Rob Nijst & Jared Pearl – CEO & CCO, VTTI – Netherlands
Rob Nijst and Jared Pearl share an intimate account of VTTI’s motivation to become a publicly-traded company on the New York Stock Exchange, and their personal vision on the strategic direction of their global operations.
Last time we met in 2010 you stated your main ambition was “to make VTTI one of the top five terminal and infrastructure companies in oil with a global footprint.” Five years later how far has this vision advanced?
Rob Nijst (RN): Last time we met in 2010, MISC Berhad had recently become co-owner of the company. Since then, some major game changers have taken the organization to the next level of excellence. For example, we filed for an IPO with the SEC to be able to take advantage of the strong and experienced investment base for the midstream market in the US, and, in the process, we have become the first global terminal MLP company in the US. There are massive growth opportunities available globally in a very fragmented midstream market, and VTTI decided to undertake the IPO to help bolster our role in facilitating more consolidation. The access to funding via the markets will thus fuel VTTI’s ambitious growth agenda and the expansion of our global footprint, ensuring that we established our presence amongst the top independent storage terminal companies globally. Nonetheless, as leader of the organization, I still believe we have not reached our full potential as we are always searching for new growth opportunities. Our resolute ambition for continuous global expansion is very much integrated within every aspect of our daily activities.
What sets VTTI apart from the competition?
RN: VTTI’s unique selling point is the flexibility and efficiency we offer to best service our clients and stakeholders. Indeed, we started this company by designing our terminals based on the stringent requirements of one of the most demanding traders in the world and based on our clients’s trading ventures. For this reason, we possess many capabilities around blending, pipeline diameters, and pumping that collectively constitute flexible and efficient operations, while the company’s overall culture has grown around this trader spirit that shapes our accommodating approach towards customers. Finally, being strategically headquartered in Rotterdam further sharpens our competitive edge.
Jared Pearl (JP): VTTI’s approach also quite different in terms of the customer experience, where our teams are highly responsive with a ‘can-do’ attitude to issues or opportunities. We are not the only company to claim this. However, for VTTI, we see this validated by the fact that nearly all of our customers look for more storage with us. Also when prospective customers check around the market or talk to independent players such as inspectors, they hear for themselves about the asset functionality and the solution orientated behaviour at VTTI. So the key is that value is delivered for the client by combining the high functioning asset design, that Rob referred to, with this highly driven working culture and practices.
We realized that our customers’s needs change as they see optimization options. These can occur even at the point when the vessel is approaching the jetty, so we accept shift in the blend program to accommodate this. We train our teams to understand what drives this, and then how to interact between the operations and the trader in terms of how to meet the change request. Should we ever find that there is a new operation mode that the customer values then we have many examples of where we have engineered small improvement projects to enable them.
How are you parlaying the current market trend of a lower oil price to help the company in the long term?
RN: Current low oil prices do not guarantee tomorrow’s business. It is crucial to understand that VTTI’s success does not depend upon the fluctuations of the oil price. We live by the needs of our clientele, and we adjust accordingly. It is true that low oil prices can bring about a contango structure, which can be beneficial to terminal companies. For example, the high contago structure in 2008-2009 was helpful for companies that needed to restructure storage contracts. VTTI, however, does well in both the contago market and the backwardated market. Having the right infrastructure means that we can aid our customers who desire either a high through-put or longer storage periods according to market conditions. Overall, current oil prices have not translated into higher contango rates for our company.
JP: Earlier this year crude storage globally would have filled as a result of the fairly steep contango in the market. But if you look at our assets, then pure contango storage is only a small part of the value that those terminals represent to the customer. The locations we have are based on physical trading hubs or blending or structural supply. This is not the same across the spectrum of storage companies. So this means that while we of course prefer contango markets, the sensitivity of VTTI to market structure is lower than many of our competitors.
VTTI has enjoyed rapid and continuous growth – from zero to eight million cubic meters capacity – since its formation in 2006. How is VTTI poised to seize upon future growth opportunities?
RN: We posses something that other terminal companies do not have: location, flexibility, and our unique customer approach. Furthermore, our two main shareholders, Vitol and MISC Berhad, are intimately involved in every aspect of the energy supply chain. Therefore, we have access to valuable market leads, market trends, and knowledge. As a company, we identify new business opportunities monthly and pick and choose the best options to promote our organization’s interests. When you combine the company’s wealth of knowledge thanks to our shareholders, our strategic locations, and our own business development strategy, the result is an exceptional company with unequivocal capabilities in penetrating new markets.
How do you balance your portfolio between greenfield opportunities, expansion projects, and acquisitions?
RN: Our key priority is to continuously expand on our existing sites. We have been doing this recently in Antwerp and Rotterdam, where we commissioned new projects to keep our facilities up to high industry standards and to thus yield higher returns. Afterwards, we look at acquisitions and our ability to grow through building new facilities in various parts of the world that do not have terminals. For example, we are currently looking into greenfield opportunities in Cape Town, South Africa and Brazil.
With an impressive portfolio of six state-of-the-art terminals located in four key energy hubs worldwide, what geographic regions do you consider the most promising for VTTI’s ambitious growth plans?
RN: Our company strategy is to consider all opportunities that have a function in the supply chain, but we do not consider investments based on market pricing structures. Location is a primordial concern, as we believe this element is pivotal in keeping our terminals in demand. The company is currently looking at multiple opportunities in the Mediterranean, Africa, and Asia Pacific – all global hubs that need to be more integrated.
JP: The same standards are employed in our terminals around the globe to ensure equally promising market opportunities throughout our company’s global operations. Taking a look at the growth options that we are pursuing, we only look to acquire where we see that we have a good understanding of what drives the flows in or out of that location, and that there is scope to enhance the functionality of the asset.
The Port of Rotterdam is often seen as Europe’s “Energy Port” – providing both the vision and the physical location for industry players come together to innovate. How much of reality do you see in those assertions?
RN: Approximately 75 percent of products being consumed in Europe pass through the ARA region, and more specifically Rotterdam with its extensive links to the hinterland. Within the ARA region, Rotterdam is generally more associated with refining, Amsterdam with gasoline blending, and Antwerp with the chemical and petrochemical cluster markets, but this division is becoming less defined, as all these ports have increased their oil and gas presence as a result of Rotterdam’s strategic importance in the oil and gas market. All the conditions are present to ensure that this region remains an energy hub, yet nothing is guaranteed due to fluctuating market demands.
How do you ensure high safety standards across your global operations?
RN: First and foremost, we have defined uniform safety standards that are implemented consistently across all of our facilities, while also sharing our successes and failures with our employees to encourage quality assurance. Recently, independent terminal companies in the Netherlands and the local terminal association, VOTOB, reached an agreement to share information and collaborate on revitalizing the industry’s reputation. VTTI takes this one step further through in-house “cost auditing.” This intiative has cultivated an environment for effective coalition building and knowledge transfer by establishing a central audit theme that incorporates inputs from the various auditors across the company’s terminals. This is a massively successful project for our company by having peers, not external auditors, sharing their knowledge and comprehension to establish compliance across the board. Additionally, our buddy system has fostered a safer working climate, and we even invite our customers to visit our facilities to develop a greater sense of transparency. Overall, strengthening our safety programs is an on-going effort, but we are satisfied with the progress of the organization thus far.
On a personal note, what would you cite as your most proud achievement here at VTTI since its creation in 2006?
RN: Since I began in 2006, the company has tenaciously fortified its practices and consequently experienced healthy, steadfast growth. We pride ourselves on having employees with an unparalled drive for success, as well an appetite for continuous development and growth—ultimately refining the quality of service towards our customers. I cannot cite one single milestone that trumps the others, as I am equally as proud of such events as our IPO and the acquisition of our Antwerp terminal. VTTI truly embodies the spirit of collaborative efficiency and functionality at every level, and we are poised to continue this trend moving forward.
VTTI has experienced expansive growth since you last met with Focus Reports in 2010 and now boasts various storage hubs across 11 countries and five continents. Where do you see VTTI in five years time?
RN: We will continue striving towards reaching our full potential by capitalizing on developing market opportunities and expanding upon our existing facilities. We are not a company driven by size. Rather, we are focused on serving the needs of our customers by operating in an increasingly efficient and flexible manner, maintaining a unified culture of safety, and attracting a different breed of qualified employees to the company.