Oil Storage Tanks

The oil price crash and COVID-19 is indeed causing all sorts of problems as it relates to oil demand. While Gibson Energy president and CEO Steve Spaulding said that they would not start new projects, they do have plans of commissioning new oil storage tanks.
 
Spaulding mentioned that he remains in discussions about more tanks and supporting infrastructure. There has been a huge demand for oil storage since crude prices have started collapsing amidst the coronavirus pandemic. Producers are now dealing with higher than usual inventory.
 
Gibson seemed to get ahead of things by selling off its oilfield services and some of its propane units. This would allow them to focus their attention on oil storage. With at least 70% of the business in terminals, the company is not as concerned about the oil price drop as they were during the crash in 2014.
 
The company is now in the process of building new storage tanks in Alta so that an additional 1.5 million barrels of oil can be stored. When these tanks have been completed, there will be 13 million barrels of oil storage capacity provided by Gibson at the Hardisty storage hub with 1.7 million barrels in Edmonton.
 
Spaulding says that they have had a lot of short-term interest in storage, but they are 100% leased. They lease the storage tanks to longer-term operations and not to short-term traders that are trying to store oil for future markets.
 
Gibson Energy’s competitor, Enbridge, Inc., is repurposing a pipeline that is sitting idle. It was previously used by the Mainline pipeline in Saskatchewan for storing oil. After examining their system and identifying an opportunity to use part of the legacy Line 3 pipeline between Regina and Cromer, as temporary regulated storage before the line is decommissioned next year. This create enough additional oil storage space for 900,000 barrels. Enbridge is considering developing additional options for storing oil.
 
The temporary storage and additional maintenance options to their storage tank program will help create more than two million barrels of additional storage for 2020. Alberta oil producers announced shut-ins that total roughly 705,000 barrels per day or 910,000 BPD when diluent volumes blend with oil sands production are counted.
 
With voluntary shut-ins occurring, this will keep inventories from the tops of the tanks, as crude-by-rail volumes are being quickly ramped down and spare amounts become available on export pipelines. Oil storage is approximately 80% of capacity.
 
Despite what Enbridge is doing, Gibson does not have plans of changing its approach and has no plans of offering storage to traders for future markets. Spaulding said that Gibson’s storage is not in the commodity-based market. They don’t have storage to lease out and cannot benefit from the current state of the market aside from extending existing contracts.
 
They have a clear vision of what they are willing to do and are sticking with it.