Special Report: Storage in Europe benefits from trade shifts

Elaine Burridge

30-Jan-2015

Trade flows are becoming increasingly global with low-cost production sited away from regions of highest consumption. Storage capacity is expanding to meet rising demand

The development of lower-cost feedstocks and shifting trade flows is driving changes at chemical storage operators and ports in Europe.

Production is becoming increasingly concentrated in areas with a beneficial cost position, such as the Middle East or the US, where shale gas has transformed the country’s feedstock economics. Europe’s chemical manufacturers are seeking to benefit from the US’s low-cost ethane, and ports such as Rotterdam and Antwerp are seeing an increased need for storage.

Tank storage operator Vopak sees the resulting global imbalance as leading to increasing trade flows around the world. Vopak expects these imbalances to rise across a broader range of products, and anticipates demand for independent storage services to increase in key production, import and export locations as well as the major global trading hubs.

The need for more storage capacity in Europe is a boon for tank terminal operators

Copyright: Rex Features

This has prompted the company to shed around 15 smaller terminals. The objective, said Vopak, is to further align and strengthen its global network along the major trade routes. It is planning more capacity expansions through 2017 in the Netherlands, Belgium and Germany (see table).

Last year, Vopak carried out an upgrade of its benzene and pygas storage in Rotterdam to reinforce its aromatics trading hub there. Total seabound throughput of benzene, toluene and xylene (BTX) and pygas at the Rotterdam cluster totals almost 3m tonnes/year.

The Port of Rotterdam Authority’s advisor for business intelligence, Ronald Backers says: “We will watch over the next two years how demand and trade flows impact supply. Imports could increase more than exports because of the changes in flows from the Middle East and US.”

He believes that a “little more” storage capacity will be needed for new products but, essentially, Europe’s supply/demand balance will stay in line.

The port’s strategy is centred on three key parts: maintaining good relationships with chemical producers to assess their demand and any potential change in product flow; to work with world-class logistics service providers; and to seek “optionality” – so that the port can offer as many options as possible to increase its attractiveness both to storage companies and chemical manufacturers.

ROTTERDAM’S NEW INVESTMENTS
Backers says many chemical storage companies are continuously seeking investment possibilities in Rotterdam to further improve facilities and provide maximum flexibility. At the Botlek Tank Terminal, for example, land reclamation has doubled the area occupied by the current facility. The additional 5 hectares will allow total storage capacity to increase from 200,000 cubic metres to about 750,000 cubic metres for transportation fuels, edible oils and biodiesel.

Other opportunities are seen at LBC Rotterdam, Rubis and Standic Terminal.

As well as terminal operators, the port itself has an ongoing programme of investment in its infrastructure. These include new jetties, new dolphins for ship-to-ship transfer, as well as improving road, rail and water accessibility.

Intermodal operators Bertschi, Hoyer and Hupac together have taken a 49% interest in the rail terminal RSC Rotterdam to partner majority owner DB Schenker Rail. Backers says the expanded ownership of the terminal is very positive for the port as the carriers have good contacts with chemical shippers and the consortium will provide an excellent basis for expanding rail transport to and from Rotterdam.

One major project involves deepening access to the Botlek area. The waterway will be deepened from 15m to over 16m so that bigger vessels can enter. The project is scheduled to complete in mid-2016.

Throughput of liquid bulk, which accounts for 45% of total volumes in Rotterdam, dropped by 2.1% to 202.5m tonnes last year. The port says the most significant factors behind the decline were competition from new tank terminals in other ports and a decline in handling naphtha feedstock and jet fuel. The category “other liquid bulk”, which consists mainly of chemical products, declined by 7.4% because, says the port, Europe’s chemical industry finds it difficult to compete with that overseas.

ANTWERP’S RAPID EXPANSION
In Belgium, several leading energy companies announced record levels of investment in the Port of Antwerp last year. ExxonMobil and Total are spending $1bn and €1bn respectively on their refining plants. These add to projects from BASF Antwerp, Evonik Industries, LANXESS, Praxair and Air Liquide.

Tank storage companies such as LBC Tank Terminals, Noord Natie Terminals and Odfjell are also investing in Antwerp. LBC’s facility there now offers an additional 35,000 cubic 
metres for storing distillates and heavy fuel oil. Noord Natie has 240 tanks with a current total capacity of 350,000 cubic metres.

Xavier Vanrolleghem, advisor business development oil and chemicals at the Port of Antwerp, says an expansion of up to 90,000 cubic metres will be possible in the future. “Six hectares of new land adjacent to the existing terminal will accommodate 32 tanks of 1,250, 2,500 and 5,000 cubic metres,” he states.

Norwegian shipper and storage operator Odfjell has added 50,000 cubic metres in Antwerp during the past two years and further expansion is planned. Carl Fredrik Odfjell, vice president of business and commercial development, says the company’s main focus is on existing facilities. However, Odfjell “continues to monitor and evaluate investment opportunities, both acquisitions and greenfield terminals”.

Last October, Antwerp’s port authority announced it had made 96 hectares available for new investment. The Churchill Industrial Zone is located beside deepsea docks, has its own rail connection and is linked to a dense road network.

Michel Leyseele, manager investments oil and chemicals, says the port authority has set up a one-stop shop to support the oil and chemical cluster. This, he explains, assists investors and shippers in setting up business in Antwerp, giving advice on areas such as permitting, finding partners and synergies, and attracting investment. Vanrolleghem notes nearly every tank storage company at the port has invested or expanded during the past five years. “The ultimate aim of these efforts is to enable the oil and chemical sector in Antwerp to grow more rapidly than its direct European competitors,” he states. Several initiatives are underway, including a second lock in the Waasland Port on the left bank of the river Scheldt and improving the rail network.

Liquid bulk throughput grew by 5.4% last year, climbing to 62.7m tonnes. Leyseele says this is significant growth, particularly because it follows a hugely successful year in 2013 when liquid bulk surged by 31.4% to 59.5m tonnes.

LOOKING AHEAD
Vanrolleghem believes Europe’s storage supply/demand balance will be location dependent and there will be overcapacity at some point in time. When, however, is the unanswered question, especially given the ongoing volatility whether that is oil prices, or geopolitical or economic factors.

Odfjell is expecting a stable market in 2015. However, longer-term planning has become even more difficult following the shock of oil’s rapid decline in December 2014/January 2015. US shale gas and investments should continue but the “oil shock” could dampen the pace of growth, according to Odfjell. The positive side for Europe is that oil’s fall has made naphtha feedstock cheaper.

Europe’s challenging business climate remains a key issue. But changing trade flows and the need for more storage capacity to handle rising import volumes can only benefit tank terminal operators.


ODFJELL SCRAPS PLAN FOR FRENCH TANK TERMINAL
Norway’s Odfjell, has stopped plans to build a new storage terminal in the French port of Le Havre. In a statement, Odfjell Terminals says the current adverse economic situation in the French petrochemical industry has forced it to halt the project. However, it adds: “We still consider the Port of Le Havre as an interesting logistical port and interface for France in the long run.”

Odfjell signed an agreement in mid-2013 with the port authority, Grand Port Maritime du Havre, and reserved a site of 31.5 hectares.

Construction was scheduled to begin this year with the terminal going into operation in late 2017. In the first phase, it would have offered 150,000 cubic metres of storage for petrochemicals and petroleum-based products such as base oils.

When asked what would have to change for Odfjell to resurrect its plans, Carl Fredrik Odfjell says a more stable and predictable economy and environment that allows companies to make long-term commitments is required. “A level playing field in Le Havre with North Europe should support growth in Le Havre,” he comments. He states that there is a need to develop infrastructure to support the French petroleum and petrochemical industry and the local cluster of Le Havre and the nearby region.

The port authority has said it will now call for further expressions of interest in developing the site.

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