July 30, 2015 [Reuters] - State-owned and private companies will start up about 26 million barrels of new oil tanks in southern China in coming months, amid strong demand for storage from traders who expect prices to recover enough to pay for the cost of holding crude.
Benchmark crude oil prices recovered some of their recent losses on Thursday following a large U.S. stock draw, but concerns over a global glut still weigh on the markets as OPEC pumped some 3 million barrels a day (bpd) more than demand in the second quarter, a Reuters survey found.
Vopak – the world’s largest independent tank terminal operator – is set to start operations at a 1.3 million cubic metre (8.2 million barrels) crude storage facility in the southernmost island province of Hainan in end-August, said one source with knowledge of the facility.
That is about three months behind a timeline expected by industry sources earlier in the year. Vopak declined to comment on potential customers, but confirmed that operations at the tanks would start in the third quarter.
Vopak and its Chinese partner State Development & Investment Corp are in advanced discussions with potential clients, including commodity trader Noble Group and the National Iranian Oil Company, said senior trade sources.
Private company CEFC Energy is slated to bring online in early October a 2.8 million cubic metre (17.6 million barrels) facility, including 2.4 million cubic metres for crude oil and the remainder for light transportation fuels, traders said.
The CEFC tanks, also located at Yangpu near the Vopak site, are about one month behind schedule. A company source said “a number of clients are in discussions” to lease the space.
Traders said the two new storage sites do not have great locations as there is only one big refinery, the Sinopec-owned 160,000 barrels-per-day Hainan plant, nearby as a potential end-consumer, but the storage tanks could be a springboard for shipments further north.
Some of the tanks will be bonded, which means oil could be transferred to other markets such as Taiwan and South Korea.
China, the world’s second-largest oil consumer, has been taking advantage of oil prices that are less than half of last year’s peak to fill its strategic reserves, analysts say.
Customs data showed China’s crude imports in the first half of the year up 7.5 percent on year at 6.6 million bpd, and possibly surpassing the United States as the world’s top crude oil buyer in April and June.
The new facilities are part of the 42 million barrels of commercial storage expected to start this year in China.
