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The UAE oil storage terminal market size was USD 115.51 million in 2019 and is projected to reach USD 541.97 million by 2027, exhibiting a CAGR of 2.6% during the forecast period.
Oil storage terminals are a crucial part of an oil and gas supply chain. These terminals are vital for oil trade activities across the world. Oil and gas export account for a huge share of the UAE’s economy. UAE has several oil storage terminals, but Fujairah is the most critical storage terminal in the Middle East and Africa, located on the UAE's Eastern seaboard. The increasing global demand for oil and gas resources, coupled with the growing population, will bode well for the overall market's growth in the forthcoming years. The increasing investments in the research and development of advanced terminals with improved efficacies will positively impact market growth.
Lockdown & Social Distancing Restrictions amid COVID-19 to Heavily Impact Progress of Oil Storage Terminal Projects
The COVID-19 pandemic has created economic turmoil across industries and businesses worldwide. The lockdown & social distancing restrictions in the wake of the novel coronavirus have crippled economic activities, disrupting supply chains, delaying projects, creating a shortage of labor, and causing demand for goods and services to tumble. With a ban on international travel and a reduced number of flights, global trade activities have been put on hold for the time being.
The oil and gas activities are generally considered essential by several governments worldwide and have been mostly exempt from the lockdown measures. The spread of Covid-19 poses a significant threat to the global oil and gas industry. China and India are the major importers of oil & gas across the globe.
However, due to the COVID-19 pandemic, oil & gas demand has decreased significantly in these countries. Therefore, to address this situation, the Organization of the Petroleum Exporting Countries (OPEC) convened a summit to ask the leading oil producers to cut the oil production by an additional 1.5 billion barrels. This has economically affected the companies operating in the market. Furthermore, given the unlocking procedures in several countries, the market will take a long time to recover these losses.
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Rising Investments to Build Advanced SPR is a Prominent Trend
The requirement of the strategic petroleum reserves (SPR) has seen many countries prioritizing their storage capacity expansion to suffice the oil demand in case of import failure or crisis. Following the coronavirus pandemic, various countries, including UAE, are expected to invest in their storage capacities for crude oil in the forthcoming years. This is considered to avoid any shortfall of energy during uncertain conditions and be less dependent on regular imports over a long period.
The increasing demand for different types of fuels and storage tanks is required to construct the terminals is expected to rise. For instance, the adoption of liquefied petroleum gas was less in percentage over the last decade. However, today, the same has increased at a very healthy rate in the UAE. Therefore, the demand for storage terminals at high-pressure conditions has increased significantly, which will drive the market during the forecast period.
Increasing Demand for Crude Oil and Petroleum Products to Drive Growth
The key market driver for the UAE oil storage terminal market is the increasing demand for various types of petroleum products that has compelled diesel producers to drive up their production capacity. This, in turn, has hiked the working rate of refineries and, therefore, created significant demand for the construction of storage terminals. The crude oil products such as diesel, petrol, aviation fuel, and others have witnessed growth in demand exponentially.
In UAE, the automobile and industrial sectors have expanded exponentially following rapid urbanization and increased demand for various end-use products. Automobile sales have been at a peak in the last decade and have been surging every year, leading to the increasing adoption of liquid petroleum. Hence, the rising automotive sector will favor market growth.
The industries running on crude oil products for aviation fuel and other applications have also expanded. The chemical industry requires specific light distillates from refineries for the production of different chemicals. This requires constructing a particular type of storage tank terminals as per demand for the end product by various industries. Therefore, the growth in the chemicals industry will propel market growth.
High Demand for Energy Globally to Favor Market Growth
One of the major factors driving the growth of the oil storage terminal is the increasing demand for energy due to the rising population and rapid urbanization. The UAE is experiencing a significant rise in population and an increased number of storage terminals in the past few years. The region is also leading in the chemical industry and automobile sales. This has boosted the production rate that is likely to drive the demand for oil storage terminals in the region.
Several new oil discoveries in the UAE are leading to a positive influence on the market. For instance, in November 2019, UAE’s Supreme Petroleum Council (SPC) revealed the new oil & gas discoveries. SPC said the discoveries included 7 billion barrels of crude oil and 58 trillion cubic feet (tcf) of natural gas.
Rising Adoption of Renewables May Hamper Growth
One of the key market restraints for the oil storage terminals market is the rising adoption of renewable sources for aviation fuel and various industries that earlier used conventional fuels. The catalysts for this have been the increasing concerns over the rising global temperature and carbon emissions control schemes. This has resulted in the shutting down of many industries that used fossil fuels and contributed to global warming. Also, green energy targets are being set up across the UAE and several countries worldwide to have the power generated using solar, wind, and other renewable sources. The other factor hampering the growth is the high cost required for the terminal construction and the required periodic maintenance.
Commercial Reserve Segment to Remain Dominant
Based on the type, the market is segmented into the commercial reserve and strategic reserve.
The commercial reserve segment dominated the market in 2019. The increasing oil & gas production activities and the growing demand for crude oil in several end-use sectors are expected to drive the market during the forecast period. The suppliers are actively focusing on inventories and infrastructure development due to the rising crude oil demand and are storing crude oil in large quantities. Also, fluctuating crude oil prices have resulted in oil-importing countries safeguarding their energy security through enhanced oil storage.
The strategic reserve segment is expected to contribute significantly during the forecast period. The growing trend for strategic petroleum reserves will positively influence the industry landscape.
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Floating Roof Segment is Anticipated to Dominate in the Upcoming Years
The market is segmented into the floating roof, fixed roof, bullet tank, and spherical tank based on the tank type.
The floating roof segment dominated the market in 2019. The floating roof tanks are widely preferred for oil storage across the globe. Moreover, they can be customized according to the personal requirement of the customers. The segment's growth can be attributed to the floating roof's efficient design, which helps minimize evaporative losses and corrosion.
The fixed roof segment is expected to contribute significantly during the forecast period. The growing penetration of the segment can be credited to the high degree of containment of these products that minimize a fire incident's risks. Moreover, declining installation costs of fixed roof designs are expected to boost the segment growth.
A bullet tank is a storage container that stores natural gas liquids (NGLs). These tanks come in different sizes ranging from 6,000 to 30,000 gallons, with an 18,000-gallon tank being the most common size.
A spherical tank has lesser welded connection points that contribute to its strength. These types of storage tanks are more expensive to fabricate than the other types of storage tanks.
Crude Oil Segment is Expected to Grow at a Considerable Pace
Based on the product, the market is segmented into Diesel, Petrol, Aviation Fuel, Crude Oil, Kerosene, and Others.
Petrol and diesel are the two most used fuels across the region, and therefore, the majority of the tanks are used for storage of the same.
In terms of application, the aviation fuel segment is expected to show considerable growth in the region as the air traffic and air passengers have increased rapidly over recent years.
The crude oil segment is expected to grow at the highest CAGR during the forecast period. The increasing oil production in the UAE is further encouraging suppliers to improve their inventories and infrastructure to store a large quantity of oil. This factor will, in turn, boost the UAE oil storage terminal adoption in the region.
Key Participants Are Concentrating On Oil Storage Terminal Capacity Expansion
The market is consolidated owing to the limited number of players operating the market. Currently, Royal Vopak, Horizon Terminals, and VTTI lead the market, accounting for a dominant share in 2019.
The major players in the market are employing several strategies to consolidate their position in this market. One of the preferred strategies is expanding the oil storage terminal capacities by introducing new ones or upgrading the existing ones. For instance, in October 2020, Brooge Energy, a midstream oil storage and service provider, commenced the preconstruction work for its Phase III oil storage terminals and refinery outside the Strait of Hormuz situated next to the Port of Fujairah, in the UAE. The preconstruction work includes the assessment of the soil investigation and the Environmental Impact Assessment report. The storage facility is expected to be operational in late 2022.
An Infographic Representation of UAE Oil Storage Terminal Market
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The market research report includes a detailed oil storage terminal industry analysis. It focuses on key aspects such as leading companies and leading product applications. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the report encompasses several factors that have contributed to the advanced market's growth over recent years.
Value (USD Million)
By Tank Type
Fortune Business Insights says that the market size was USD 115.51 million in 2019.
The UAE market is projected to grow at a CAGR of 2.6% during the forecast period.
The floating roof segment is expected to lead the market.
The UAE market size is anticipated to reach USD 541.97 million by 2027, growing at a substantial CAGR of 2.6% during the forecast period (2020 – 2027).
The increasing global demand for oil and gas resources, coupled with the rising population, is the primary factor driving the market growth.
In terms of product, the diesel segment held the largest share in 2019
Royal Vopak, Horizon Terminals, and VTTI are the major players in the market.
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