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Demand for storage exploded following the oil price plunge in
2014 because the abundance of crude for immediate delivery meant
traders could make millions by buying oil cheaply and storing it
to resell later as prices recover.
As the Organization of the Petroleum Exporting Countries (OPEC)
decided to cut oil output at the end of 2016 to prop up prices
and help ease the global glut, the market balance began to
change.
Today, future prices are no longer trading at a steep premium to
immediate prices, thus reducing the appeal of storing oil and
prompting some of Glencore's rivals to reduce exposure to
storage assets, including Vitol and Gunvor.
If the sale reaches completion, Glencore will likely end up with
minority stakes in the assets. The company owns much of its
storage terminal interests via joint ventures and is selling
half of these stakes, the sources familiar with the sale said.
A spokesman for Glencore declined to comment.
"It's an exotic combination of assets with a variety of
functions, mainly storage. It's most, if not all, of Glencore's
global liquid storage," one source said.
The portfolio includes assets in Argentina, Belgium and
Madagascar, the source said.
"As a bundle it would appeal to someone looking for an entry
point to certain countries," the source added.
The source said the assets were generating EBITDA or core
earnings of around $75 million a year.
Glencore and other trading houses with large storage assets
compete with listed storage firms such as Vopak NV, Magellan
Midstream Partners LP and Kinder Morgan Inc.
Given a limited number of listed storage firms, price to
earnings (P/E) ratios in the sector tend to vary significantly
between as low as 7 and as high as 15, which in theory could
give Glencore's storage assets a value of between $0.5-$1.1
billion.
Lately, some of Glencore's competitors have been divesting
similar assets. Vitol, the world's largest independent oil
trader, sold a 50 percent stake in its terminal and
infrastructure company VTTI to Buckeye Partners in October last
year.
Swiss trader Gunvor is looking to sell a stake in a Rotterdam
storage terminal and Trafigura is considering an IPO for
downstream company Puma Energy, in which it holds a major stake.
(Additional reporting by Dmitry Zhdannikov; Editing by Dale
Hudson/Ruth Pitchford)
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