South Africa’s oil hub woos global traders with million-barrel tanks

Bloomberg

What started as a strategic oil storage for South Africa during apartheid is now gearing up to attract the biggest traders as it turns into a global center for crude.
A venture building a dozen new interconnected tanks on Africa’s southern tip will add to neighbouring government-owned capacity, making it one of the world’s biggest hubs.
They are on some of the busiest energy transit routes, giving traders the option to store and blend various crude grades to help maximize profits at a time earnings have taken
a beating.
“The location is key, and then the flexibility is the other main selling point,” said Johnny Stewart, principal analyst at consultant Wood Mackenzie Ltd. The tanks are able to accommodate a wider market with the blending capability and configuration, he said.
The partially underground tanks tucked away in Saldanha Bay are a monument to oil trading. A big advantage is their strategic position between the Atlantic and Indian Oceans, giving merchants relatively easy access to markets in Asia, Europe and America.
Each new tank has concrete walls and about 200 steel-reinforced concrete columns support a roof that large trucks can drive on. Unlike metal tanks, concrete is lower maintenance and helps keep temperatures constant, meaning fewer barrels will be lost to evaporation, said Arthur Martin, the project’s commercial manager.
They’re also built to allow nearly all the stored oil to be drained out, he said. “Even if you leave 10,000 barrels—times $60—it’s money that’s gone,” he said at the project site.
Over 100 meters (328 feet) across and 18 meters deep, each tank can take in 1.1 million barrels of oil. Heavier crude grades from places like Colombia and Venezuela can be blended using specially designed nozzles in the storage.
Oiltanking MOGS Saldanha, the joint venture of Hamburg-based Oiltanking GmbH and local company MOGS Oil & Gas Services, has already leased out at least half of the new tanks. Over the next few days, the company will look to drum up more interest during the International Petroleum Week in London, one of the oil industry’s biggest gatherings of traders and producers.
Their success is partly dependent on oil-market structures that sometimes make it appealing to store crude and sell at a later date. It also depends on how much OTMS charges for leasing the tanks in comparison with the government-owned storage nearby.