September 27, 2013 [Platts] - A barge of residual fuel oil next week from Valero Energy will be the first delivery made to a new major terminal on the Houston Ship Channel, according to John Schlosser, president of Kinder Morgan Terminals.
Market sources list Valero, Unipec USA, Glencore, Tauber Oil, Petrochina, BP, Mercuria and Rio as having storage at BOSTCO.
The terminal was developed by John McDonald, who has been in the liquid storage business in the US since 1968. McDonald announced the BOSTCO project in December 2010 and is now serving as a consultant to operator Kinder Morgan.
Kinder Morgan owns 55.5% of the terminal and TransMontaigne owns 42.5%, with a few other entities owning the balance.
The terminal for now will operate at about 40% of its 7.1 million-barrel capacity, but be fully operational in about six months, Schlosser added. It will handle mostly residual fuel oil initially, but will add 900,000 barrels of diesel tanks in about a year.
The BOSTCO startup comes at a time of falling residual fuel production. That is due in part to increased use of cokers combined with light crude feedstocks that increase a refinery’s output of fuels such as gasoline.
In addition, market sources said that traditional arbitrage trade to Singapore has become more difficult, and local bunker margins are thin as well.
BOSTCO will compete with the nearby Houston Fuel Oil Terminal (HOFTI) for residual storage business. HOFTI has 13.8 million barrels of storage, and will push that to 16.1 million barrels in the third quarter of this year.
The advantages of BOSTCO will be quicker pumping rates and easier barge and ship access, which will cutting demurrage costs, an issue sometimes at HOFTI, according to market sources.
BOSTCO is expected to lower resid storage rates in Houston. Current storage rates vary widely, but one source estimated a savings of 10-15 cents/b per month at BOSTCO, compared to traditional rates at HOFTI.
HOFTI was not immediately available for comment.
