Fuel for Thought

  • Surplus volumes amid global drop in oil demand due to COVID-19 leaves oil companies grappling for storage space.

Surplus volumes amid global drop in oil demand due to COVID-19 leaves oil companies grappling for storage space.

May 14 2020 Read 561 Times

Oil companies are dealing with a plethora of challenges due to the sudden decline in demand amid the COVID-19 pandemic. Distant storage locations increase costs as transportation fees get factored in with storage fees. Additionally, the relatively short shelf life of gasoline and jet fuel, and the limitations of storing light crude alongside heavy crude, add further challenges for these companies, says GlobalData, a data and analytics company. 

Haseeb Ahmed, oil and gas analyst at GlobalData, comments: “North America is battling a severe shortage of storage capacity. The US Energy department is leasing spare Strategic Petroleum Reserve (SPR) capacity to private companies. However, with US crude inventories surging, it may be only a matter of time, before the country runs out of storage space.” 

Meanwhile, the Asia Pacific region is dealing with inflated storage costs that have become nearly 40% dearer due to excessive demand. Despite higher prices, companies such as SK Energy and Nayara Energy have taken on lease SPR spaces from their respective countries to store crude.

Saudi Arabia is filling up its large spare storage capacity with domestic production. In the wake of demand destruction and dearth of storage space, the Kingdom’s oil giant – Saudi Aramco – has offered up to 90-day deferred payment option for its crude deliveries to European oil refiners.

In Europe, maintenance activities at storage terminals are being delayed in Germany, Italy and France. Capacity expansions of storage terminals are likely to be delayed as the activities are hindered due to limited number of workers. Tankers anchored at ports are serving as floating storages to store surplus crude volumes.

Ahmed concludes: “The brighter side of this chaotic situation can be the likelihood of operators thinking on the lines of building enough storage spaces to tackle such unforeseen challenges. This may pave a way for increased investment in storage projects from private and foreign entities - particularly in nations that lack enough storage space. While India is one such example, developing four additional SPRs, countries such as Japan and South Korea may follow, especially when it comes to building emergency reserves.”

Reader comments

Do you like or dislike what you have read? Why not post a comment to tell others / the manufacturer and our Editor what you think. To leave comments please complete the form below. Providing the content is approved, your comment will be on screen in less than 24 hours. Leaving comments on product information and articles can assist with future editorial and article content. Post questions, thoughts or simply whether you like the content.

Post a Comment





Digital Edition

Petro Industry News September 2020

September 2020

In This Edition Fuel For Thought - DKSH extends partnership with Bruker in China - Will insurers mandate digital ecosystems for energy assets by 2025? - XOS heads to Mars Analytical Inst...

View all digital editions

Events

PUMPS & VALVES ASIA 2020 - NEW DATES

Sep 23 2020 Bangkok, Thailand

Sensor China

Sep 23 2020 Shanghai, China

International Pipeline Expo

Sep 28 2020 VIRTUAL EVENT

Chemistry. Oil & Gas

Sep 29 2020 Minsk, Belarus

View all events