VTTI Storage Markets : Our Perspective Onur Capan: Market Intelligence StocExpo Europe March 2017
VTTI track record at its 10 th anniversary VTTI has grown in 10 years to be one of the largest global independent storage companies across the globe. There is a significant opportunity to expand upon VTTI s proven track record of growth. Capacity Growth & current investments VTTI Terminal Locations Expanding geographic footprint and the range of products handled Diversifying portfolio of assets ranging from pure transshipment hubs to hinterland oriented supply infrastructure 2
Buckeye is the new shareholder of VTTI Combined network with significant international footprint, spanning across five continents Complementary asset geographies Strong Terminal and Pipeline company adding their experience in the sector Broadened customer base available to VTTI and relationships across the industry Ability and appetite to fund VTTI s global growth agenda Buckeye, a US-listed MLP and one of the largest midstream operators in the US and Caribbean with over 110 petroleum products terminals and ~6000miles of pipelines 3
Value to customer of our assets driven by many factors other than contango High quality assets in hub and supply gateway locations mean stable, steady growth in capacity and tank rental rates through market structure and crude price cycles. Terminal Location Asset Functionality Changing Market Structure: Brent 12-Month Forward Price vs. Spot (1) Contango Backwardation Contango Customer Experience Balanced Customer Mix Customer Tailored Developments Utilization Rate (2) 93% 94% 98% 96% 96% 97% 98% (1) Brent contango shown as 12 month forward price vs. spot from 1/1/2010 to 12/12/2016. (2) Commercial capacity rented divided by available (marketable) capacity. 4
Global product demand continues to be driven by gasoline Overall gasoline throughput at our terminals increased by 55% and 20% in 2015 and 2016 respectively Bulk of the demand growth is in Asia Pacific. Trade is up as exports from China and India increases. Breakdown of VTTI gasoline throughput 2016 NW Europe Gasoline gross trade (Mt) Europe, with its large gasoline surplus, benefits from the current strength in global gasoline demand. This supports activities in Amsterdam, the key gasoline hub. US gasoline demand hit record highs. Mexico also imported larger volumes due to refinery issues and growing domestic demand Global demand growth Source: JODI Source: Vitol
High stock levels and global trade growth continued in distillates Higher refinery runs on the back of strong gasoline demand generated excess distillates Despite a slight decrease in global diesel/gasoil demand in 2016, trade numbers indicate an increase. Large volumes went into storage. Growing diesel arrivals from Middle East (kt) China becomes a major diesel exporter In line with global product stocks, ARA middle distillate stocks remained very high throughout 2016 and supporting strong demand for storage. There was a significant growth in exports from Middle East and China ARA middle distillate stocks (000 m3) Source: IEA Source: JODI Source: Euroilstock
Source: JODI, Argus Fuel oil market is adjusting to changing supply/demand dynamics Russian upgrades reduce fuel oil output, while demand in Asia remains buoyant Russia has by far the largest surplus of residual material, but exports are in decline as major refinery upgrades come on stream. FO arrivals at ETT (Rotterdam) This reduced fuel oil arrivals into ARA by over 15%. At ETT these were partly replaced by NW Europe and CEE volumes Demand in Singapore remains robust, with bunker fuel sales increasing by around 7% versus 2015. On the other hand, China s teapot refineries reduced their fuel oil intake as feedstock and switched to crude oil China & Singapore FO imports (kt)
IMO decision to bring radical changes to the bunker market in 2020 We expect the switch to 0.5% global cap to increase blending requirements Breakdown of the bunker fuel market Scrubbers are economical but their uptake will be slow: expectations are 1500-3000 scrubber installations per annum in a total global vessel fleet of around 90,000 During the decade, we expect the HSFO bunker demand to partially recover 0.5% ULSFO availability will be very limited, therefore bulk of the LSFO will be blended into distillates Achieved by blending various distillates, residual streams or VGO Some non-compliance is also expected SECA will still be in place in NW Europe and US& Canada coast, therefore ARA will continue to supply 0.1% bunker fuel, in addition to max0.5% fuels.
The world moves towards cleaner fuels Sulphur content in fuels fall gradually East of Suez, Africa is willing to follow suit but there is no clear road map In January 2017 China switched to 10ppm and India to 50ppm diesel. World road diesel demand by max Sulphur content Significant increase in availability of ULSD across Asia and Middle East as new refineries and upgrades come on stream Some West African countries incl Nigeria and Ghana proposed a reduction in Sulphur content, but implementation will be challenging. Gasoline 2017 2018 2019 2020 China 10 India 50 10 Vietnam 50 Bangladesh 150 Diesel 2017 2018 2019 2020 China 10 India 50 10 Vietnam 50 Malaysia 10 Bangladesh 350
Brownfield developments ARA products expansion: 175,000m 3 ARA LPG expansion: 30,000m 3 We are building additional tanks in anticipation of growing diesel imports into ARA, and increasing blending requirements for bunker fuels post 2020 Two new spheres of 15,000m 3 will be constructed for butane/propane storage with future compatibility with ethane options. Flexible tanks accessible by LR2/VLCC jetty, that can handle both class 3 and class 2 products to accommodate largely distillate driven bunker fuels mix in 2020. The proportion of HSFO will gradually increase thereafter as scrubbers are expected to be widely adopted Crackers in NW Europe generally run on naphtha due to lack of gas supply logistics. Prices generally support butane cracking and many crackers can switch to butane with modest investment Expansion will cater for max0.1% Sulphur ECA compliant fuels as well as 0.5% fuels for the global market
Acquisitions & Greenfield Panama: 250,000m 3 Adriatic: 50,000m 3 to 200,000m3 Serves as a clean products bulk breaking location to supply deficit markets on the West coast of South and Central America Strategic proximity to the power plants for fuel oil supply. Thermal plants will provide bulk of the incremental power supply to the growing domestic demand The facility is ideally located for truck supplies to a wide region in the Balkans, where the combined clean product and LPG deficit amounted to 2.7Mt With the new jetty, the terminal will have the second deepest draft in the region (after the crude port of Omisalj) The deficit will likely grow as some of the weak refining assets in the region could close New jet tanks to supply the airport, which is currently being expanded and only has a single supply route In Q4 2016 VTTI completed Phase1 with 50,000m 3 Phase2 involves 200,000m3 clean products and 60,000m3 LPG capacity as well as a new jetty with 16.5m draft to accommodate LR and VLGC
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