February 12, 2016 [Reuters] - Refinery closures will eventually funnel the world's diesel, gasoline and jet fuel into "mega hubs" that are increasingly far from the end consumer, boosting the value of storage and logistics operations, Puma Energy executives said.
The Trafigura-affiliated group, which owns a global network of storage and retail assets, said low crude prices will force more oil companies to sell off downstream assets, creating opportunities for those looking to develop larger hubs.
Jonathan Pegler, Puma’s head of supply and trading, said refinery rationalisation would continue unabated once product prices caught up with tumbling crude oil futures.
That would make certain regions more reliant on imports, creating the opportunity for so-called downstream storage and distribution assets to increase in value relative to upstream oil exploration.
“Puma has been sitting in a very nice position on the oversupply of products. But those products are typically in the wrong place,” Pegler said.
His company has been able to boost profits by shipping products to where they were needed, he said.
The oil price has fallen about 70 percent since mid-2014 to around $30 a barrel. That in turn has inflated refining margins and created a windfall for refiners, who for years had struggled to make a profit.
Robust demand for gasoline, naphtha and other blending components in both the United States and China has encouraged refineries to run as hard as they can while margins are healthy. That has led to a swelling in inventories of unwanted products.
In the longer term, as product prices fall, refineries will find margins once again squeezed.
Puma is expanding its network with new assets in South Africa, Myanmar and Ghana, and said it sold more than 18 million cubic metres of products last year. It also expanded in developed markets such as the United Kingdom and Australia.
It recently reopened the Milford Haven plant on the west coast of Britain as an import terminal.
Chief Financial Officer Denis Chazarain said more potential storage assets would become available this year as oil majors look to divest.
Oil majors divested in the past to fill a cash need for upstream, Chazarain said.
“Today, it’s probably shifting to the need for pure cash,” he added. “Probably a new wave of divestment will come… to get a bit of cash for their daily operations.”
