Global oil trade pattern shifts

The latest ultra modern refineries and major traders are shifting to longer haul tankers and large storage terminals in key hubs.

New refineries in Asia, the Middle East and the US benefit from lower feedstock and energy costs and fewer taxes and regulations. This enables them to compete against local refineries in Europe, Latin America and Africa in the sale of gasoline, diesel, gasoil and jet fuel.

These refiners, keen to sell larger volumes, are now using 75 000 t tankers (LR2s), double the size of traditional product tankers.

General Manager of Saras Group, Dario Scaffardi, has commented that ‘the whole dynamics (of trading) are changing. The basics of refining have always been to have refining centres close to consumption centres and crude on the long haul and the products were in the short haul. A lot of logistical problems are related to bringing small parcels of product to a variety of small ports’.

‘This model has been challenged and changed and Reliance shows us that you can have models where you are shipping LR2 vessels around the world and the logistics is adapting to that. We will probably need to move to big size and some sort of vertical integration’.

Reliance Industries’ 660 000 bpd Jamnagar refinery in India and the new 400 000 bpd Jubail refinery in Saudi Arabia are leaders in export oriented refining.

Big plants on the US Gulf Coast, such as the 600 000 bpd Motiva refinery in Port Arthur, owned by Royal Dutch Shell and Saudi Aramco, are also targeting the international market as they ramp up diesel and gasoline production thanks to the abundance of domestic light sweet shale oil.

Tony Fountain, head of refining and marketing at Reliance has commented that ‘the transition in the ships that are being used has been enormous. We are using ships that are twice the size of those that were used 20 years ago that can make a US$ 3 – 4/bbl difference in shipping costs’.

The flow of oil products from overseas markets is taking a heavy toll on Europe’s refining industry where many plants closed down in recent years due to falling demand and high costs.

Storage

Refiners and traders are also investing in large storage terminals and trading hubs in order to guarantee supply flows in case of shipping disruptions.

Fountain said that ‘in all key markets, whether it’s Singapore, the Medittereanean, Rotterdam or New York, [Reliance] hold storage. Hopefully there is confidence with the buyer that you are not totally dependent on the next cargo’.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/07102013/oil_trade_pattern_shifts719/