This interview was first published in Tank Storage Magazine, Volume 16, issue 07, December 2020 / January 2021.
“2020 has been challenging and has put us to the test, as it has for everyone. I am very proud of our organization, which has successfully executed important strategic initiatives amidst this unprecedented crisis, all the while upholding strict virus precaution measures.
On the ‘non-COVID’ end of our operations, it has been a year of completing the restructuring of our terminal portfolio and organization. We now have a smaller but healthier platform, fully aligned with our strategy to focus on terminals in global chemical hubs where we have either operational synergies with Odfjell Tankers or see other apparent angles for value creation.
We have moved Odfjell Terminals’ global management back to the Odfjell headquarters in Bergen, Norway, enabling better leverage on synergies with our shipping organization – and with a leaner organization that works closely with high-quality and empowered local management teams at our terminals in the US, China, Belgium and Korea.
Other selected highlights:
- Construction and commissioning of a new, fully automated, stainless steel tank bay in Antwerp
- Refurbishment and commissioning of capacity in Houston
- Refinancing of our US business, putting us in a good position to execute on our growth strategy for the Houston terminal
- Successful divestment of our terminal in Dalian
- Buy-out of joint venture partner Lindsay Goldberg from our terminal in Ulsan, Korea, increasing Odfjell’s ownership stake to 50%
All in all, 2020 will stand as a strong testament to our platform’s resilience from a commercial perspective, but just as much from an operational and organizational point of view.
COVID-19 has affected us in many ways, and we are very pleased and proud of how our different local teams have handled this threat. They have worked tirelessly to stay one step ahead and ensure our personnel’s health and safety, as well as uninterrupted, safe operations throughout.
The effects of Covid-19
Market wise, we have seen strong demand for storage across our portfolio, with most of our terminals at full or near full commercial occupancy. In Q2, we noted a drop in throughput and handlings, which in part was a direct effect of local lockdowns, but also a consequence of a drop in exports/imports. We see that this picked up again into the second half of the year.
2020 as a whole
In general, it appears that many of our peers have had similar experiences: Benefitting from a strong storage market while seeing lower activity levels than in 2019.
While the oil contango in April spurred an unprecedented demand for storage capacity in the oil products segment, 2020 has also shown us what the energy transition may have in store in terms of reduced demand for certain products. As such, we believe that we are well placed with a portfolio that is closely aligned with Odfjell’s core business of transporting, handling and storing specialty chemicals.
Looking to 2021
We are cautiously optimistic about 2021, first and foremost because 2020 has shown us how resilient our organization and business are. There is no doubt, however, that COVID-19 will continue to be an important factor in 2021, but it is hard to tell to which extent and for how long.
While we cannot influence the macro picture, we can, and will, continue to focus on improving our operations and strengthening our platform. After several years of restructuring and scaling down, we also look forward to gradually shifting our view outwards. As part of the Odfjell group, we have a quite unique platform within our segment. I see great potential in further leveraging on this, both to provide excellent service to our customers, to continuously improve operations, and to identify market opportunities.
COVID-19 will continue to be a question mark for 2021, but fundamentally I am optimistic that we will see increased activity levels. With more visibility on the future, we may see that some of the capital projects that were put on hold by chemical producers in 2020 come back on the agenda in 2021.
On the other side, I believe that we will also see some captive assets coming to market as producers impacted by COVID-19 will look at ways to shore up liquidity and strengthen their balance sheets.
Lastly, I am convinced that we will continue to see increased attention and expectations from regulators, customers and shareholders on how operators address sustainability matters within the environmental, societal and governance sphere.
The energy transition
The Odfjell Group has run several environmental and efficiency programs for years, and recently launched ambitious goals to further reduce our environmental footprints: We aim to reduce our carbon intensity by 50% by 2030 (compared to 2008 levels) and to have a climate-neutral fleet from 2050.
Both targets go beyond the targets set by IMO and contribute to achieving the UN Sustainable Development Goals.
There is no doubt that the energy transition will have significant impacts on the storage industry. The shift towards alternative sources of fuel also means a shift in demand for capacity and infrastructure. With our core market being specialty chemicals and other specialty bulk liquids, we may not be as directly affected as some other operators.
While we may see some pivoting into our market segments due to this, I see the energy transition and increased focus on sustainability as an opportunity for ‘best in class’ operators to leverage on this as a competitive advantage.
Challenges in the near term
In the short term, COVID-19 is something we will have to continue to lead with. Our teams are taking extensive steps to ensure our people’s health and safety while providing excellent service to our customers.
Depending on how 2021 pans out, however, COVID fatigue may become a bigger issue. While we all quickly transferred to digital platforms such as Teams and Zoom, and everyone saves a lot of time with less travel, it is not a perfect substitute for meeting face to face – especially when managing a global organization, keeping up interactions between colleagues on a day-to-day basis, and nurturing relationships with our customers.
I am optimistic, though, that we in 2021 once again can travel and meet with our colleagues, customers and investors. Personally, I cannot wait to see what 2021 holds in store.”