Bunker Fuel Supply & Storage Managing the Logistical Challenges. Larry Taylor John McDonald

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1 Bunker Fuel Supply & Storage Managing the Logistical Challenges Larry Taylor John McDonald

2 Outline Definitions Today s presentation will discuss the logistic challenges Background information for the logistic challenges Management of the challenges Presentation 2

3 Definitions A. Bunker and Residual Fuel Oil B. Logistics The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition including inbound, outbound, internal, and external movements. Product handling requires: 1. Mode of Transport 2. Maintaining product integrity 3. Inventory Management 3

4 Definitions (Cont.) C. Mid-Stream Assets Midstream is a term often used to describe the processing, storage and transportation sectors within the oil and gas industry. Midstream defines the industry processes that occur between the upstream and downstream sectors. Midstream assets consist mainly of transportation modes (pipelines, barges, trucks), processing and storage facilities. 1. Past a) Captive b) 3 rd party providers 2. Present a) 3 rd party providers 3. Future a) Strategic alliances b) Partnerships 4

5 Today s Presentation A. Lots of logistic challenges but summarized under 3 categories: 1. Cost management 2. Performance of assets 3. Support the market requirements B. meeting the challenges of a new modern terminal facility 5

6 Background Information for the Logistic Challenges A. Cost Management 1. The financial model has changed the last ten years for mid-stream assets A. MLP s a) Tax benefits B. Private equity (i.e. Capital intensive and cash flow) a) Higher returns b) Risk adverse 2. Cost increases c) Not long term players A. Pricing (replacement cost) B. Operating cost a) Regulation C. External factors a) Price of oil 6

7 Background Information for the Logistic Challenges (Cont.) B. Performance of assets 1. Best practices (vary by mode) A. Industry standards a) Association work B. Operating procedures a) Management/Discretionary 2. Terminal industry standards for dock utilization has been established by the marine industry, terminals and specifically the market: A. For the terminal industry the accepted/ recommended policy is: a) 65% for ships b) 80% for barges B. Factors that influence that decision a) Vessel time to load / unload b) Maintenance, operational procedures c) Weather d) Incidences (Spill, injury, damage, etc.) 7

8 Background Information for the Logistic Challenges (Cont.) C. Support the market requirements 1. Background A. World demand and flow patterns B. Refining industry 2. Supply A. Source/ Location B. Inventory Management 3. Logistics (Supply/ distribution) A. Storage capability for collection/ blending B. Mode of transportation i.e. rail, tank car, barge and ship C. Product integrity 4. Pending legislation A. Impact i.e. sulfur regulations B. Alternative response 8

9 Management of the Logistical Challenges A. Cost Management (utilization of assets) 1. Competition 2. Contracts and escalation A. Pricing B. Escalation criteria 3. Partnerships, strategic alliances (ownership, control, etc.) B. Performance (vetting your suppliers/partners) 1. Safety 2. Environmental responsibility 3. Operating procedures C. Support market requirements 1. Management of risk A. Safety and environmental 2. Control cost 3. Inventory Management A. Product Integrity 9

10 Presentation A. New modern facility 1. Schematic B. Driven by the market C. Value proposition 1. Design/technology A. Turn tankage B. Eliminate the demurrage 10

11 Master Plan Map 11

12 The Next Generation Black Oil Terminal Value Proposition Waterfront o Capability 4 Ship Docks Aframax, Panamax, Ocean-going barges Barges 16 barge spots to handle river tows and bunkering Rail car facilities 24 spots o Purpose To eliminate demurrage Tankage o Capability Blending Pump Rates Change of Service (i.e. VGO, Slurry Oil, Blendstocks) o Purpose Designed for optimum utilization (multiple tank turns) 12

13 Value Proposition (Cont.) Pumping and Line Stripping o Capability Pump rates for loading and unloading vessels efficiently Booster pumps at barge docks for unloading o Purpose High-speed operations Eliminate contamination / product loss Inventory Management System o Purpose To provide customer service Traffic control / scheduling 13

14 Primary Sources Of Residual Fuel Oil Components HC C2H2 CRUDE Heavy Distillate FCCU PyOil Vacuum Gas Oil Slurry Decant HCO CBO Atmospheric Resid LCO Residuum VACUUM VIS BREAK Vacuum Resid COKER Coke #6 Asphalt