October 18, 2023 [S&P Global]- Vitol-backed storage terminal owner and operator VTTI may look to expand its storage footprint at the Port of Fujairah on the UAE’s east coast in the coming years as displaced Russian crude and product flows continue to spur demand for oil storage at the key regional hub, VTTI CEO Guy Moeyens said.
Rotterdam-based VTTI controls 2 million cu m of storage capacity at Fujairah, making it the second-largest terminal operator at the port. Already the world’s third-largest bunkering hub after Singapore and Rotterdam, the Fujairah oil storage and blending hub has become key to Russia’s efforts to divert its oil product exports away from traditional US and EU markets since the war in Ukraine.
“We can see an influx of much more Russian crude and products which are looking for places to be stored. As a result of that, we also see more changes in ownership intervals,” Moeyens told S&P Global Commodity Insights in an interview. “There is a lot of activity around here to get access to storage capacity. But for us, we work with blue chip customers and we’re fully sold out.”
The Port of Fujairah has 11.1 million cu m of crude and product storage capacity, or about 78 million barrels. Oil products in storage, including gasoil, fuel oil and jet fuel totaled 19.8 million barrels on Oct. 9, according to the Fujairah Oil Industry Zone, down from a 2023 high of 25 million barrels in mid-May after the February price caps on Russian petroleum product exports filled tanks.
“What we’ve noticed is the renegotiation of storage contracts, it has put upward pressure [on storage rates] because the demand is higher so there is an opportunity for us to capitalize on that,” Moeyens said.
In March, the CEO of Minerva Bunkering, part of the commodities trading giant Mercuria, said he was evaluating expressions of interest from potential buyers for its storage terminal next to the Port of Fujairah.
Last month, Prostar Capital sold its 350,000 cu m bulk liquid storage terminal facility, GTI Fujairah, to Mercantile & Maritime Group (M&M). Two weeks later Gulf Navigation Holding, or GULFNAV, submitted a proposal to acquire Brooge Petroleum and Gas Investment Company, which controls 1 million cu m of storage at the port.
Expansion plans
Helped by its location near the entrance to the Strait of Hormuz, Fujairah has expanded in recent years as a transit point for storage, blending and ship-to-ship transfers.
VTTI owns 17 storage terminals across 14 countries, with a capacity to hold a combined 60 million barrels (9.5 million cu m) of crude and products. Vitol, the world’s biggest independent oil trader, owns most of VTTI but in 2019, Abu Dhabi National Oil Co., which pumps most of the UAE’s 3 million b/d of crude, acquired a 10% stake in VTTI.
In Fujairah, where ADNOC is building the world’s biggest single-site underground oil storage caverns, Moeyens said VTTI has “quite a bit of spare land” that could be used to either build storage for renewable fuels such as biofuels or hydrogen, and chemicals or expand the existing oil tank capacity.
“We will be looking early next year to see what we can do here to develop further,” he said. “If someone approaches and says, ‘we want to make long-term contracts with traditional fuels’ then we’ll need additional tanks so that’s not excluded.”
“We will, not only here in Fujairah but in in every hub location we’re present, if opportunities become available we will look at it. Our philosophy is that in these big trading hubs we want to be the last man standing in terms of a bunker supplier.”
Non-oil growth
Further out, Moeyens said VTTI wants to triple the company’s pre-tax earnings by 2028, with half of the total coming from “transitional fuels” and new energies which include LNG.
VTTI is planning a 5 Bcm/year floating storage and regasification unit in the Netherlands that it hopes to start up in 2024. The Netherlands already doubled its LNG import capacity last year after Russia’s invasion of Ukraine triggered a rush to secure new LNG import infrastructure. Europe is looking to LNG to replace lost Russian gas and in 2022 imported higher volumes year on year as high prices drove increased LNG deliveries.
“We are working on some of the potential acquisitions in LNG and our focus is where we believe we can offer open-access FSRU into terminal capacity,” Moeyens said. “Currently, the focus is in Europe where there are a number of opportunities.”
He said the company is also pursuing potential acquisitions to boost its exposure to chemicals storage and plans to grow a portfolio of bio-energy facilities in the Netherlands and Europe.
The company plans to develop a world-scale ammonia cracker in Rotterdam with E.ON supporting the European hydrogen economy. Moeyens said VTTI was also working with renewable diesel maker Neste in Rotterdam and Antwerp, and in Amsterdam it is looking at a pre-treatment project for feedstocks that can be used to make sustainable aviation fuel and other biofuels.
Other projects include a world-scale renewable gas plant in the Netherlands to make biogas from manure, with a later CO2 capture development and a UK-based tire recycling plant capable of producing combustible gas, pyrolysis oil and heat.
“Our aim is to build more of these plants on our existing facilities because there are synergies with our terminals in terms of operations and maintenance,” he said.
Overall, VTTI’s objective is for non-oil energy products to account for half of VTTI’s pre-tax earnings by 2028, up from around 10% currently, he said.
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