Steven Barsamian, COO at the Tank Tiger, discusses the business of moving and storing oil. He talks about storage capacity, how crude oil and refined products are transported, and the challenges of building storage facilities. They also touch on sediment in tanks, the diesel shortage, and the global demand for renewables.
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Quick takeaways
Terminal storage plays a vital role in the oil industry, serving as a facility for storing petroleum products and facilitating transactions between those in need of storage and those with available tank space.
The storage infrastructure for oil has adapted to changing market conditions, with mergers and acquisitions among oil majors and shale producers, construction of new refineries, and improvements in transparency and liquidity in storage pricing.
Deep dives
The Role of Terminal Storage in the Oil Industry
Terminal storage plays a crucial role in the oil industry. It serves as a facility for storing petroleum products, chemicals, and bioproducts in large tanks. Oil traders and oil majors are the main customers for these storage facilities. The Tank Tiger, a company that acts as a clearing house for terminal storage, facilitates transactions between those in need of storage and those with available tank space. Desirable storage facilities are typically well-connected with pipelines for easy transportation of oil. Storage prices are typically quoted in dollars per barrel per month, and the minimum lease period is usually one month.
The Storage Infrastructure and its Changes
The storage infrastructure for oil has undergone significant changes in recent years. There have been mergers and acquisitions among oil majors and shale producers, as well as in the terminal storage industry. The industry has also experienced the construction of new refineries to meet global demand for renewables. Inventory levels and pricing fluctuations in the oil market influence storage activities, and the availability of storage capacity plays a critical role in stabilizing prices and meeting demand. Storage infrastructure and capacity have been able to adapt to changing market conditions.
The Challenges and Considerations of Oil Storage
Oil storage presents its own unique challenges. Crude oil can be stored indefinitely without major issues, as it is similar to leaving it in the ground. Storage facilities for petroleum products have to consider factors like price, safety, convenience, and the location's connectivity to pipelines and trading hubs. Cleaning and maintaining storage tanks is necessary to prevent buildup of sediment and sludge. Compliance with regulations and safety standards is crucial, and the industry has seen improvements in transparency and liquidity in storage pricing.
The Storage and Transportation of Oil
The storage and transportation of oil involves a complex network of pipelines, terminals, and tanks. Crude oil is typically transported from the wells to aggregation sites and then into tanks for long-haul pipelines. Midstream companies often own the terminals at both the origin and destination points of the pipelines. Refineries have their own storage tanks for crude oil and clean products. Delivery of products from terminals to end consumers can be done through trucking, barges, or pipelines depending on the location. Strategic storage reserves are maintained to ensure stability in supply during fluctuations in demand and production.
US oil production has surged to an all-time record of more than 13 million barrels produced per day. But where's all that crude actually going? And how is it being handled and stored? On this episode, we speak with Steven Barsamian, chief operating officer at the Tank Tiger, a clearing house for terminal storage, and co-host of the Tank Talk podcast, about the business of moving and storing oil and its related products. We talk about what storage capacity looks like right now, how it's changed over time, plus last year's diesel shortage in the Northeast. He also describes exactly how crude oil and refined products move from point A to point B, talks about the crud you find at the bottom of storage tanks, and explains why you should definitely not keep oil in the bathtub (or on your desk) to benefit from contango.