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March 2011 • TA N K S TO R A G E OUTLOOK

Industry leaders share their visions on what the year holds – what

opportunities and challenges lie ahead?

Outlook for 2011The oil industry is rapidly changing and these changes will have particular repercussions

for the European oil logistics industry. The world’s economic gravity centre is moving from the US and Europe to Asia, pushed by the extremely rapid growing economies of China and India.

The growth in recent times of China and India will continue over the next few years – the International Monetary Fund GDP compound average annual growth projections show 12% for China and 11% for India in the 2011-2015 period.

This economic situation has a clear reflection in the oil industry as Asian regions will be increasing their oil consumption. The International Energy Agency has predicted a compound average annual growth of 2.4% for China and 3.6% for India in the 2009-2035 period.

To reduce its energy dependence from other countries, highly competitive oil refineries are being constructed to cover the countries’ demand. Although

their production will be mainly used for the region’s consumption, more and more tankers from Asian refineries are reaching Europe with refined products at highly competitive prices.

European oil demand is predicted to decrease at an annual rate of 0.8% in the next few years, in part due to environmental policies that are progressively introducing biofuels. Furthermore, local production is likely to be substituted by imported products from the Asian region and also from the Middle East, which is very active in the refining industry.

Due to their loss of competitiveness, in the next decade several refineries will shut down in Europe and some of them, depending on their physical location, reconverted into large storage facilities, which could be very competitive for receiving imported products.

As major oil companies are focusing on E&P activities, opportunities for logistics companies to acquire these reconverted storage facilities may arise. Additionally,

logistics companies may be able to make the most of new opportunities in the emerging countries. These are likely to need facilities, not only to export refined products,

but also to develop logistic systems integrating storage facilities and oil pipelines to efficiently distribute the refined products throughout the country.

Andres Suárez, strategy and business development manager at CLH

NuStar enters 2011 very bullish and poised to continue seizing growth and expansion

opportunities across our system, which spans seven countries in North America, Europe, and the Caribbean region. Our company has 8,417 miles of pipeline and we are the second largest independent liquids terminal operator in

the US with 88 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids.

Based on strong and growing demand from our customers, we invested over $150 (€109) million to add millions of gallons of storage capacity at our terminals in 2010 and have an additional $218 million in storage projects planned

for 2011. These strategic projects will allow us to seize opportunities that have been created by two significant and historic trends in our industry –changes in global crude and refined product trade flows and the shale developments in the US.

There are various reasons for the changes to the trade flows. One involves major crude finds in regions such as Brazil and other countries. In the case of Brazil, there is very

little storage infrastructure to handle the increased production of crude. It is the same situation with other finds across the globe.

Another key factor influencing the shifting trade flows involves the dramatically growing demand in India and Asia. Crude and product flows that have typically come into the western hemisphere are now moving into the eastern hemisphere.

To make it economically

Danny Oliver, senior VP of marketing and business development at Nustar

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feasible to transport and store new crudes and to re-route shipments from the US to India and Asia, storage capacity needs to be added at hub locations within major shipping routes where ships are already travelling. NuStar is fortunate to have terminals strategically located along major shipping routes, including our St. Eustatius Terminal in the Caribbean, and our St. James, Louisiana Terminal on the US Gulf Coast. We have made major investments to expand or modify storage capacity at both of these terminals to accommodate new crude sources and volumes of crude and refined products now being sent to the eastern hemisphere.

The other growth opportunity in which we are involved relates to the US shale developments in North Dakota (producing Bakken crude), and Texas (producing Eagle Ford Shale crude). These are major finds that are among the biggest in US history. NuStar has pipelines and terminals across the US, and our St.

James Terminal is strategically situated to receive and store the Bakken crude, so we are making additional investments to expand our storage capacity to accommodate the Bakken.

In 2010 NuStar invested in a pipeline project to transport Eagle Ford Shale crude to refineries and terminals in Corpus Christi, Texas, which is also on the US Gulf Coast. In conjunction with this effort, NuStar is investing in crude storage projects at its Corpus Christi-area terminals to take further advantage of the Eagle Ford play.

We fully expect these initiatives and the many others we are implementing to be high-return projects that will be accretive to our earnings and shareholders, both in the short and long term. And we continue to review and expect to invest in more aggressive growth projects that will allow our company, customers and shareholders to further benefit from the changing and bullish industry fundamentals.

Lutz Szibor, CEO of TanQuid

‘Mineral oils will remain a substantial part of energy supply for industries, households and traffic.

Therefore, TanQuid expects an overall stable mineral oil market, showing a small decline within the western European market.

This decline will be driven mainly by the increasing role of renewable energies as well

as alternative fuels and new propulsion technologies. These alternative fuels, as well as chemicals, offer opportunities for new storage and handling solutions. Furthermore, the rising demand in mineral oils in eastern Europe’s

developing markets contains large growth potential.

TanQuid expects changes in the ownership structure for petrol stations in connection with the further streamlining of downstream and logistical activities. This also applies to the European refinery business, which is currently subject to major changes influencing the product flows as well as available storage capacity and logistical infrastructure. This is expected to positively influence the tank storage business. For the structure of remaining market participants especially in Germany no substantial changes are expected in the short-term.

The implementation of legislation and the public perception are of growing importance. Stricter environmental and regulatory requirements incur higher costs so corresponding price adjustments will need to be realised. Although oil prices are expected to grow in the long-term this will only have a minor price impact on the overall price considering the small share of storage and handling costs.

OUTLOOK TA N K S TO R A G E • March 2011

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Gene McClain, President, Westway Terminals

‘Although 2010 was a subdued year for the global economy, the liquid bulk storage

industry remained crucial to helping producers, suppliers, traders and customers in managing their supply chains in times of uncertainty. Going forward into 2011 and the coming decade, we expect a more robust global economy driving recovery and subsequent growth of trade flow volumes in the agricultural and chemical sectors we cater to. As patterns of global production and consumption areas shift, the role of liquid bulk storage providers grows more important. The renewable fuels sector has added a further dimension, and its full impact on the storage industry is yet to unfold. No doubt we as well as our peers are keeping a close watch on this.

The recession has brought about a growing recognition on the importance of storage in balancing and providing logistic solutions in the supply and demand of liquid commodity products – which can only be good for the industry. We are also seeing storage customers demanding increasingly higher levels of service and flexibility, requiring storage providers to be ever more joined at the hip with their customers.

Westway is well positioned to meet these changing needs. In terms of growth, we continue to expand capacity at our prime hub locations in Houston and Amsterdam with 40,000m3 and 16,000m3 of infill capacity underway or planned for 2011, with the view that these locations will play a critical role in connecting global supply chains.

Westway maintains our belief in the long term sustainability and importance of the industry to the global economy. As the industry landscape evolves so do our strategies. We

are primed for growth and continue to seek opportunities to work with our customers, seeking new business partners

and evaluating new geographies and related business services.’ n

March 2011 • TA N K S TO R A G E OUTLOOK