The crude price collapse has hit energy companies hard, but oil storage is booming with producers and traders renting tanks and investors snapping up assets.

“There is a lot of capacity but there is also a lot of demand,” said Rob Nijst, chief executive officer of VTTI, which is half owned by the world’s largest oil trader Vitol.

“Everyone wants more storage volumes at the moment.”

The high volatility in oil prices has offered trading houses such as Vitol, Trafigura, Mercuria, Royal Dutch Shell and BP many opportunities to make money through storage.

“The price volatility has been a good change,” said Jared Pearl, VTTI’s Chief Commercial Officer. VTTI facilities are mostly geared for refined product storage, not crude, he added.

After seeing weaker profits in 2013 and 2014, trading companies want to expand their physical storage program, Pearl said.

Storage in global hubs such as Singapore, Saldanha Bay in South Africa and northwest Europe and smaller, regional locations have been filling rapidly over the past year with both crude oil and refined oil products such as gasoline and diesel.

But the world is unlikely to run out of storage for now thanks to unconventional storage facilities such as salt caverns or rock-cut caverns in Scandinavia and Asia, Nijst said.

Looking at Africa, Central and South America

VTTI, together with its New York-listed sister company VTTI Energy owns 8.4 million cubic meters of storage and seeks to expand to 11 million cubic meters by 2018-2019, said Nijst, who heads both companies.

Vitol uses around 50 percent of VTTI’s storage capacity.

Unlike some investors who have rushed into the storage sector to lock in high profits, VTTI’s expansion plans are detached from current market conditions and are lead more by demand centers.

“We never build terminals purely on the price structure of the market. We always build terminals … to serve massive shorts in end markets so there is always in-and-out flow,” said Nijst.

Africa is set to be a focal point for growth. VTTI currently has a 170,000 cubic meter terminal in Cape Town serving local markets.

It is also looking to invest in demand centers with little existing logistics for products such as diesel, liquefied petroleum gas (LPG) and ethane, heavily exported from the United States as a result of the shale boom.

“Quite a bit of our growth and acquisitions will be non-hub. If you look at demand changes in Africa or Central and South America, there are quite a lot of under-served markets for logistics,” said Pearl.

Even mature economies such as Europe had under-served markets, he added. China also offered expansion possibilities.

In the United States, VTTI is unlikely to expand beyond its one terminal in Florida as high demand for storage and pipeline infrastructure has boosted valuations, Nijst said.

The dramatic drop in oil prices offers some attractive possibilities elsewhere.

“We see a very healthy consolidation opportunity in a lot of markets and we are working on a few of them. You have family owned businesses or companies that own a few assets that want to link up to a global player like ourselves,” said Nijst.

“In addition to that, there are a lot of companies that are up for sale.” 

Vitol last month bought the second half of the privately-owned arm of VTTI from Malaysian shipping company MISC Bhd to take full control of the company.