engineering company Prozach S.A., PKN Orlen chose 77 AUMA actuators fitted with AC .2 actuator controls to isolate around 20 tanks. The SIMA master stations, in redundant setup with Hot Standby SIMAs, provide supervisory control via the Modbus RTU protocol.
The SIMA system provides redundant control from different locations to maximise fire safety. Each SIMA loop is able to handle up to 247 actuators over a distance of 296 km using a conventional RS-485 cable. Entire communication is based on standard open fieldbus protocols.
The design phase of the project was completed in May 2015. The AUMA equipment was ordered in July 2015, and it was installed and commissioned in November and December 2015.
The system is now operating as designed, to PKN Orlen's satisfaction. This was the first stage of a modernisation project that will extend to around 200 tanks over the next few years.
Canada | Large scale automation contract
Honeywell Process Solutions will provide full automation and
safety systems and serve as the integrated main automation contractor (I-MAC) for a new LNG facility being built in Eastern Canada to process North American natural gas for international export. Honeywell technology is currently being used in more than 40 similar LNG import and export terminals around the world.
Located on the eastern shore of Canada in Nova Scotia, Pieridae Energy’s Goldboro LNG project will include a natural gas liquefaction terminal and facilities for LNG storage and marine export. The facility will be able to process 10 million tpy of LNG and have a storage capacity of 690 000 m3. Startup is expected in 2021.
Honeywell is responsible for designing, delivering and installing the distributed control systems (DCS), safety instrumented systems, fire and gas systems, and operator training simulator (OTS) for the project. Honeywell will also be responsible for helping Pieridae integrate all plant infrastructure to the business enterprise systems.
Specific key deliverables include a number of Honeywell's innovative and patented technologies including: LEAP, Honeywell's lean project execution services; Experion® PKS (process knowledge system) Orion with distributed systems architecture (DSA); Experion Security Integrator; Fault Tolerant Ethernet (FTE); universal process I/O and safety I/O; Safety Manager fire and gas systems; UniSim operator training simulator; DynAMo® advanced alarm management software; Uniformance® Suite PHD data historian; and the Intuition Executive operational insight platform.
USA | Terminal business acquisition
Valero Energy Partners LP has announced that the Board of
Directors of its general partner has approved its acquisition of the Meraux and Three Rivers Terminal Services Business from a subsidiary of Valero Energy Corporation for a total consideration of approximately US$325 million.
The business to be acquired includes terminals that support Valero’s Meraux and Three Rivers refineries. The Meraux assets consist of 24 tanks with 3.9 million bbls of storage capacity for crude oil, intermediates and refined petroleum products. The Three Rivers
assets consist of 62 tanks with 2.25 million bbls of storage capacity for crude oil, intermediates and refined petroleum products.
The company expects to finance the acquisition with borrowings under its revolving credit facility, cash on hand, and the issuance of additional common units and general partner units to Valero subsidiaries. Upon closing, the company plans to enter into 10 year terminalling agreements with a subsidiary of Valero. The agreements are expected to include minimum volume commitments covering approximately 85% of planned throughput.
USA | Fuel terminal construction
Flint Hills Resources is planning to begin construction on a
US$20 million expansion of its Waupun, Wisconsin, fuel terminal. The project will help meet demand for transportation fuels in the central and northeastern parts of the state, including the Fox River Valley and Green Bay markets. The company is also nearing completion of an estimated US$7 million expansion of its Junction City fuel terminal.
The expansion and improvement projects at the Waupun and Junction City fuel terminals involve more than doubling the loading capacity of the current two bay Waupun terminal, with the addition of three new bays, and adding a fifth loading bay to Junction City. Together, the projects will give the company the capability to supply at least an additional 27 000 bpd of product volume to central and northeastern Wisconsin markets.
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USA | Improved crude storage capacity
In August, Louisiana Offshore Oil Port (LOOP) announced the early
commissioning of services on three new aboveground crude oil tanks located at its Clovelly Hub in Louisiana. Each tank is capable of accommodating over 355 000 bbls of crude oil for customers at the hub. These tanks utilise the latest technology for environmental and safety compliance. The tanks include electronic level controls, fire detection equipment, advanced security surveillance and around the clock operational monitoring.
When the entire project is completed in April 2017, seven new tanks totalling 2.5 million bbls of capacity will be online. The project, which began in April 2015, has employed hundreds of craftsmen, designers and engineers during a period of constrained employment opportunity in the region.
The Deepwater Port Complex was initially developed to facilitate imports of crude oil to the US, but has grown to be an essential landing point for domestically produced energy.
Bangladesh | First LNG import terminal
Excelerate Energy L.P., Petrobangla and the Government of Bangladesh have
executed a terminal use agreement (TUA) and implementation agreement (IA) for the construction and operation of Bangladesh's first LNG import terminal – Moheshkhali Floating LNG. Located offshore near Moheshkhali Island in the Bay of Bengal, the terminal will provide the crucial infrastructure required for the country to access natural gas from global markets. The signing of the agreements signals the commencement of the project and the approval to move forward.
The new terminal, which is expected to be in operation in 2018, will enable Petrobangla to procure LNG from international gas markets.
Moheshkhali Floating LNG will be the world's first fully integrated turnkey
floating LNG terminal whereby all services will be provided under a single contract by a single provider. Excelerate will fully develop, design, construct, install, finance, and operate the terminal. This structure will allow for a single point of interface and responsibility to Petrobangla and provide seamless operations for the Bangladeshi market. Excelerate will operate the terminal for 15 years, after which the company will transfer ownership to Petrobangla.
The terminal will include the provision of one of Excelerate's existing floating storage and regasification units (FSRU), the installation of a subsea buoy system anchored offshore, and the employment of port service vessels during operation. The FSRU will have 138 000 m3 of LNG storage capacity and a base regasification capacity of 500 million ft3/d.
Panama | Management agreement
Royal Vopak has reached a long term agreement with Chevron to manage
and operate Chevron's existing 509 000 m3 terminal in Panama. Chevron continues to be the owner of the terminal, and Vopak's operatorship is expected to start in 3Q16.
Next to this agreement with Chevron, the key regulatory approvals have been obtained for the development of a first phase 360 000 m3 independent oil terminal,
owned by Vopak, at Bahia Las Minas at the same location. A long term contract has already been signed for part of this new capacity. The project entails, in addition to the new tankage, complementary marine infrastructure, including jetties to handle ships of up to 80 000 dwt. The construction will take approximately 24 months and will start when the associated local construction permits are obtained in the coming months.
the netherlandsGate Terminal and its shareholders Gasunie and Vopak have announced that the LNG terminal at the Maasvlakte in Rotterdam has been expanded to include a third berth and special infrastructure for the loading of small LNG vessels. These small LNG vessels will enable distribution to LNG terminals in other North Sea and Baltic ports where large LNG tankers are prohibited to deliver directly due to their draught. In conjunction with LNG bunker vessels, the new berth will in future also make it easier for ocean-going vessels to fill up with LNG in Rotterdam.
usaBeginning this Autumn, Genesee & Wyoming, Inc.'s Arkansas Midland Railroad Company, Inc. (AKMD) subsidiary will offer the first ethanol unit train solution for the North Little Rock and surrounding gasoline blending markets, serving the JP Energy terminal, which is the largest terminal at North Little Rock’s tank farm complex. Unit trains will be unloaded directly to JP Energy’s ethanol storage tanks on premises for onsite blending or direct outbound truck loading. Prior to this, the local ethanol market was served only by truck deliveries and single car rail shipments.
belgiumOiltanking has acquired Antwerp Gas Terminal N.V., one of Europe’s largest independent LPG and petrochemical gas terminals located at the Port of Antwerp. As part of the acquisition, Oiltanking will focus on further expanding the terminal, which has an existing capacity of 138 400 m3 and offers storage, throughput and distribution services for pressurised and refrigerated LPG and petrochemical gases.
usaSunoco LP has completed its acquisition of the fuels business from Emerge Energy Services LP for US$167.7 million, plus working capital adjustments. The fuels business comprises Arlington-based Direct Fuels LLC and Birmingham-based Allied Energy Company LLC, both wholly owned subsidiaries of Emerge, and engages in the processing of transmix and the distribution of refined fuels.
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STORAGE SOLUTIONS YOU CAN COUNT ON As the world’s most experienced tank builder, CB&I supplies complete storage solutions to meet the needs of leading energy companies around the globe.
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ATMOSPHERIC STORAGE TANKSPRESSURE SPHERESLOW TEMPERATURE AND CRYOGENIC TANKS BULK LIQUID TERMINALSLOW TEMPERATURE AND CRYOGENIC SYSTEMS
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WORLD NEWSIN BRIEF
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USA | Master services agreement
Technip has been awarded a Master Services Agreement (MSA) by
SCT&E LNG, Inc. for its proposed LNG export terminal located on Monkey Island, in Cameron Parish, Louisiana.
The MSA will be utilised to execute the engineering services necessary to develop the project, including the front end engineering design (FEED) and
supporting the Federal Energy Regulatory Commission (FERC) process.
The total liquefaction capacity for the SCT&E LNG project is 12 million tpy and will be achieved through three identical 4 million tpy natural gas liquefaction trains, with the necessary utilities, storage, and marine facilities.
Technip’s operating centre in Houston, Texas, USA, will execute the contract.
Mexico | Storage and distribution project
Grupo TMM, S.A.B. and a Mexican maritime transportation and logistics
company have announced that, in conjunction with TransCanada and Sierra Oil & Gas, they are proposing to jointly develop storage and transportation infrastructure to serve the growing demand for refined products such as gasoline, diesel and jet fuel in the central region of Mexico.
The proposed US$800 million project would be the largest single investment in refined products since the establishment of the Mexico energy reform. The project includes: a marine terminal in Tuxpan, Veracruz, for offloading vessels with a
draft of 14 m, storage and distribution; an approximately 265 km 100 000 bpd refined products pipeline parallel to TransCanada's recently awarded Tuxpan-Tula natural gas pipeline project; and an inland distribution hub in central Mexico, which will provide excellent connectivity to the majority of the Mexico Valley market with access to major highways and distribution centres in the country.
The Tuxpan-Central Mexico corridor is the ideal route to efficiently supply refined products in the region, making this project a significant contribution to the existing refined products distribution chain in Mexico.
USA | Construction of new marine terminal
Magellan Midstream Partners, L.P. is planning to construct a new high
capacity marine terminal along the Houston Ship Channel in Pasadena, Texas, to handle refined petroleum products, including various grades of gasoline and diesel fuel, and renewable fuels. The new terminal will be built on nearly 200 acres of recently acquired land.
Supported by a long term customer commitment, Magellan initially plans to build approximately 1 million bbls of refined products and ethanol storage, and a new marine dock capable of handling Panamax-sized ships or barges with up to a 40 ft draft. Magellan is also constructing a 36 in. pipeline between the partnership’s existing Galena Park, Texas, terminal and the new Pasadena terminal to enhance
connectivity and distribution options for both facilities. In addition, Magellan is connecting its existing 18 in. Texas City to Pasadena pipeline to the new facility. Magellan is developing opportunities for additional connections to third party refineries, pipelines and terminals within the Gulf Coast region.
The project is currently estimated to cost approximately US$335 million, including the acquisition of land. Subject to receipt of necessary permits and regulatory approval, Magellan expects its new Pasadena terminal to be operational in early 2019.
If warranted by additional demand, the new Pasadena facility could be expanded to include up to 10 million bbls of storage and up to five docks.
ukThames Oilport is planning to expand the amount of tankage to be used for diesel storage, bringing into use a further 56 000 m3 of tankage from 1Q17. This is additional to the 175 000 m3 of tankage that came into use in April 2016, and the 64 000 m3 of tankage that was commissioned earlier this month, both of which have been previously announced. Thames Oilport is being developed in phases, beginning with diesel storage and moving on to storage and road loading for other products.
usaPhillips 66 Partners LP has announced that an agreement has been reached for it to acquire a natural gas liquids (NGL) logistics system in southeast Louisiana, currently owned by Chevron. The system includes approximately 500 miles of pipelines and a storage cavern connecting multiple fractionation facilities, refineries and a petrochemical facility.
drcPuma Energy has announced the opening of its 99th bulk fuel storage terminal at Matadi in the Democratic Republic of Congo (DRC). The terminal – which includes four 6500 m3 clean fuels storage tanks with truck loading and unloading racks, a state of the art firefighting system, and a floating jetty and interconnecting jetty pipelines – is equipped to handle a variety of product types including gasoline, jet fuel and gasoil. It is an important hub for the shipment and distribution of petroleum products, providing reliable product supply to DRC and its neighbouring countries.
finlandWärtsilä has signed a turnkey engineering, procurement, construction and installation (EPCI) contract with Raahen Voima to supply an LNG receiving terminal to be built in Raahe, Finland. The scope includes two LNG vacuum insulated storage tanks with a combined net volume of 1400 m3, an LNG regasification system, truck loading and unloading functions, and all required civil structures. The LNG terminal is scheduled to be operational in April 2018.
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WORLD NEWS
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GlobalData | Oil, LNG and LPG tanker outlook
According to GlobalData's new report, '1H16 Oil Tanker, LNG Carrier and LPG
Tanker Outlook', in terms of planned oil tanker deadweight tonnage, Gener8 Maritime, Maran Tankers Management and Tsakos Energy Navigation are the top three operators globally, with 3.319 million t, 2.213 million t and 1.619 million t planned, respectively. Four new crude oil tankers were announced in 1H16: two from Arab Maritime Petroleum Transport Co. and one each from Kyoei Tanker Co. and Tsakos Energy Navigation.
In terms of planned LNG carrier storage capacity, the top three operators are Teekay LNG Partners (3.460 million m3), Mitsui OSK Lines (3.033 million m3) and Maran Gas Maritime (2.256 million m3).
SK Shipping Company and Maran Gas Maritime each announced two new LNG carriers in 1H16: Skes 5 and Skes 6 (180 000 m3 of capacity each) and Maran Gas I and Maran Gas II, (173 400 m3 of capacity each), respectively.
The report also identified that Petredec, BW Group and Exmar LPG BVBA are the top three operators in the world in terms of planned liquefied petroleum gas (LPG) tanker storage capacity. The three operators are expected to have planned carrier storage capacities of 610 800 m3, 336 000 m3 and 228 000 m3, respectively. In 1H16, Petredec announced four new LPG tankers, while Nippon Yusen Kaisha Line, BW Gas and Hyproc Shipping Co. each announced two.
API | Enhancing rail tanker safety standards
In mid-August, the American Petroleum Institute (API) filed a petition with the US
Pipeline and Hazardous Materials Safety Administration (PHMSA) requesting that the agency issue a rule clarifying its role as the regulator of rail tank car safety and the role that industry plays in recommending and developing new standards.
“PHMSA’s role as the regulator for tank car safety ensures tank car safety designs are in the public interest. Attempts by third party groups to deviate from PHMSA’s tank car requirements could compromise safety and jeopardise the strides industry has made to ensure the safe transport of products by rail," said API's Director of Midstream and
Industry Operations, Robin Rorick. “While industry voices from the railroads, shippers, and builders are critical to advancing safety by developing and recommending new and innovative safety measures, it needs to be clear that PHMSA is the sole authority.”
API was joined by the American Chemistry Council, American Fuel and Petrochemical Manufacturers, Chlorine Institute, Fertilizer Institute, National Association of Chemical Distributors, National Industrial Transportation League, Society of Chemical Manufacturers and Affiliates, Sulphur Institute, and the US Clay Producers Traffic Association, Inc. in submitting the petition.
DIARY DATES27 - 28 SeptemberTank Storage AsiaMarina Bay Sands, SingaporeTel: +44 (0)20 8843 8800Email: [email protected]
28 - 29 SeptemberNISTM 9th Annual National Aboveground Storage Tank Conference & Trade ShowMoody Gardens Hotel, Galveston, TexasTel: 1-800-827-3515Email: [email protected]
29 September2016 Tank Storage Conference & ExhibitionRicoh Arena, Coventry, UKTel: +44 (0) 1702 471846Email: [email protected]
17 - 21 OctoberAPI Fall Committee On Petroleum MeasurementStandards MeetingHyatt Regency Orange County, CaliforniaTel: 202-682-8195Email: [email protected]
14 - 16 NovemberERTC 21st Annual MeetingEpic Sana Hotel, Lisbon, PortugalTel: +44 (0) 20 384 8013Email: [email protected]
16 - 17 NovemberTank Storage GermanyHamburg Messe, GermanyTel: +44 (0)20 8843 8800Email: [email protected]
23 - 30 MarchStocExpo EuropeRotterdam, the NetherlandsTel: +44 (0)20 8843 8800Email: [email protected]
26 - 27 AprilStocExpo Middle East AfricaDubai World Trade Centre, UAETel: +44 (0)20 8843 8800Email: [email protected]
12 - 14 JuneILTA 37th Annual Operating Conference and Trade ShowHouston, TexasTel: (703) 875-2011Email: [email protected]
EIA | Asian countries top LNG import market
Japan, South Korea, and China are the three largest importers of LNG in the
world, accounting for more than half of global LNG imports in 2015, according to data from the US Energy Information Administration (EIA). Combined LNG imports in these countries averaged 18.2 billion ft3/d in 2015, a 5% (0.9 ft3/d ) decline from 2014 levels and the first annual decline in these countries' combined LNG imports since the global economic downturn in 2009.
Declines in LNG imports in these
countries were partially offset by increasing LNG imports elsewhere in Asia. Imports in India and Taiwan, the fourth and fifth largest LNG importers, respectively, increased slightly in 2015. However, most of the increase in LNG imports came from emerging Asian LNG markets, such as Malaysia, Singapore, Thailand and Pakistan. Although LNG demand growth prospects are limited in the more mature markets of Japan and South Korea, LNG demand in China, India, Taiwan, and emerging Asian markets is expected to grow in the future.
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ASIA'S STORAGE SURGE
ASIA'S STORAGE SURGE
HYDROCARBON ENGINEERING
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A fter months of debate over the direction of global oil prices, the International Energy Agency (IEA) has emerged the clear winner over Wall Street for correctly calling the market’s
short term recovery. The Brent crude price touched an eight month high of US$52.70/bbl on 8 June to complete a clean rebound from a near 13 year low of US$27.10/bbl in late January.
In its March report, the Paris‑based agency swam against the tide of industry opinion, led by
Goldman Sachs and Morgan Stanley, that crude prices could collapse below US$20/bbl. While acknowledging the market was struggling from an overhang of over 3 billion bbls of stockpiled crude and products, the IEA said it glimpsed ‘light at the end of the tunnel’ after detecting a slowdown in supply growth, along with a pick up in global demand.
In its May report, the IEA said it expects global oil demand to grow by nearly 1.3% from last year’s 94.7 million bpd to a new all time high of 95.9 million bpd in 2016. The oil market’s collapse from mid‑2014 helped ignite global demand growth by nearly 2% that year. Over the past two years, cheaper energy has encouraged consumption and stimulated economic growth among the world’s major net energy importers, such as India, China and the US. It has also boosted stockpiling activities in storage terminals and tankers at ‘impressive rates’ since late 2015 for a variety of reasons, according to the IEA.
As the fight for global market share intensified, oil producing countries and companies have turned to
Ng Weng Hoong, Contributing Editor, discusses the Asian storage market's growing role in the volatile global oil sector.
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stockpiling surplus crude that they are unable to sell. As an indication, the Organisation for Economic Co-operation and Development (OECD) countries held record inventory totalling more than 3 billion bbls of crude and oil products by the end of 2015, according to separate estimates issued by the IEA and the US Government's Energy Information Administration (EIA).
The EIA predicts the OECD commercial crude oil and liquid fuels inventories will rise to 3.11 billion bbls by the end of 2016, sufficient to meet over 68 days of consumption. There was a surge in global stockpile of over 1 billion bbls between 2014 and 2015 that, in turn, has fuelled an investment boom in the storage sector.
AsiaThe IEA said an 'impressive' 230 million bbls of new land-based storage capacity could be commissioned before the end of 2016 in locations as diverse as North America, the Middle East, Africa and Southeast Asia, with Chinese strategic petroleum storage (SPR) capacity expected to account for more than half.
In the Middle East, Saudi Arabia was able to sell off more than 32 million bbls between last October and March 2016, but was still left holding nearly 297 million bbls of crude oil in storage at the end of 1Q16, according to the Joint Organisations Data Initiative (JODI). The Riyadh-based organisation was jointly established by six global agencies in 2001 to collate and analyse oil data. Iran kept between 35 and 50 million bbls of crude in floating tankers at the start of the year just before it was freed of trade sanctions earlier imposed by the US for its controversial nuclear programme.
Major consumers such as China and India, which together account for over 16% of global oil demand, have been building up their strategic stockpiles to take advantage of recent low prices. Asia’s consuming countries remain fearful of supply disruptions in the conflict ridden oil producing regions of the Middle East and North Africa.
For traders, stockpiling remains central to their trading strategies. Many have profited from buying when Brent crude prices hit near 13 year lows of US$27.10/bbl on 20 January 2016.
According to E.A. Gibson Shipbrokers, traders kept 68 million bbls of oil in short term floating storage around the world in January. Nearly three quarters of that, or more than 50 million bbls, were held in the Persian Gulf, with another 16 million bbls kept in tankers off Singapore and other parts of Asia. Traders have turned to floating storage facilities due to the shortage of land-based tanks.
Despite roughly 100 million bbls of available capacity in the US and the projected launch of another 230 million bbls of new capacity around the world by the end of 2016, the IEA predicts that this will not be enough to meet storage demand, which could reach a high of 385 million bbls in 2016. While fees vary across locations and charters, the IEA estimates floating storage costs to be in the range of US$1.30 - US$1.50/bbl, a fraction of what land-based terminal operators charge. The lower fee, along with logistical bottlenecks at ports and marketing difficulties in key regions, have driven traders to continue storing oil at sea.
Singapore There are no immediate or serious security threats yet to the growing volume of oil stored in floating tankers in and around the increasingly congested waters off Singapore, but, according to analysts, vulnerability exists. Faced with a permanent land shortage, Singapore, one of the world’s leading oil trading and storage centres, has quietly enabled the expansion of offshore stockpiling of the world’s surplus crude and products. According to intelligence provider Thomson Reuters Eikon, tankers sitting idle in and around Singapore in late May held an estimated total of 47.7 million bbls of oil. To put that figure into perspective, the owners of Singapore’s land-based oil terminals took several decades to develop their combined storage capacity to just under 130 million bbls. There is now less scope for expansion on tiny Singapore owing to high land and construction costs, and the expected prolonged weakness of oil prices.
These factors have contributed to rising demand for tankers as temporary storage terminals. Traders have made a lucrative play from buying and stockpiling crude and products, and re-selling them as soon as prices rise. Bound by security, environmental, and health and safety considerations, land-based terminals often cannot compete against the flexibility and quick turnaround of tanker operations out in the open seas, which are mostly unregulated.
However, the concentration of oil filled tankers in a small area could become a source of new risk amid reports that the Islamic State (ISIS) terror group is making inroads into Southeast Asia, while piracy is becoming rampant in the region’s waters.
PGI Intelligence analyst Jack Wagner has noted that the presence of a large number of vessels filled with crude oil in Indonesian, Singaporean or Malaysian waters could present an attractive target for pirate gangs known to operate in the region. This threat is exacerbated by the fact that the vessels or facilities will be stationary, and while security will likely be high, the vessels are easier targets for highly organised Southeast Asian pirates, who are experienced in hijacking mobile tankers.
There were 200 incidents of piracy and armed robbery against ships in Southeast Asia in 2015, an increase of 7% from 2014 according to the Singapore-based Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP). The most dramatic cases involved the hijacking of small oil tankers, with 12 incidents reported in 2015. In the most serious case, 13 armed pirates stormed and robbed the Orkim Harmony fuel tanker in June. Two months later, pirates seized the Singapore-flagged Joaquim near Malaysian waters and siphoned off 3500 t of marine fuel oil worth around US$700 000.
PGI has said that frequent hijackings underline the financial and security threats facing small tanker operators in Southeast Asia, and such crimes are expected to continue. Given the high demand for stolen fuel and the presence of a well established black market, Wagner noted that floating storage tankers will be more vulnerable to attacks the further they are located from shore, due to the reduced protective presence of coast guard vessels and looser security protocols. Wagner observed that attacks on oil tankers have declined sharply since September 2015, due
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WILLIAMS PARTNERS ADVANCES GULF CONNECTOR PROJECT
Constructed in two phases, the Gulf Connector Project is designed to deliver 75 000 Dth/d to Freeport LNG Development, L.P.’s liquefaction project by the second half of 2018, and 400 000 Dth/d to Cheniere Energy’s Corpus Christi liquefaction terminal in 2019.
SSE GAS STORAGE AWARDS CONTRACT TO SIMMONS EDECO
Simmons Edeco has announced that UK energy supplier SSE Hornsea Limited has awarded the company a multi-million pound contract for comprehensive asset integrity services. Simmons Edeco will provide services for SSE Hornsea’s Atwick and Aldbrough gas storage facilities.
MYRY TO SERVE DEF TERMINAL
Genesee & Wyoming Inc. (G&W) has announced that its subsidiary, The Mahoning Valley Railway Company (MVRY), will serve Pilot/Flying J’s new diesel exhaust fluid (DEF) terminal in Struthers, Ohio. MVRY will deliver the urea needed to produce DEF at the terminal.
Latest News
INEOS VESSEL LOADED AT ENTERPRISE EXPORT TERMINAL
INEOS and Enterprise Products Partners L.P. have announced that the first cargo of ethane to be exported from Enterprise’s Morgan’s Point, Texas, terminal has been loaded. The INEOS Intrepid has set sail on route to the INEOS facility at Rafnes in Norway.
For further information go to: www.hydrocarbonengineering.com
HYDROCARBON ENGINEERING
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possibly to the slump in oil prices, and an increase in anti-piracy actions undertaken by Malaysia, Singapore and Indonesia.
For now, Wagner has said he would not consider oil storage facilities in the region to be a major terrorist target, and while there have been attacks against vessels carrying crude by Al-Qaeda operatives based in Yemen, there is no precedent, stated intent or proven capability of Southeast Asia’s ISIS or Al-Qaeda affiliated groups to conduct such difficult offshore operations.
The Philippines’ Abu Sayyaf Group (ASG) targets slow moving tugboats, operating near its strongholds in Sulu and Basilan, where there are no major oil storage operations. The group does not have the resources, manpower, or known intent to conduct attacks on oil assets further than the Sulu or Celebes Seas.
East Indonesia’s Mujahideen is on the verge of being eradicated by the Indonesian military, while Jemaah Islamiyah has not been active outside the Philippines for several years. Local Filipino groups, such as the Bangsamoro Islamic Freedom Fighters or New People’s Army, do not have sufficient maritime capabilities. As for ISIS, it has not demonstrated any intent or precedent for attacks in Asia on the oil sector, according to Wagner.
With regard to accidents, most of the recent collisions in the Singapore Strait involved moving vessels, but, given how narrow and congested the strait has become, it is possible that future collisions could involve stationary oil tankers. Singapore is aware of the growing threat of vessel collisions. In 2014, its Maritime and Port Authority (MPA) began implementing a series of safety measures to minimise accidents after acknowledging the possibility of ‘systemic issues’ caused by increased maritime traffic.
In a June commentary, Stratfor analyst Roman Muzalevsky wrote that Southeast Asia’s waters are becoming ‘treacherous’ as the region’s governments ‘lack the ability to adequately govern their sprawling territorial seas’. For centuries, pirates have stalked vessels sailing through the Straits of Malacca, the Singapore Strait and the South China Sea, but the recent surge in trade, in particular of oil and gas between East Asia and the rest of the world, has raised the stakes as piracy could become an important source of finance for militant and organised crime groups, according to Muzalevsky.
On the back of its successful global expansion since 2000, Singapore-based Puma Energy is looking to list its shares on a major stock exchange, according to media reports. The UK’s Sky News reported that the firm, which specialises in operating fuel storage and logistics in Asia, Europe, Africa and the Americas, could be valued at between US$6 and US$7 billion.
Puma Energy has expanded rapidly as a global company after it was acquired by Swiss commodities giant Trafigura in 2000. Angola's state-owned Sonangol bought a 20% stake in Puma Energy for US$300 million in 2011, and expanded that to 30% in 2013 for another US$500 million. The company said it achieved rapid growth in its January to March quarter (1Q), including record sales volume and gross profit compared with the same period last year. The integrated midstream and downstream energy company
said gross profit rose 23.3% to US$428 million, helped by a 22.5% increase in the sale of 5.23 million l of products and fuels. Earnings before interest, taxes, depreciation and amortisation (EBITDA) surged 37.5% to US$209 million to reflect a 36.2% rise in cashflow to US$203 million. The company said it expanded its oil storage capacity to 7.8 million m3 and lifted the value of its investment in major construction projects in Africa and the Asia Pacific region to a total of US$186 million.
From its Singapore base, Puma Energy has begun building new storage facilities and terminals in South Africa and Mozambique to meet rising domestic demand in Africa. It has acquired a chain of 123 retail stations and is building a 46 million l storage depot at Richards Bay. Last year, the company opened a 110 000 l storage terminal in Matola in neighbouring Mozambique to add to an existing 275 000 l terminal in Beira.
Commenting on the company’s latest financial results, Chief Financial Offier Denis Chazarain said that the company has begun the year with a strong first quarter, which reflected the continuous growth in sales volumes and record levels of gross margin and EBITDA, despite obvious challenges in the wider market. The company opened two new airports, expanded its service station network in Ghana, and increased storage capacities in the Asia Pacific while maintaining a healthy cash flow. In explaining its success, the company said it has chosen to focus on fulfilling the transportation and storage roles in the global oil supply chain, claiming products needed to be shipped reliably and safely over large distances. Local oil markets today, unlike in the latter part of the 20th century, need to be connected to the fewer, global super refineries, which are increasingly serving them.
IndiaIndia is hoping to secure oil storage investment deals with Iran, Saudi Arabia, the UAE and Kuwait to enhance its own energy security, as well as bolster political, economic and military ties with the Middle East. Iran offers the most exciting prospect following the 23 May signing of a landmark agreement with India and Afghanistan to boost regional development. A key project will involve developing the under utilised Iranian port of Chabahar into a major hub to support shipping traffic, as well as the oil and gas trade between Asia, the Middle East and Europe.
India secured a coveted commercial agreement from Iran to develop and operate Chabahar Port during Prime Minister Narendra Modi’s two day visit to Tehran. To realise the port’s potential from its strategic location along the Gulf of Oman, New Delhi wants state owned and private Indian companies to invest some US$20 billion to develop downstream chemical and manufacturing plants in the port’s free trade zone.
“History is being created,” Modi proclaimed, after signing a broad tripartite agreement in Tehran with Iran’s President Hassan Rouhani and Afghanistan’s President Ashraf Ghani to develop a trade corridor linking Afghanistan to Central Asia and Europe. India will start by investing US$500 million in basic infrastructure to prepare the port and the surrounding area for long term growth.
Commerce is not the only motivating factor, as India is aiming to pre-empt a future challenge from Pakistan’s emerging Gwadar Port, located just 140 km east of Chabahar. China is investing US$46 billion to develop Gwadar into a regional port and industrial zone that India views as a long term threat.
Oil storage and refining will feature prominently in the development of both ports as their backers want to tap into the region’s massive oil and gas trade. For India, Chabahar will offer an important route for its trade with Central Asia and the Middle East that will also isolate its long time enemy Pakistan, as well as China’s plan to revive the old silk road under its new 'One Belt One Route' strategy.
The Modi government also expects the UAE to invest in an Indian oil storage project to follow through on its recent decision to store petroleum crude at the newly completed Mangalore terminal in Karnataka state. The UAE has been warming up to the proposal as a long term hedge against prolonged oil price weakness with Russia and Saudi Arabia, the world’s two largest producers, both refusing to slash output in their fight for global market share. In February, Indian oil minister Dharmendra Pradhan and his visiting UAE counterpart, Suhail Mohammed Al Mazrouei, reached an agreement in New Delhi for state owned Abu Dhabi National Oil Company (ADNOC) to take up half the 1.5 million t Mangalore terminal to store crude oil for delivery to Indian refineries.
For more than two decades, India has been courting Middle Eastern producers to jointly invest in refineries, storage terminals and petrochemical plants along its long coastline to serve both the domestic and export markets. It had little success as oil companies were more interested in China and Southeast Asia, which offered better investment terms and growth prospects compared with India. However, the
wind has shifted in India’s favour since oil and gas prices began declining from mid-2014. Amid the global oil supply glut, Saudi Arabia, Iran, Iraq, Kuwait and the UAE are anxious to lock up sales with a large customer such as India.
For Saudi Arabia, India has become vital to its marketing plan as China’s oil demand growth is slowing down and the US has become less dependent on crude imports. Saudi Arabia remains the largest crude supplier to India. India’s Petroleum Ministry expects the nation’s consumption to surge by 7.3% to more than 3.82 million bpd in the current financial year ending 31 March 2017. To ensure it has direct access to the Indian
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consumer, Saudi state oil giant Saudi Aramco and petrochemicals firm SABIC are looking to invest in downstream projects including oil storage facilities and chemical plants. On his two day visit to the Kingdom in April, Modi’s delegation signed five memoranda of understanding to boost bilateral economic, labour and cultural ties, including investment cooperation between the two countries.
IndonesiaWith the 6 June startup of a 730 000 m3 terminal, Indonesia’s Karimun Island has realised a century old vision to provide oil storage services to support the booming trade in Southeast Asia. In a statement, PT Oiltanking Karimun, a joint venture between Oiltanking GmbH and Gunvor Group, said its state of the art terminal, located 80 km southwest of Singapore, was launched with the receipt of a cargo of 60 000 t comprising gasoline and gasoline components.
The European partners developed the estimated US$250 million terminal within the sheltered Straits Hub to serve Asia’s growing demand for petroleum products and blending services. Germany’s Oiltanking is believed to have a 60% stake in the company, with Switzerland-based Gunvor and an unidentified Indonesian firm having the rest. They chose Karimun, citing its proximity to land scarce Singapore and convenient location along the Malacca Strait through which the bulk of the region’s merchandise trade is conducted with the Middle East, Africa and Europe. The terminal is served by four deepwater berths to cater for very large crude carriers (VLCCs) and ‘excellent onshore infrastructure’ to ensure that vessels can make rapid turnarounds.
Apart from storing and handling petroleum products, PT Oiltanking Karimun said the terminal has ample 'ready to build' land available to allow for expansions within Karimun’s free trade zone. Since the early 1900s, oil traders have been looking to develop storage terminals in the islands around the Malay archipelago to complement, as well as compete against, Singapore, which had established an oil trading and logistic role around 1890s through Shell. Different groups of investors had previously identified Karimun, but were deterred by the high cost of construction and the project’s uncertain viability.
Oiltanking GmbH is a subsidiary of Marquard & Bahls, a Hamburg-based family owned company that operates energy supply, trading and logistics. With tank capacity totalling 19.2 million m3, the company is the world’s second largest independent tank storage provider for petroleum products, chemicals and gases. Geneva, Switzerland-based Gunvor Group is one of the world’s largest independent commodities trading houses.
FujairahConcord Energy, a Singapore-based energy trader and developer of oil infrastructure assets, said it is on course to construct and startup its second oil storage terminal in Fujairah by mid-2018. The Concord Oil Terminal will have the capacity to store up to 1.1 million m3 of crude and oil products to add to the Fujairah Oil Terminal’s (FOT) 1.2 million m3 capacity that was commissioned in early 2015. In a statement, Concord Energy said the new terminals’ tanks,
located on a 200 000 m2 site, will store 400 000 m3 of crude and a total of 700 000 m3 of gasoline, gasoil and fuel oil. The crude tanks will be connected by pipeline to the VLCC jetty with flow rates of 12 000 m3/hr, while the product tanks will be linked to eight jetties at the Port of Fujairah.
“Demand for oil storage in the Middle East continues to grow, and Fujairah is strategically located outside the Strait of Hormuz to benefit from this continued growth,” said Nasrat Muzayyin, Concord Energy’s founder. The company expects to hold a groundbreaking ceremony for the start of construction later this year. Raouf Kizilbash, Concord Oil Terminal’s Managing Director, has said the company is in talks to sign up several anchor customers, including an unnamed Asian national oil company, which wants a long term lease for crude and fuel oil storage. There has also been growing demand for gasoline storage in the Middle East.
The facility has been designed with high pumping rates, providing for more flexible tank farms, which can be switched between gasoil and gasoline depending on market demand. Concord said it expects to sell off a large stake in the terminal to a major player, similar to its earlier divestment of a large stake in the Fujairah Oil Terminal, to the Fujairah government and Chinese state owned Sinopec Kantons.
Fujairah, the world’s second largest bunkering location after Singapore, is becoming a major logistics port as well as an oil and gas hub serving the Middle East. The Fujairah government has seized upon the port’s strategic location along international shipping lanes outside the Strait of Hormuz to serve the region’s growing trade and demand for energy. To date, 15 companies have built a total of 400 tanks in the port area, with a total capacity to store 13 million m3 of crude and products.
JapanContinuing its divestment of global assets to boost competitiveness, Dutch oil and chemical logistics giant Royal Vopak said it has sold off its 40% stake in Nippon Vopak Company Limited that owns and operates five storage terminals in Japan. The Rotterdam-based firm said it will realise a gain of €26 million net of capital gains tax from the sale to Macquarie Asia Infrastructure Fund for an unspecified sum. Nippon Vopak’s five terminals have a combined operational capacity of 203 200 m3. Vopak said the divestment follows a business review announced in July 2014 to update its portfolio with the proposed sale of 15 mostly smaller terminals. The sale’s proceeds will be used to execute the company’s ‘selective capital disciplined growth strategy and consistent dividend policy’ and support its ‘robust financial position’.
Vopak, one of the world's leading independent tank storage providers for the oil and chemical industry, operates 66 terminals in 24 countries, with a combined storage capacity of 33.5 million m3, with another 4.1 million m3 under development by 2019. The company reported net income of €812 million last year, a 6% increase from 2014, as it boosted occupancy rate of its tanks from 88% to 92%. 2016 occupancy rates of the global terminal network are expected to exceed 90%, supported by a diversified portfolio, healthy contract coverage and strong supply chain positions.
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AUTUMN 2016 ISSUE
