The oil product trader Gulf Petrochem is eyeing entry into East Africa next year and expanding further into India and Fujairah. Currently the oil market is in contango, where spot prices are lower than future prices, driving investment in the oil storage business.
As an oil trader, Gulf Petrochem needs oil storage tanks to help it improve its revenue stream, particularly since 80 per cent of its top line comes from the trading business. The firm is forecasting up to 70 per cent increase in its trading business this year, versus last year.
“If it’s your terminal you are able to operate it much more flexibly than [when you have a terminal] with somebody else,” said the Gulf Petrochem executive director Thangapandian Srinivasalu.
“You have the option of playing into the contango as much as you want to.”
Gulf Petrochem is looking to take advantage of economic growth in India and East Africa to enter the markets, which have good logistical links with the UAE.
In East Africa, the company is looking to have a physical presence in Kenya and Tanzania next year.
Building a terminal in East Africa will be at cost of about $15 million each.
Gulf Petrochem already has a 250,000 cubic metre terminal in Pipavav in the west coast of India and would like to grow its presence further in the region with a new terminal and another one in the eastern part of the country. It is looking at expanding in India by next year. The cost of each terminal could range between $50m and $70m.
In Fujairah, the company is expanding its 412,000 cubic metre oil storage tanks by adding 260,000 cubic metres at a cost from $55m to $60m.
“Our tanks are fully occupied for almost a year now [in Fujairah] and we are forced to store products outside our terminals because our trading activity has improved and increased,” said Mr Thangapandian.
The first phase of expansion in Fujairah should be finished in December next year, with final completion set for March 2017. The expansion will also allow the company to store crude oil, naphtha and petrol in addition to other products.
The company also last week inaugurated its $60m storage terminal with a capacity of over 200,000 cubic metres in Hamriya free trade zone, Sharjah.
dalsaadi@thenational.ae
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