Digitisation and automation are remaking the terminal industry
Kathryn Clay, President, International Liquid Terminals Association, affirms that COVID-19-led drop in fuel demand has put liquid terminals firmly in the spotlight. Furthermore, the terminal business is headed for a major transformation with the increased application of digitization and automation.
Many experts say the key to successfully coping – or even thriving –- during a difficult time is to find the silver lining in the situation. The coronavirus pandemic has presented challenges to the liquid terminal industry, but it has also demonstrated the resilience and importance of the industry to the economy overall.
Without a doubt, COVID-19 put terminals in the spotlight. With drivers worldwide heeding public health guidance to stay at home, gasoline, diesel and jet fuel demand plummeted. At the same time, producers, especially Russia and Saudi Arabia, flooded the market with crude oil. The result was a dramatic drop in world oil prices and sharp increases in the amount of crude oil and petroleum products in storage. Tank storage soon approached full capacity, presenting immediate operational challenges.
Market analysts, who in recent years gave only a passing nod to weekly storage inventory reports, began reporting on them in earnest. The spotlight on terminals became even brighter at the end of March, when West Texas Intermediate crude oil went into negative territory as a direct result of storage. The Energy Information Administration, the statistical arm of the U.S. Energy Department, even expanded its weekly report to include estimates of U.S. crude oil storage capacity utilization.
The collapse in demand rendered an extraordinary flexible industry hampered at full capacity. The liquid terminal industry began to act. For example, our members took every opportunity to consolidate existing stocks at storage facilities. Pipeline operator Enterprise Products Partners began offering two-way shipping along a crude oil pipeline connecting the Gulf Coast and storage terminals in Cushing, Oklahoma, in a move to give oil companies more storage options to cope with the global supply glut and rapidly filling storage stocks. And oil traders were storing record volumes of oil on ships as onshore storage filled. Some terminals investigated switching liquid food storage tanks to petroleum product storage.
The US Department of Energy even awarded contracts to store a total of 23 million barrels of crude oil in the nation’s Strategic Petroleum Reserve, its emergency stockpile, to help alleviate the oversupply situation. Considering the exceptional market circumstances, ILTA had no objection to the leasing space in the reserve to commercial interests. We communicated to President Trump and the Energy Secretary Dan Brouillette that once normal market conditions were re-established, ILTA would oppose further government actions in commercial storage markets. “Allowing government-owned storage into the market constitutes a subsidized storage service that could place private commercial storage operators at a competitive disadvantage,” we told them in an April 29 letter.
ILTA has been hard at work to support our membership as they pivot to address COVID-19 related challenges. Our work has focused on four main efforts: providing a forum for peers to exchange successful strategies in reacting to the new constraints; advocacy to remove regulatory burdens emerging from the special circumstances of the crisis; leveraging the high visibility of storage markets during recent market imbalances in our communications strategy; and finally, folding in all of this new knowledge to enrich the educational content of our annual conference and trade show.
Role of next-generation technologies
Even as COVID-19 challenges the industry, digitization and automation are remaking the terminal industry and driving efficiencies. Port and terminal operators in Europe tend to be further along the transition to digitization than similar facilities in North America. We are beginning to see that change, and it is an exciting time to be in the industry.
One of the implications of the new digitization of the industry is blockchain technology. Blockchain is profoundly changing how the world works, and how business gets done. Maritime applications of blockchain can bring multiple benefits to importers, exporters, terminals, transporters and ship owners.
Blockchain technology has the potential to increase efficiency and lower costs in the exchange of goods and shipments, while increasing trust and resilience throughout business networks. In just the last few years, some of the most important shipping companies, such as Maersk, Hyundai Merchant Marine and Maritime Silk Road Platform, have teamed up with tech giants to create blockchain shipping systems to streamline their logistics, reduce administrative costs, and safeguard against cybercrime.
As marine shipping companies and ports around the world begin to embrace blockchain, terminal operators need to understand this trend and how it is affecting the way their partners and their customers will increasingly want to do business. Maritime blockchain can lead to more transparent and more efficient global trade.
Most parties in the maritime industry communicate through lengthy paper chains, making it impossible to track shipments in real time. By replacing paper systems, all parties to a blockchain can have access to pertinent information as transactions occur, making it easier to plan operations efficiently and to reduce costs.
Ports, terminals, and shipping companies are also at the beginning of a business transformation made possible by predictive analytics. One estimate puts the number of data points generated by the maritime and shipping industry to be over 100 million each day. This wealth of data has the potential to optimize operations, improve cybersecurity, and increase overall efficiency of the supply chain.
Processing this massive amount of data is a challenge, and business networks can benefit by joining forces in data analysis. Blockchain can make it possible to safely maintain crucial data in a unique, shared “invitation-only” platform for ports, terminals and agents that operate along a single supply chain.