February 25, 2011 [Bloomberg] - Europe’s growing diesel deficit and rising gasoline surplus is leading to increased demand for storage terminals, according to Wood Mackenzie Ltd.
“Growth prospects in European storage are being driven by the increasing middle distillate deficit,” Ben Holt, vice president of downstream consulting at Edinburgh-based Wood Mackenzie, said in a Feb. 22 interview in London.
“The rising deficit is because of the dieselization of the car pool in Europe, coupled with a switch to gasoil from fuel oil in the bunkering sector in 2015,” he said, referring to the switch to cleaner burning fuels in vehicles and ships.
Refiners such as Petroplus Holdings AG, Total SA, and Royal Dutch Shell Plc plan to convert plants into storage terminals as falling demand for products such as gasoline and diesel during the worst recession since World War II led to lower profits from processing crude. Distillates are a group of fuels including diesel and jet.
“We expect oil storage activities in northwest Europe to remain robust in the future as the region’s product imbalances are set to widen and contango opportunities are likely to continue in the short to medium term,” the researcher said in a note last month. Contango is a market situation where prices for cargoes delivered in the future are higher than immediate shipments, allowing traders to profit from storage.
Essar Energy Plc, the U.K. unit of India’s Essar Oil Ltd., entered into an exclusivity agreement to buy Shell’s Stanlow refinery, the company said in a Feb. 18 statement.
Vadinar Refinery
Stanlow “fits very well with our strategy of providing options for the export of high quality products from our Vadinar refinery in India,” Naresh Nayyar, Essar Energy’s chief executive officer, said in the statement.
There is more than 6.5 million cubic meters of storage in the Amsterdam-Rotterdam-Antwerp area, Europe’s main oil-trading hub, excluding capacity at refineries, Wood Mackenzie said. A further 3.5 million will be added by companies such as Vitol Group and Glencore International AG, the researcher said.
Projects under way and in the planning stages in the Mediterranean will add about 4 million cubic meters in the next few years, Holt said. Terminals in Malta, Spain and France are being built with start-up scheduled for this year, the researcher said.
