“In recent years, the lower prices of oil have affected the industry, and also some players have invested in their own capacity – therefore, I expect to see some consolidation and optimization in the industry over the next five years.”
Could you briefly present Oiltanking?
We are the second largest independent liquids storage company worldwide, with a footprint in 25 countries and around 21 million cubic meters of storage capacity between crude oil, refined products, chemicals and gas. In Latin America, we are mostly dedicated to crude and refined products, while we have chemicals storage in Colombia and Peru. In gas, we operate LPG capacity in Peru – this is an area where we are growing significantly, especially in northern Europe, through the acquisition of our Antwerp Gas Terminal in 2016, which is currently under significant expansion.
We are involved in the whole chain, being a classic company who typically owns the assets, either 100% or via joint ventures with other companies. We do everything from greenfield projects to brownfields and acquisitions. Having said that, we are proud to be flexible and adapt to local needs where we operate. For instance in Mexico we are supervising the construction of two terminals and a future pipeline, which we will operate. This case is a good example where we do not own the assets, but we will operate them via an Operations and Maintenance (O&M) contract. We have a few examples of this in Latin America, and it is something that not many players do.
Argentina was your first operation in Latin America. How is that doing, and what potential do you see in Vaca Muerta?
In Argentina, we have had a partnership with YPF for 25 years. We manage a crude oil gathering system, the biggest tank farm for crude oil in Argentina, and we feed five of the eight refineries in the country. Vaca Muerta’s potential has been there for a few years now, but of course oil prices did not help, and also the government was unable to attract enough investment. Luckily, and in spite of the macroeconomic issues the country saw during 2018, things have changed. We are seeing the different players increasing production in the formation, hence we will start feeling the need for capacity expansions on the crude oil side. Moreover, gas production is also increasing. With prices going up and the cost of exploration going down, the country can look at the possibility of liquefaction plants to export its gas in the years to come. This is a good dynamic for us, because some of these flows are likely to go through Bahía Blanca, where we are based.
Overall, what is the fastest-growing country for Oiltanking in Latin America?
Mexico is the country that is seeing fastest growth for Oiltanking. We only opened our Mexican office in 2017, with just two people, and now we have around 30 people. Once we start the O&M contract during 2019, we may have more than 100 people in Mexico. It is going to be a very important market for us in the years to come, with the opportunities arising from the energy reform. Then, Brazil is obviously a very important market, where we have had a presence for 10 years.
Oiltanking’s shareholders see Latin America as a very important market, Mexico being the star right now. Of course it is a part of the world that always presents some inherent risk, with political hiccups and countries shifting from a business-friendly, investment mode to a less friendly model and vice-versa. For sure, looking at the long term, Latin America, Africa and Asia are the growing regions. Europe is very mature and we see a trend for optimization in that market.
How do you read the global market dynamics for liquids storage?
This industry has been growing a lot in the last 10 to 15 years, and our company is a good example of that, with both organic growth and acquisitions. In recent years, however, the lower prices of oil have affected the industry, and also some players have invested in their own capacity – therefore, it is a challenging time. At Oiltanking we take a long-term view of the industry, so we manage to navigate the ups and downs, but we cannot ignore that there is some extra capacity in certain hubs, and that an extra effort is needed to rent and fill up our tanks. Because of this, I expect to see some consolidation and optimization in the industry over the next five years.
How important is safety when you are storing dangerous liquids?
HSSE and operational excellence are key drivers in this industry. We always had this in our DNA, but over the last few years we have expanded further our focus on HSSE, with a very thorough HSSE management system that we apply on all our operations, either our own assets or those of third parties, as we do in Mexico, replicating Oiltanking’s stringent internal standards.