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Wednesday, July 22, 2015

Bullish near-term outlook for oil and gas storage

PETALING JAYA: In the oil and gas sector, the storage industry’s near-term outlook remains bullish, according to UOB Kay Hian Research.
The research unit pointed out that oil price do not impact long-term decisions of building storage terminals as they are primarily driven by storage demand.
The report was issued after the Platts Asian bulk liquid storage (ABLS) conference which was held recently in Singapore.
The conference focused on the global storage outlook for oil and gas, and the role of the Straits Hub (Singapore, Malaysia and Indonesia).
“We see a bullish near-term storage outlook as existing and planned increases in storage capacity are sufficient to meet future demand, supported by higher product trade volumes and refinery expansions,” said the research unit.
It said Johor storage rates were at between S$5 and S$7 (RM13.90 to RM19.50) per cu m for term leases.
It said the outlook for the long term was still unclear as storage rates and tenures could be under competitive pressure once additional capacity came on stream.
UOB Kay Hian Research pointed out that Dialog Group Bhd was a major beneficiary of Pengerang and Tanjung Langsat terminals.
It said MISC Bhd had a minor exposure in Tanjung Langsat but was an indirect global player via its 50% stake in Netherlands-based VTTI B.V. with a global capacity of 8.06 million cu m.
It said the Malaysian terminals were projected to see capacity increasing to eight million to 10 million cu m by 2020, and were integral to the Straits Hub, to boost capacity to more than 30 million cu m
“We believe Dialog and MISC are trading at sector premiums, partly due to their exposure to storage terminals. The unique exposure to storage, akin to a long-term concession, partly justifies the stocks’ premium valuation to the Malaysian oil and gas sector,” said UOB Kay Hian Research.
The report also noted that valuations for existing storage terminals remained attractive.
It said oil traders and national oil majors such as China Petroleum and Chemical Corp, Petroliam Nasional Bhd, Royal Vopak and Oiltanking were being more active in mergers and acquisitions of storage terminals for strategic reserve or dedicated storage capacity.
“We view this positively because this underpins differentiated needs of storage demand, otherwise further unplanned capacity increases could generate long-term price wars among terminals,” said UOB Kay Hian Research.
http://www.thestar.com.my/Business/Business-News/2015/07/22/Bullish-nearterm-outlook-for-oil-and-gas-storage/?style=biz

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