Covid-19 making critically clear the importance of storage, says the ILTA
Recent events have highlighted the importance of the liquid terminal industry to the petroleum supply chain as the terminal storage improves the flexibility of the entire supply chain and its ability to respond to market fluctuations.
“Over the past week, the market has been reminded of the critical role played by terminal storage,” noted ILTA President Kathryn Clay. “Nationwide, tank storage at liquid terminals can accommodate over 500 million barrels of crude oil.
“That’s enough to store all the crude produced in the United States over a 40-day period. That is an enormous amount of storage that, under normal circumstances, provides ample flexibility for pipelines and distributors.”
Ordinarily, storage space is at a surplus even during periods of oversupply or lax demand. Recent circumstances have caused a “perfect storm” in increasing the demand for petroleum storage.
Not only has gasoline demand fallen off precipitously due to lessened economic activity as a result of Covid-19, but simultaneously, foreign petroleum producers such as Russia and Saudi Arabia are flooding markets with crude oil.
Most liquid storage terminals do not own the crude oil or petroleum products stored on their facilities. Storage is a contracted service offered to those that own and sell the product, such as petroleum producers, distributors or commodity traders. ILTA member companies plan for their facilities’ total storage capacities based on contracts with their customers.
“Expanding storage capacity is a lengthy process that varies by the size of tank and permitting jurisdiction. On average, a typical aboveground storage tank in a petroleum product terminal would take at least 12-18 months to permit and construct,” said ILTA Chairman Kip Middendorf, who is also vice president and managing director of Wolf Lakes Terminals.
“Terminal operators are closely attuned to the needs identified by their customers. No one—not even our customers—could have foreseen these extraordinary circumstances, and an unprecedented run on storage is the result. We will continue to work with customers during this extraordinary period to provide safe and quality services.”