The oil and gas industry is worth billions of dollars, which has changed the fortune of many oil exporting nation. The logistics network of oil and gas is gigantic as crude oil has to be transported all over the world in vast quantities. Although transportation is an essential function within the logistics of this industry, the oil and gas storage part is often overlooked. Oil and gas storage facilities are used to store the extracted and refined petroleum products. Such products are either stored underground or in above-the-ground facilities in tanks, empty salt caverns, and floating vessels. Analysis from procurement experts at SpendEdge determines the category spend in the oil and gas storage market itself to be worth US$12.1 billion by 2021.
Rise in Vacant SPR Capacities
Due to the decline in oil prices a couple of years ago, some of the major importers of oil in the APAC region such as China and India have increased their strategic petroleum reserves (SPRs). For instance, the Government of India plans to add SPR capacity of 91 million barrels by 2020. Such a spectacular rise in SPR capacities will help them cope with demand-supply imbalances of petroleum in the future. Additionally, buyers can also utilize their excess capacity to store their petroleum cargoes at cost-effective rates.
Increased R&D Activities on SNG Technology
Synthetic natural gas (SNG) technology allows companies to store natural gas in the form of hydrates. Such hydrates can be compactly stored; thereby, leading to savings in energy and transportation costs. Currently, a team from CERT at NUS is working on this technology with funding from Lloyds Register Global Technology Center Singapore and the NRF. Apart from cost savings, it also enhances the safety while handling such gases.
Increasing Use of LNG as a Ship Fuel
Following the IMO ruling in 2016 to impose a new cap on limiting the sulfur content in marine fuel to 0.5% from the current 3.5%, shipping service providers are forced to turn to alternative fuel source with low sulfur content such as LNG. Many customers including IKEA are demanding that shipping service providers comply with the new IMO regulations. Such a switch will result in port authorities to invest in new LNG terminals. For instance, in 2016, the Northwest Seaport Alliance approved the setting up of an LNG terminal and liquefaction plant at the Port of Tacoma in the US.
Growing Investments by Institutional Investors
Storage tank terminals have been providing consistent returns over the past few years. Due to such lucrative returns, institutional investors such as banks are eager to increase their investments in oil and gas storage facilities. In 2017, Whitehelm Capital acquired 90% shares of the Netherland-based tank storage terminal, Vopak Terminal Eemshaven. Additionally, suppliers can also leverage investment from institutional investors to upgrade and set up new storage facilities.
Read more about the trends in the oil and gas storage market along with fuel storage tanks, gas storage tanks, oil containers, sourcing strategies, procurement challenges, and pricing models in SpendEdge’s upcoming report on the global oil and gas storage market.