LOOKING AHEAD: Oil producers and exporters seek more storage
| DOI | http://doi.org/10.1111/oet.12439 |
| Date | 01 November 2016 |
| Published date | 01 November 2016 |
LOOKING AHEAD
Oil producers and exporters seek more storage
Attempts to increase oil production in a number of
countries are being hampered by insucient storage.
It is a particular problem in Iraq and could become a
constraint in Canada. Exports, too, are similarlyaected
and in a number of cases, including the North Sea, the
US Gulf, and the Pers ian Gulf, cru de oil has had to be
storedintankersatsea.Renedproductshavealsohad
to go into oating storage. Shortage of storage capacity
has prompted several companies to become involved in
storage operations. In the US, there ha s been a boom
in the storage business to handle the rising volumes
from domestic oil pro duction. Access to storage is also
becoming an increasingly important consideration in
exporting oil to Asia.
Coping with rising output
Insucient storage capacity can impose severe restric-
tions on attempts to increas e production, which is the
case in Iraq at present, where there are shortages of stor-
age both in the main production areas and at export
terminals in the Persian Gulf. Iraq’s Gulf marine termi-
nals have a nominal capacity of 4.3 mn bpd, made up
of the 1.6 mn bpd Basr ah Oi l Terminal, the 0. 3 mn bpd
Khor al-Amaya terminal and three Single Point Moor-
ing (SPM) ber ths with a total capacity of 2.4 mn bpd.
However, insucient storage at the SPMs eectively
reducesIraq’sGulfexportcapacitytoabout3.5mnbpd.
Since the southern terminals are the only reliable export
route for Iraqi crude, their lack of eective storage lim-
its Iraq’s oil production to about 4.7mn bpd, assuming
Gulf exports of 3.5 mn bpd plus 0.5 mn bpd via Ceyhan
and0.7mnbpdconsumeddomestically[1].Iraqhopes
to be producing 5 mnbpd by early 2017.
Iran recently found itself in a similar position to Iraq
overstoragebuthasbeenaddingcapacity.Asastopgap,it
chartered a number of t ankers for use as oating storage
foranestimated40mnbblofcrudeoilandcondensate.
It is now building permanent storage on land, including
4 mn bbl on Kharg Island, which acts as its main crude
oil export termin al, and a furt her 10 mn b bl nearby, on
land,atBushehr.Afurther10mnbblaretobeaddedat
the southern port of Jask, in the Gulf of Oman.
North American developments
Another country that has been adding storage to keep
pace with rising output is the US. A major expansion
occurred in connexion with the tight oil boom of the rst
half of the present decade. e storage business received
a further boost aer most restrictions on the export of
US crude were removed in late-2015. Storage is notonly
required for long-term periods, months, or even years,
but is also necessary just to enable pipelines to keep
owing with oil. About a h of US storage is required
in order to keep the country’s extensive pipeline system
functioning properly.
Most US storage is located near important pipeline
junctions, such as Midland, Texas and Cushing, Okla-
homa, or on the US Gulf Coast, from where most US
crudeisexported.Cushinghas90mnbblofcrudeoil
storage: approx imately 13% of t he US total. Storage als o
encourages trading activity,as it allows oil to be delivered
quickly to buyers requiring physical oil. Large storage
concentrations,suchasMidland,Cushing,andHouston,
arealsousedaspricingpointsforUScrudeoilblends.
Canada, like the US, has seen rapid growth in storage
to handle new production there. is, too, has occurred
at major pipeline centers –main ly in Hardisty and
Edmonton in Alberta, where approximately 9 mnbbl of
storage is planned to handle the expected increase in
production over the next four to veyears. Determining
the precise volume of ad ditional storage t hat will be
required will not be easy, owing to uncertainty over
plans for the pipelines that will be needed to trans-
port the extra crude production. Many pipelines face
opposition from local interests and have been delayed
as a result [2], which could in turn lead to delays to
future storage schemes, leaving the province short of
capacity.
Temporary shortages
Storage is necessary in order to de al with seas onal
changesinoildemand,aswellaschangingpatternsof
trade. is year saw a rise in temporary oating stor-
age of unsold crude, with concentrations in Nort hwest
Europe, the US Gulf, the Persian Gulf, and Singapore.
Some rened products were also stored at sea when an
excess of middle distillate in the AtlanticBasin could not
be accommodated on land [3].
Asian markets
Access to storage is becoming increasingly an element in
the marketing of crude oil in Asia. Most of Asia’s crude
oil is sourced from outside the region: mainly from the
MiddleEast,butalsofromAfrica,theNorthSea,andthe
Americas. is makes it dicult for exporters to respond
to sudden changes in demand in Asia. Several countries,
including Saudi Arabia, Abu Dhabi, and Algeria, have
therefore been leasing storage there.
Saudi Arabia has been particularly active in this
regard, having rece ntly raised the volume it leases on t he
Japanese island of Okinawa by a third to 8.2 mnbbl. e
Okinawa facility allows it to supply oil quickly not only
© 2016 John Wiley& Sons Ltd
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