Some logistics companies have already set in motion plans to add significant crude storage capacity in Houston, with Oiltanking Partners leading the charge to capitalize on the growing crude tank demand.

Although the Brent-WTI crude price spread has narrowed significantly since last year, the delivery of price-advantaged crude from Midcon and West Texas remains a profitable business because of lucrative and very active crude blending activities on the Gulf Coast.

The other significant player adding new capacity is Enterprise Partners at ECHO terminal. Just outside of Houston, Sunoco Logistics is also expanding its crude logistics business at Nederland, which is located east of Houston.

By the end of 2014, Oiltanking will have a total of 19.7 million bbl of storage capacity in Houston. Oiltanking storage terminal is located on the Houston Ship Channel at mile post 38 across from Shell’s Deer Park Refinery.

In the second quarter of 2013, Oiltanking will add 275,000 bbl of capacity at Houston after adding 800,000 bbl in the first quarter.

As of May 2013, Oiltanking Houston has 13 million bbl of operational storage capacity. Another 3.2 million bbl of new capacity will be added by the end of 2013, bringing the total new capacity for 2013 to 4.27 million bbl.

In 2014, Oiltanking Houston plans to bring online 3.3 million bbl of new storage capacity.

Although Oiltanking Houston caters to crude oil, LPG, refined products, chemical feedstocks and fuel oil, a significant capacity is dedicated to crude oil.

At ECHO terminal in Houston, Enterprise is to expand to about 6 million bbl of crude storage capacity. Also, Enterprise will also add 55 miles of 36-inch pipeline. Both new storage capacity and pipelines are expected to be in service by fourth quarter of 2014.

OPIS reported last week that the stronger crude storage demand was reflected in a full crude storage tank utilization at many terminals in Houston as well as robust crude storage tank rates.

It is a tale of two cities for crude storage tank rate moves in Houston and Cushing. While Houston crude tank rates were firm in the several months amid rising demand, Cushing rates have fallen sharply.

Houston crude tank rates in the spot market are pegged at about 65cts per barrel, up from 40-50cts per barrel three years ago. The actual rates would depend on the term of the tank lease.

In comparison, Cushing rates dropped from about 50cts per barrel last year to only 30cts per barrel in May. This is due to new or reversed pipelines delivering crude from Cushing and West Texas to Houston.

Besides Oiltanking Houston and ECHO terminals, Kinder Morgan Energy Partners LP’s new Battleground Oil Specialty Terminal Company (BOSTCO) project on the Houston Ship Channel is expected to start up in the third quarter of 2013 as planned. It is also on budget at $430 million.

BOSTCO project is aimed at the Houston black oil storage business, but industry sources noted that Kinder Morgan, like other terminal owners, would consider storage expansion or tank conversion to accommodate the surging distillates exports out of the U.S. Gulf Coast.