Are terminals part of the degassing solution?

Today, despite the availability of terminals with Vapor Recovery Units (VRUs) and their associated costs, shipments are still left with significant challenges. In some cases the supplier only permits Middle Distillates or FAME pre-cargos, limiting the scope of its solution. Additionally, there are situations in which the Vapor Recovery Unit (VRU) can only be used for specific products. This limitation exists because certain gasses are too potent for the VRU to handle effectively.

Furthermore, during the spring and summer seasons, VRUs are prone to malfunctioning due to overheating. When a barge is not fully loaded, gasses can remain on top of the product and contaminate the cargo. In such cases, the barge may be able to load under a VRU, but if there is no VRU at the discharge port, the barge may not be allowed to discharge.

When renting storage, it can be beneficial if a terminal is equipped with a VRU. For instance, when storing products like FAME or diesel, having a VRU can offer a distinct advantage. However, this advantage is contingent upon the supplier allowing pre-cargos such as naphtha or other light products. Consequently, terminals with VRUs can differentiate themselves from competitors and potentially be more attractive to clients.

Oil companies

Oil companies that make use of storage facilities with a Vapor Recovery Unit (VRU) can gain a competitive edge by providing brokers with increased flexibility for loading operations. This advantage allows them to secure a higher number of suitable barges for their needs. For instance, if a gas-free barge is required but none are available, utilizing a barge under the VRU can be a mutually beneficial solution. The oil company obtains a barge for their operations, while the broker can load the barge to its full capacity under the VRU, subsequently making it gas-free once again.

The decision to invest in a VRU ultimately lies not only with the oil company but the terminal as well. While exact figures may vary, estimates suggest that the cost of a VRU likely ranges between €500,000 and €1,000,000. To illustrate the potential benefits, one may consider a scenario where the oil company cannot secure a gas-free barge for loading in the next five days, and the booked barge is delayed. Meanwhile, a sea-going vessel is waiting on demurrage, causing costs to quickly escalate into six-digit figures. It's worth noting that the above constitutes merely one single trip, highlighting the potential for significant costs associated with even a single delay due to a lack of availability of gasfree barges.

Delays

Barges are frequently delayed, and some delays can create costly domino effects which result in multiple barges being on demurrage. Another scenario could be a tank needing to be emptied for blending purposes. Delays in such situations can lead to substantial costs. One possible solution in such cases is to request a barge to become gas-free and subsequently wait in line at a degassing installation. However, the duration of this process can be uncertain, ranging from 2 to 5 days or even longer. Moreover, this approach does not necessarily guarantee a resolution to the problem, as it may simply shift the issue elsewhere in the logistical chain and the barge may still not arrive on time.

Additionally, degassing costs can be a significant factor. If an oil company needs to degas two barges per month (a conservative estimate) at a cost of €20,000 each, the annual expense would amount to €480,000. This situation can lead to internal disputes among product desks, with the FAME and diesel desks arguing for investing in a VRU, as they perceive the Gasoline/Light Products desks to be the source of the problem.

Conversely, the Gasoline/Light Products desk might contend that they do not require a VRU for loading their products, effectively shifting the responsibility back to the other desks. This investment is applicable to both spot and time charters. Time charters can be optimized for efficient backloadings, leading to cost savings. Instead of considering an additional time charter at a cost of over $1 million+ per year for dedicated sailing, companies may also explore investing in VRUs.

By conducting a cost-benefit analysis, companies can determine which option is more advantageous in the long run. Product desks and terminals should collaborate to assess the potential costs and benefits of this potential investment, taking into account factors such as barge delays, demurrage expenses, imported/exported volumes and degassing fees.

Given the fact that numerous oil companies lease storage facilities at various terminals, a potentially beneficial strategy for some of them could be to invest in a VRU collectively. This approach allows them to share the cost, as well as the terminal, among 2 or more parties, thereby potentially making such an investment a more financially viable option. The effective reality of such projects, however, often is that they require time to develop and materialize. The first year typically serves as an observation period, during which all parties assess the impact of new regulations and gain clarity on the actual costs involved. Consequently, the implementation of such ideas usually takes a minimum of 2-3 years.

Cargo matrix

As previously mentioned, some terminals and refineries are equipped with a VRU, but suppliers or customers may be hesitant to allow certain product combinations due to concerns over product contamination. For instance, they may not permit naphtha as a pre-cargo for diesel. However, if their product quality assessments are based on loaded volume and Remaining On Board (ROB), they might conclude that such combinations are feasible. In strong markets, when alternative barges are scarce, these principles are sometimes disregarded as well. In light of the new degassing regulations, it would be beneficial if product quality departments reevaluated their guidelines to enable barges to be more flexible in terms of product loadings and to load a wider range of products under the VRU. One potential solution could be the creation of a general matrix by industry leaders which would be widely accepted instead of having each company develop its own guidelines and/or barge product restrictions. This approach would help streamline operations and enhance efficiency across the industry