Future Refining & Storage 2016

As with the energy sector at large, refi ners are facing challenging times in light of the ongoing low oil price. Indeed, as highlighted in our opening market overview, more than one in 10 refineries across the globe are expected to cease operations by 2021, with that figure rising to approximately one in five in North America and Western Europe.

All is not doom and gloom, however – in lower cost, higher demand growth regions such as the Middle East, Asia and Latin America, there are major expansion plans, some of which are outlined in this supplement. Furthermore, even in situations where scale and market disadvantages exist, there is room for those sites with concurrent excellence in top-line, cost and capital structure to not only survive but also to thrive.

Meanwhile, some markets, like the UK refi ning sector, will have an essential role to play in the transition to a lower carbon economy – a transition that will be addressed with renewed vigour following the Paris Agreement at the recent COP21 meeting last December.

Those trends feed directly into the global market for independent tank storage services, where low oil prices and rising refining margins are having a signifi cant impact on the volume of product seeking a temporary home. That is good news for has suff ered.

Terminal operators are adopting a variety of strategies to counter the effects of volatility in the market but the corollary of uncertainty makes planning ahead rather difficult. Still, the cash that terminals can generate under most market conditions means they remain attractive to equity investors, who have proved themselves very happy to off er signifi cant profit multipliers to extend their reach inthe sector.

Meanwhile, terminals are under pressure from their customers, from government regulators and from the public to up their game in terms of environmental protection, corporate social responsibility and safety management. While this may sometimes dovetail nicely with pressure from shareholders for profi tability and medium-term stability, that is not always the case and charting a course between the two imperatives is a major challenge for managers.