The oil storage business has taken a hit from IMO 2020. Image Credit: File Image / Pixabay
The global decline in fuel oil demand prompted by IMO 2020 caused a drop in occupancy rates at terminal operator Vopak's oil storage facilities last, but rates started to recover by the end of the year with new very low sulfur fuel oil (VLSFO) demand.
"IMO-related out-of-service capacity" led to occupancy rates in Vopak subsidiaries dropping as low as 82% by the third quarter of 2019, down from 87% in 2018, the company said Wednesday.
But by the fourth quarter the average rate advanced to 84% "following contracted IMO 2020 capacity coming into operations," Vopak said.
IMO 2020 poses its own challenges for the storage industry. Where before the high sulfur fuel oil (HSFO) used as the dominant bunker fuel was a relatively monolithic product that could be stored in large tanks, the wide range of VLSFO blends on offer means traders now need a much larger number of much smaller tanks carrying a wide variety of blends and blending components.
Vopak now has about 3.5 million cubic metres of fuel oil capacity worldwide, it said, of which 15% can only be used for VLSFO, 30% only HSFO and the remaining 55% is flexibile.
In 2017 65% of its fuel oil storage was for HSFO only and 35% was flexible, Vopak said.