Global Oil Storage Market: Exceeding Oil Production Driving Demand, finds TMR

The global oil storage market is rather competitive among the top five players, who jointly held a share of more than 67.0% in 2014. These five players are Royal Vopak N.V., Buckeye Partners L.P., Oiltanking GmbH, Kinder Morgan Inc., and NuStar Energy L.P. The Transparency Market Research report suggests that this market is extremely capital driven and hence, the entrance of new players is highly unlikely during the forecast period of 2016–2024. Rising at a healthy CAGR of 4.73% by volume during the forecast period, the global market for oil storage is estimated to reach 2,027 mn cubic meters by 2024, up from 1,337 mn cubic meters in 2014.

The report also finds that several companies are indulging in strategic alliances, mergers, acquisitions, partnerships, and joint ventures to maintain their hold over the global market for oil storage. Via these strategies, these key players in the market are able to raise funds, which they use to develop new pipelines, extend their storage facilities, and expand their terminal networks. For instance, Kinder Morgan acquired Hiland Partners in 2015 in order to enhance its storage and terminal infrastructure in North America.

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Commercial Petroleum Reserves Segment Augmented by Fluctuating Oil Prices

The global oil storage market is segmented on the basis of type of reserve and geography. By type of reserve, the market is segmented into commercial petroleum and strategic petroleum reserves. In 2015, the segment of strategic petroleum reserves accounted for a massive 79.21% of the market. This was a result of substantial investment from several governments for the expansion of oil reserves. On the other hand, the segment of commercial petroleum reserves is expected to expand at a stronger CAGR of 7.8% during the forecast period 2016–2024. This increase in demand is attributed to fluctuating oil prices because commercial petroleum reserves help control the prices and plan for the future.

Geographically, the Middle East and Africa serves the most prominent demand in the global market for oil storage. Countries such as UAE, Iran, Saudi Arabia, Oman, Qatar, and Nigeria contribute to most of the demand in the MEA oil storage market. Extensive oil production and declining oil prices are two factors driving these regional markets.

Improved Road Conditions Easing Transportation of Finished Petroleum Products

The supply of crude oil has exceeded the demand in recent years and, as a result, the demand for oil storage facilities has increased globally. Concurrently, the leading players in the market have increased their focus on expanding storage capacity, particularly their refineries in Asia Pacific and Europe. Moreover, the quality of road travel has improved drastically in the past decade, which has aided the transportation of finished petroleum products and in turn driven the demand for oil storage. For example, CLH Group raised over US$200 mn in 2015 to develop its integrated network, including several kilometers of storage facilities. Conversely, the high cost of initial investments and time-consuming approval processes are some of the factors that may hinder the growth of the market.

According to the author of the report, “The investment in oil storage facilities must be done with long-term goals to ensure higher returns.” The author also picks out Asia Pacific as the most lucrative market for players. Countries such as China, Singapore, Japan, and South Korea are among the leading markets for oil storage in this region in terms of volume, driven by increased investments in petroleum reserves.

Key Segments of the Global Oil Storage Market

Oil Storage Market – Type of Storage Segment Analysis

• Open Top Tanks
• Fixed Roof Tanks
• Floating Roof Tanks
• Other Storage Facilities

Oil Storage Market – Product Type Segment Analysis

• Crude Oil
• Gasoline
• Aviation Fuel
• Middle Distillates

Asia Pacific to Emerge as Lucrative Market in Oil Storage through 2024

Oil storage is as essential to ensuring a steady supply of the commodity as it is to influencing its trading prices. The growing import of oil products in emerging economies is expected to increase the demand for oil storage worldwide. Moreover, the supply/demand imbalance will increase with the growth in emerging economies, especially in Asia Pacific, and create more trade, subsequently benefitting the global oil storage market. The growing investments by major oil trading companies in tank storage are also expected to drive the global oil storage market.

According to a report published by Transparency Market Research (TMR), the global oil storage market is anticipated to expand at a 4.73% CAGR by volume between 2016 and 2024, reporting a rise from 1,337 mn cubic meters in 2014 to 2,027 mn cubic meters by the end of 2024.

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TMR analysts shed light on three important questions that companies operating in the oil storage market have:

Q. What are the common strategies adopted by players in the global oil storage market?

The most commonly adopted strategies by key players in the market include establishing alliances and partnerships. Key players such as Kinder Morgan Inc., Royal Vopak N.V., Oiltanking GmbH, NuStar Energy L.P., and Buckeye Partners L.P. are resorting to mergers and acquisitions and joint ventures in order to expand their crude oil storage infrastructure. Since the degree of competition is high in the market, players are raising funds for the development of new pipelines and expansion of terminal networks through strategic alliances. For instance, Kinder Morgan acquired Hiland Partners in February 2015 and this has helped the company to enhance both its terminal and storage structure.

Q. What are the recent developments in the global oil storage market?

On September 2016, Suncor Energy Inc. announced that it is selling one-third of its stake in its oil-storage terminal in northern Alberta to the Fort McKay First Nation, as it strives to strengthen ties with aboriginal groups present in close proximity to the oil sands.

Another development in in the market is the rising demand for crude oil in emerging nations due to the substantial drop in the price of oil. The petroleum ministry in India for instance, has announced that it would increase its oil storage capacity to take advantage of the lowered crude oil prices. To execute this plan, India has set up three petroleum reserves in Mangalore, Padur, and Visakhapatnam and two new storage facilities are expected to be set up in the states of Rajasthan and Odisha, each with about a 5 mn mt of capacity.

Q. Which regions are expected to be lucrative markets in the global oil storage market?

The Middle East and Africa region has been the leading contributor in the global oil storage market with a 30% share in 2014. North America and Europe followed the Middle East and Africa in terms of holding dominant shares. The market in Asia Pacific is also anticipated to pick up speed and grow in the coming years. With Saudi Arabia intending to expand its use of oil storage tanks in Japan and China, the Asia Pacific oil storage market is expected to witness significant growth. While Saudi Arabia intends to fend off potential competitors by strengthening ties with these two key Asian buyers, such developments will simultaneously help Asia Pacific to grow in the market.

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Storage Crisis after Recent Decline in Oil Prices to Create Viable Opportunities for Oil Storage Market

According to a research study published by Transparency Market Research (TMR), the global market for oil storage, which stood at 1,337 mn cubic meters in 2014, is likely to increase its market volume to 2,027 mn cubic meters by 2024 at a CAGR of 4.73% during the period from 2016 to 2024.

Of late, oil prices have been experiencing a sharp decline, leading to prominent alterations in oil trends, including the supply of crude oil exceeding its demand. This depression in oil prices has caused a severe oil glut across the world, creating a storage crisis. As a result, the demand for oil storage facilities is witnessing a remarkable surge since the last few months.

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Apart from this, the plummeting oil prices have also intensified the competition within the oil sector. The leading companies involved in oil supply are aggressively focusing on expanding their operations to increase their supply volume, which is likely to create a huge demand for oil storage units in the coming years.

In this blog post, analysts at TMR answer important queries about the worldwide oil storage market:

What are the key trends that are likely to define the future of global oil storage market?

The demand for oil storage facilities will mostly be influenced by the overhaul in the oil sector over the next few years. With the supply of crude oil surpassing its demand, the need for storage facilities has suddenly intensified, leading to increased oil inventories. Oil companies, especially in Europe and Asia Pacific, are focusing on increasing their storage capacity by constructing new storage facilities.

Apart from this, the demand for finished petroleum products, propelled by the rise in road travels, has also fueled the need for storage capacity expansions considering the future usage, which is expected to impact the demand for oil storage facilities positively in the coming years.

What are the factors influencing the demand for oil storage facilities in various regions?

The Middle East and Africa leads the demand for oil storage facilities across the world. The surge in oil production and the decrease in oil prices are the key driving forces behind the extensive demand for oil storage in this region.

The growing need for additional oil storage space has been driving the demand for oil storage in North America. The increasing investments for the expansion of storage capacity are likely to boost the market for oil storage in North America in the near future.

On the other hand, the demand for oil storage facilities in Asia Pacific is anticipated to be greatly influenced by the rising investments in petroleum reserves in this region over the next few years.

What are the latest developments in this market?

The oil prices are continuing to tumble with the rising crude stockpile in the U.S. According to the U.S. Energy Information Administration (EIA), the crude supplies have increased by 2.5 million barrels in the country till mid-August 2016. Oil suppliers in the U.S. are compelled to build new storage facilities in the next few months, leading to a sudden surge in the oil storage market in the U.S. and across the world, at large.

Japan, on the other hand, is planning to examine the potential for increasing the capacity of Okinawa-based Saudi Arabia’s crude oil storage facility in the near future, which will also reflect positively on the global market in the long run. At present, the facility boasts of a capacity of 6.29 million barrels crude oil.

Need for Oil Storage Facilities on the Rise as Global Supply of Crude Oil Surpasses Demand, says TMR

The top five companies in the global oil storage market accounted for a combined share of just over 67% in 2014. These players are Royal Vopak N.V., Kinder Morgan Inc., Oiltanking GmbH, Buckeye Partners L.P., and NuStar Energy L.P. Transparency Market Research has found that the degree of competition in the increasingly capital-intensive oil storage market is extremely high and the threat of new entrants is likely to remain moderate throughout the forecast period.

Looking to strengthen their foothold in the global oil storage market, an increasing number of companies have been resorting to strategic alliances, partnerships, mergers, acquisitions, and joint ventures. “These strategies have enabled companies to raise funds for the development of new pipelines and storage facilities, the expansion of terminal networks, and the expansion of crude oil storage infrastructure,” the author of the TMR study states.

Kinder Morgan is an excellent example. Currently focused on enhancing terminal and storage infrastructure across North America, the industry giant acquired Hiland Partners in February 2015 for US$3 bn.

Ongoing Expansion of Oil Storage Capacities Driving Growth

“The global supply of crude oil has surpassed its demand and this has resulted in the need for oil storage facilities,” a TMR analyst states. This changing trend in the oil industry has given rise to oil inventories over the years. Companies have been striving to expand storage capacity, especially refineries in Asia Pacific and Europe. In addition to this, the swift rise in road travel has spurred the demand for finished petroleum products, which, in turn, has fueled the need for future storage capacity expansions. This has given the global oil storage market a significant boost. For instance, in 2015, CLH Group invested over US$200 mn to build integrated storage and transportation networks, including thousands of kilometers of storage facilities.

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In contrast, TMR has observed that high initial investments and lengthy approval processes required for setting up and expansion oil storage facilities have restricted the growth of the global market.

“However, higher return on investment in the long term is likely to give players in the oil storage market the push they need,” the author of the study predicts.

Opportunities Galore in APAC Oil Storage Market

The global oil storage market is poised to expand at a 4.73% CAGR by volume from 2016 to 2024, reporting a rise from 1,337 mn cubic meters in 2014 to 2,027 mn cubic meters by the end of the forecast period. The Middle East and Africa region is the leading contributor in the global oil storage market with a 30% share in 2014, followed by North America and Europe. “Although Asia Pacific comes in fourth in terms of market share, the region is anticipated to trail the MEA oil storage market in terms of percentage growth from 2016 to 2024,” the analyst predicts.

By type of reserve, strategic petroleum reserves were the key contributor in 2014, followed by commercial petroleum reserves. By type of product, crude oil led the overall oil storage market in 2014 and will continue this trend through 2024.

Oil Storage Market – Type of Storage Segment Analysis

• Open Top Tanks
• Fixed Roof Tanks
• Floating Roof Tanks
• Other Storage Facilities

Oil Storage Market – Product Type Segment Analysis

• Crude Oil
• Gasoline
• Aviation Fuel
• Middle Distillates

Oil Storage Market – Reserve Type Segment Analysis

• Strategic Petroleum Reserve
• Commercial Petroleum Reserve