We’re at a turning point where people are struggling to predict what lies ahead for the industry due to a lot of instability. Under the Energy Transition for example, people assume oil demand is declining, which also impacts storage demand and trade flows. Additionally, alternative fuels are becoming partial substitutes for liquid petroleum products, creating uncertainties in the sector. Furthermore, the geopolitical landscape is shifting, with the West's influence waning as China’s rises, which could reshape global trade. All these factors impact tank terminals and storage, requiring a deep understanding of regional supply and demand dynamics.
How has European storage adapted to changing trade flows?
Recent years have been surprisingly positive for the storage sector. Many clients now treat storage as an insurance policy for unforeseen disruptions, which has increased demand for tank capacity for ‘just in case’, as well as ‘just in time’ inventory. It has also been a profitable time for trading companies.
How are alternative fuels being accepted into the sector?
We should keep in mind that the storage industry is a service-oriented business which will follow what its clients need. There are opportunities in new products like biofuels, but sometimes, they move too fast, leading to scenarios where tanks are converted but then reverted back to their original use, due to a lack of business for the new fuels or unprofitable outcomes. The transition has created uncertainty around profitable business models, what kind of feedstocks we need, and regional dynamics. No one has a definitive answer on how this will play out.
How is Europe’s deindustrialisation impacting tank storage?
In the short term, it’s positive, as imports may increase, necessitating more storage tanks. However, long-term, there’s a pervasive concern about plant closures and financial strains within Europe’s industrial sector. Europe may be moving too quickly in the Energy Transition compared to the rest of the world, creating costs that challenge our competitiveness. In my view, we should be moving at the same pace as the US or China.
Are we facing an oversupply in global tankage?
Tank storage is local, so supply-demand dynamics vary by region. Some areas may see increased investment while others don’t. For now, the US and Europe appear well-supplied, though Europe’s investments are largely in converting existing tanks for biofuels rather than new fuel storage. Investment in global chemicals storage is also growing, although that growth relies on an industrial base, which Europe is struggling to maintain due to its de-industrialization.
Is the midstream sector making enough progress to decarbonize?
Emissions reduction is critical, especially in Scope 1 and 2, and those are manageable at the terminal with technology. Scope 3 emissions however, which cover the entire supply chain, are more challenging. Innovations in shipping, like blending biofuels with fuel oil, are underway, but there’s no consensus yet on what will work long-term. The lack of clarity on future fuel directives does also complicates things for shippers. Without this, many will stick with the most cost-effective option. Fuel oil remains prevalent as the most adaptive option, until there’s global agreement on a viable alternative.
Are we any closer to agreement on a global carbon price?
It’s complex. The ETS system in Europe is expanding but requires broader adoption from other regions to prevent businesses from relocating. Carbon emissions are a global issue, and unilateral measures risk driving business elsewhere, which doesn’t benefit the climate.