INTERVIEW-Vitol Tank boss sees big shift in global oil flows
* New refineries to reshape global oil product flows
* Vitol oil tank JV to keep growing, plans Cyprus terminal
* Eyes U.S. bank assets, but sees others as front-runners
MOSCOW, Aug 21 (Reuters) - The global trade in oil products will soon see a massive shift in flows as big refineries are built in Asia and the Middle East, prompting traders to further expand their terminal businesses, a leading oil terminal player said.
Rob Nijst, CEO of Vitol Tank Terminal Int (VTTI), a venture of top oil trader Vitol, said the company was expanding and building new terminals in northern and southern Europe, Africa and the Middle East to capture new flows.
"The European refineries are being undermined by the big investments in India and the Middle East Gulf," Nijst told Reuters in an interview.
"The key here is to have terminals that are able to receive big ships. These refineries will produce large cargoes," Aernout Boot, commercial director for VTTI, said during the same interview.
In terms of flows, new refineries will turn the Middle East into a balanced market or even an exporter of gasoline instead of being an importer from Europe. The refineries could also become large diesel exporters to Asia and Africa, competing with European rivals.
VTTI is a 50/50 venture between Vitol and Malaysian shipping company MISC.
It has grown aggressively in the past years to become one of top five oil tank owners in the world and has combined capacity of 8.6 million cubic metres, up from 6 mcm three years ago.
Vitol's rivals such as Glencore, Trafigura, Gunvor and Mercuria have all expanded their terminals in the past decade as traders invested into physical assets.
The growth was also encouraged by an oil market structure known as contango when future prices are higher than prompt prices which means that oil bought today can be resold at a higher price later if simply stored in tanks.
The market has, however, reversed in the past couple of years to an opposite structure, known as backwardation, which made profits from storing operations impossible.
"It is certainly a bit more challenging market for our customers and they will be pushing more products through the same tanks in times of backwardation and use more outlets close to consumer markets," said Nijst.
"If there is prolonged backwardation, there will be pressure on rates in certain areas where you have less opportunity to go close to consumer markets," he said, citing Fujairah in the United Arab Emirates as one such potential example.
Nijst said VTTI planned to grow its capacity further to over 10 mcm in the next few years.
Key among new projects will be a terminal in Cyprus due to be built in the third quarter of 2014 with capacity of 0.54 mcm and able to receive large vessels to supply regional markets.
"The developments like ours in Cyprus are just a symptom of the way the markets are changing. We think Cyprus can become a game changer in the Mediterranean... There are huge political movements all around Cyprus with Syria, Egypt, Turkey. But still these markets consume a lot of oil," said Nijst.
Cyprus offers both logistical and customs flexibility and operations are rarely disrupted by weather, he said.
VTTI is also working on expanding terminals around the Amsterdam-Rotterdam-Antwerp area, considering an expansion in Fujairah and in fast growing African markets such as Kenya, South Africa and around the Bay of Guinea.
Nijst said competition among terminal players has increased in recent years: "There is more competition for the same plot of land in prime locations".
"Traders have taken quite a dominant role in terminals worldwide, but oil majors are still very much there. Today you might not see the Indians being very active but in the next five years presumably they will," he added. "The Middle Eastern companies are going to be more and more active as well."
(Editing by William Hardy)