(EnergyAsia, March 30 2011, Wednesday) — Despite the political upheavals in the Middle East and North Africa (MENA) and the global financial headwinds, Dutch storage terminal owner and operator VTTI remains confident of nearly doubling its global oil storage capacity over the next five years.
While the troubled MENA region remains a key target, CEO Rob Nijst believes opportunities exist in major markets such as the US, Asia and the Mediterranean for the Rotterdam-based firm to raise its capacity from around six million cubic metres (cbm) now to 10 million cbm by 2016.
VTTI, an equal joint venture beween Swiss-Dutch trading firm Vitol and Malaysian shipping firm MISC Berhad, has succeeded in rapidly establishing 11 terminals around the world since its formation in 2006. Vitol founded the company and sold half its stake to MISC, a full-owned subsidiary of Malaysian oil and gas company Petronas for US$839 million last September.
VTTI has gone on to raise 500 million euros to fund expansion projects in Malaysia, Kenya and Cyprus, ensuring that MISC has made a “fantastic” rate of return on its investment in a fast-growing independent storage operator, said Mr Nijst in an interview with EnergyAsia.
Its plan for a project in Egypt has been put on hold following the overthrow of former President Hosni Mubarak in February. (US$1=0.72 euro).
On the other hand, its projects in Malaysia’s Johor state and Cyprus are going to plan, giving the company exposure to vital oil trading hubs in Asia and the Mediterranean when they start up next year, said Mr Nijst.
Starting with a capacity of 340,000 cubic metres by late 2012 and to be expanded to 550,000 cubic metres in a later phase, the 200-million-euro Vassiliko terminal will turn Cyprus into an important oil trading hub for the region.
VTTI’s fully-owned Malaysian subsidiary, ATT Tanjung Bin (ATTB) Sendirian Berhad, is expected to complete the construction of 39 tanks with a combined capacity of 841,000 cubic metres in the first quarter of 2012.
ATTB’s CEO, Eric Arnold, said the terminal in the Port of Tanjong Pelepas, located north of Singapore, will be expanded to 1.5 million cbm in the second phase. The company expects to start work on the new tanks early next year.
The terminal is sited on a 50-hectare reclaimed site filled with 3.8 million tonnes of sand measuring seven metres in depth, said Mr Arnold.
“We have no worries about filling up the tanks as traders’ demand for storage is strong. Vitol alone will take up a large part of the capacity. We’ll rent the tanks at a slight discount to Singapore,” said Mr Nijst.
“In Asia, we find Indonesia an interesting country with good potential. We’re getting calls for prospective projects in Sri Lanka and India, but we need to be comfortable with who we’re going to be working with,” he said.
“China’s tough to get into because we need to ask: what value are we bringing to an industry where the players are well established? We want to be in markets where we can contribute. It would take alot of resources and management time for us to manoeuvre in China.
“Our focus is on investing in stable countries. We’ve secured a storage project in Florida. We’re looking to expand further in the US, but the challenges are unique. Greenfield projects are tough. Brownfield projects – we need to check for surprises, and environmental legacies.
“In the Middle East and North Africa, the geopolitical situation is very worrying. The unrest is spreading and we don’t know how it will play out.”
Mr Nijst, who previously worked for Dutch storage giant Royal Vopak, said VTTI is focused on building up oil storage projects, although coal could be considered in the future.
“For now, we’ll stick to oil, but we’ll include some chemicals if a project demands that a small amount of chemicals is needed. We won’t rule out coal in the future as the global coal trade is growing rapidly.”
The company has also clear criteria for what it would consider attractive projects.
“We go for a certain size. They can’t be too small, and must have a minimum storage capacity of 500,000 cbm.”
With the shortage of onshore projects, VTTI could be open to the idea of investing in floating storage terminals. These terminals are not the same as shipping vessels, which are popular with traders.
Mr Nijst said floating terminals do not offer the same “flexibilities” as onshore tanks. It’s much easier to undertake products blending and trading from an onshore terminal, he said.