Global oil, gas storage service market to enjoy 90% occupancy rates – Technavio

storage service
Storage service

Customers show a clear preference to vendors who provide ancillary services, especially in marine terminals

According to the latest market study released by Technavio, the global oil and gas storage service market is expected to exhibit a CAGR of more than 2 per cent during the forecast period.

This research report titled ‘Global Oil and Gas Storage Service Market 2016-2020’ provides an in-depth analysis of the market in terms of revenue and emerging market trends.

Oil trading companies will be responsible for driving the market during the next few years. Since crude oil spot prices will increase in the forecast period, these companies will need storage equipment and terminals to hold their oil until the target spot price is reached.

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Oil storage terminals located at strategic locations hold millions of barrels of oil, ready to be shipped. There will be a high demand for such terminals in the forecast period.

The slow growth of oil and gas pipeline projects will be an advantage for the oil and gas storage service market. The occupancy rates in oil and gas storage terminals are expected to be well above 90% till 2018.

The terminals that have considered future exploration projects, geopolitical factors, and transportation routes while choosing their location will see higher profits. The scope for high profits are attracting new investments and vendors to the market.

The top three revenue generating service segments in the global oil and gas storage service market are:

Storage services

“The two important groups of customers in need of storage services are oil trading companies, and oil producing companies. Together, they account for more than 70% of the revenue in the global oil and gas storage service market. The occupancy rates of oil storage terminals during the forecast period will cross 90% which will be very beneficial for the market”, says Sharan Raj, one of the lead analysts at Technavio for warehouse and storage research.

Independent vendors in the market charge anywhere between USD 0.25 and USD 0.55 per barrel per month. During peak times this rate can be as high as USD 0.85.

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In 2015, the oil and gas storage service market was valued at USD 8.24 billion. Until 2018, the highest demand will be from the oil trading companies, post which, oil prices will stabilize and there will be uniform demand from both oil storage and production companies.

Ancillary services

Ancillary services are special offerings that vendors provide to attract more customers. They offer to include services like additive injections, product heating, ethanol blending, and mixing product stored in tanks.

Although it generates a small portion of the market revenue, it helps venders to close on key accounts and increase sales.

Customers show a clear preference to vendors who provide ancillary services, especially in marine terminals. However, the costs involved in procuring oil and petroleum products greatly affects the ancillary services segment.

This segment is expected to record a slower growth rate during the first half of the forecast period, and slowly pick up after 2018. The market segment was valued at USD 600 million in 2015.

Other services

Apart from storage and ancillary services, vendors provide services like throughput agreements, product handling, movement related services, and other services that customers may request.

A throughput agreement in the oil and gas service industry is one in which a vendor provides a service or commodity to the customer for a fixed period and based on a predetermined agreement.

Such agreements are generally more beneficial to new vendors in the market as it gives them some capital for further investment.

“The other services segment is expected to witness a constant growth in the forecast period. The higher rate at the end of the forecast period reflects an increase in activity in the oil and gas industry. The use of pipelines and other means for oil transportation will add significant revenue into this segment,” said Sharan.

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