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Interview

with Rob Nijst, CEO, VTTI

03.02.2010 / Energyboardroom

Since its foundation in 2006, VTTI has experienced an impressive growth not only in North-West Europe but also worldwide. Hence, could you briefly introduce VTTI to our readers and highlight its main role within the Vitol group?

VTTI is the Terminal and Infrastructure asset group within the Vitol Group. It was set up in 2006 with the prime objective of augmenting the trading activities within the Vitol group. Thus, we look at locations where there are significant trade flows and where we can establish a terminal through which Vitol can trade. VTTI also offers the same kind of services to other players in the market, though it serves predominantly Vitol’s activities.

VTTI follows a different business model from other companies in this sector, which hinge completely on independence whereas we promote ourselves as being linked to Vitol. This allows VTTI, once dealing with the Ports and landowners, to bring in immediately not only the asset but also the flow. Our projects have the advantage of guaranteeing to every owner and port authority that almost certainly we will be a successful venture once we have established ourselves.

VTTI has important assets worldwide as well as in the Antwerp, Rotterdam and Amsterdam region (ARA) and we are now completing the acquisition of important new assets in Antwerp. The first Greenfield site that VTTI started was in Rotterdam. In its early days this terminal was dedicated to the bunkers market in Rotterdam, specializing in fuels for delivery for bunker players and the key flow was arbitrage to Asia.

In 2006 the terminal started with about 280,000m3 and then in 2007 we expanded to 645,000m3, when we increased the capacity mainly for gasoil purposes – imports predominantly. Now VTTI has approved a third phase of expansion with another 465,000m3 of capacity, bringing the total to roughly 1.1 million m3. As you know, size does matter in the oil market, which is the reason why we are creating big terminals to gain economies of scale. With the new terminal ETT 3 we will offer multi-products such as jet-fuel, naphtha and methanol, and will offer more capacity to gasoil.

How different are your terminals inside the ARA region and how complementary and integrated are they?

The function of the terminals in each of the ARA locations is very different. In Rotterdam we are more focused on bulk activities, reflecting the original sense of what a hub location is. Whereas in Amsterdam – where VTTI bought a terminal in November 2006 – we have a much more traditional gasoline blending port. We acquired this terminal from a company called World Point, which was already a well-established terminal. It hosts a variety of customers and Vitol used to be one of them.

VTTI’s most recent acquisition was made in Antwerp, where we acquired assets from Petroplus. These facilities are connected to an extensive pipeline network and harbor infrastructure providing flexibility for hydrocarbon feed stocks, intermediates and finished products. It also serves the local asphalt market and part of it is simply storage capacity to link to a jet facility and to the European pipeline network.

With terminals in the ARA region we have started to consider how to optimize these facilities from a logistic point of view. Today there are about 8 million tons going from Rotterdam into Antwerp mainly by barge. Part of this volume can be easily pushed through pipelines. That’s why VTTI is involved in the pipeline project linking these two sites. Effectively, we already have 6km of pipes in the port of Antwerp, which is now waiting to be connected to the 110km pipeline that will be brought into the Netherlands – we are currently in the process of detailed engineering and permitting applications and the construction is expected to start in 2010.

A considerable part of your growth comes from your international operations. Therefore, VTTI has been acquiring new facilities and investing in Greenfields projects worldwide. How is your international portfolio distributed and what’s your approach towards international clients in markets where VTTI is not widely known yet?

VTTI’s current international portfolio is made of important activities in Argentina; we will open our first ever international Greenfield project in Florida, to be commissioned in February 2010; we have a terminal in Kaliningrad, in the Baltic Sea; a 49% participation in a terminal in Ventspils, Latvia with a similar profile as the Kaliningrad port and with exports mainly to CIS countries; we acquired a company in the United Emirates in 2007; and recently we signed an joint venture agreement with the Malaysian International Shipping Company – the biggest LNG shipper in the world, in a 50% JV in Tanjung Bin; we built an LPG import facility in Nigeria which will be commissioned in March. Last but not least we just purchased a half built terminal in Mombasa, Kenya. When fully operational, this terminal will have 105.000 m3 of storage available, and will therefore be one of the largest and most modern oil facilities in East Africa.

Regarding our strategy towards clients, you have to bear in mind that VTTI is an asset company. Although we have a trading company as shareholders we run it as a completely independent business, since the dynamic of trading products flows or assets is completely different.
Having said that, I would like to stress that our HSE policy takes priority over any other consideration in the company. VTTI has grown through acquisition, in locations all over the world. So while we comply with all local legislation, our focus is on improving every terminal to the highest industry standard.

Around the world, VTTI’s mission is to serve the energy industry by linking oil and gas flows safely, efficiently and profitably. You will therefore find us at the major shipping crossroads and anchorages of the globe.

We currently operate from several strategic locations. For instance, having a terminal in Ventspils, Latvia is more than natural, since Vitol is one of the largest charterers of vessels in the world. VTTI will have the ships coming to Ventspils terminal, taking out Vitol products to places such as Argentina for further distribution in markets like Bolivia, Paraguay and Uruguay. That’s the chain that VTTI supports thanks to its key assets in critical locations worldwide.

VTTI targets its clients that we have a ship turnaround that is faster than any other terminal; that we can have blending of products that is faster than everyone else; that our tank cleaning system is the most efficient. Hence, our terminals tend to invest much more than others to be tailor-made according to our customers needs. The trading community wants to know how fast and how nicely we can bring in their ships and take them out. This is why VTTI will continue to invest more and more in jetty infrastructure, blending systems and tank cleaning services.

How different would you say that the terminal business is in the ARA region compared to elsewhere and how does VTTI respond to those market specificities?

Whether the product is fuel oil or complex blends of gasoline, and whether the opportunity is in South Africa, the Gulf or the dynamic energy markets of Russia, VTTI is perfectly placed to help our customers optimise their business.

One of the main differences between VTTI and other tank storage companies is that the parentage of Vitol gives us a significant advantage, since we could not be closer to the demands expressed every day by our customers.

Although the tank storage industry is a relatively basic industry, the rules of the game make it complicated. In the Netherlands we have the VOTOB – the Dutch acronym for Association of Independent Tank Storage Companies – which states the rules for the independent storage companies that are its members.

When the Oil and Gas Financial Journal interviewed Mr. Bas Hennissen he highlighted the importance of the Port of Rotterdam as Europe’s ‘Energy Port’. In the same strategic line, the Minister Maria van der Hoeven portrayed the whole country as ‘North-Western Europe’s gas Roundabout’. How much of reality do you see in those assertions and how is VTTI taking advantage of the strategic potential that the Netherlands has to offer?

First and foremost, Vitol is originally a Rotterdam based company. It started in 1966 and since then Rotterdam has been traditionally the center of gravity for our oil flow. Rotterdam is a very strategic location because from here you serve the hinterland with a coverage that no other port in Europe could offer. In order to be able to serve our customers – or the customers of our customers, which is what effectively we do – we need to have the right infrastructure in place to reach the final market.

VTTI connects the facilities in Rotterdam to the Dutch pipeline grid which is linked to Belgium and other European countries. Hence, through Rotterdam we have opened a wide range of distribution possibilities that went even further than the already granted hinterland’s market. This is why the Port of Rotterdam has continued throughout the decades as the main and most efficient port in the North of Europe.

For instance, if you look at the Port of Amsterdam it has a different role than the Port of Rotterdam, being traditionally a blending port – it will be difficult to compete in the same logistics functionalities with the Port of Rotterdam.

If you look to the future with a more global view there is currently too much refining capacity in the world. The new refining capacity has moved towards the Middle East, the Far East and India, meaning that refining capacity in Europe will gradually reduce. For instance, Shell is selling part of its refining capacity and is greatly restructuring the company. All at a time when demand for products in the OECD world is flat, at best. So both cyclically and structurally it is a tough time for the sector.

The impact of that will be that we will get more product flows towards North-Western Europe. Thus, from a location point of view – as well as thanks to the fact that we are served with the best transport infrastructure of Europe – you will get increased fuel flows towards the Netherlands. This, in combination with the Dutch leading-edge HSE standards and its wide array of services, is the winning formula for the Netherlands.

The main challenge that the Netherlands will face on the logistics front is not related to its Ports. The bottlenecks will come in the onward transport that links the ports to the internal markets such as road and rail traffic – where the country needs important investments to cope with the increasing transport demands of our citizens and companies. I believe the right steps are being taken in the Rotterdam area with the revamp of the A15 and new railway connections.

The other challenge is to know how the country will adapt to the current market changes. For instance, the demand for coal for new energy power plants that will be built in Germany will be massive. Coal will be coming through Maasvlakte 2, but the question is how it will be organized from a logistics point of view to take this coal to the inland power plants.

The challenge that Rotterdam has today, which is going to be the same in the coming years, is land availability. There is an increasing need for storage capacity not only for product flow but also for strategic stockholding companies. There is not a lot of land available but once Maasvlakte 2 is finished there will be plenty of new space and the rail road being built will be of great help, but only if it connects to Germany.

As you can see, the challenges to maintain the Port of Rotterdam and the Netherlands as the energy entrance or energy centre of Europe are great, but definitely our companies and government are moving in the right direction to guarantee our continuous success today and tomorrow.

How are these trends benefiting VTTI and how is the company supporting these projects?

The Port of Rotterdam has been actively looking for partners that can entertain that growth. It has been taking steps to get not only the asset players but also companies like Vitol that drive important products flows. A great advantage given by the Port of Rotterdam that benefits VTTI greatly is their allowing us to build our own facilities rather than renting them at a third-party terminal.

The Port of Rotterdam has been very supportive in this development and they are still looking for parties that today are not in the Port’s arena
Besides, the regional government was wise to unite all the governmental bodies under one organ – DCMR – that has made the entrance into the Port of Rotterdam much easier from a business perspective since they can help you with all procedures from permitting to whatever else you need; whereas in other parts you still have to deal with a number of institutions that are involved in the permitting process.

In order to sustain VTTI considerable growth the company has to increase its size in human resources considerably as well. How do you manage to attract young and talented people in a labor market famous for its lack of young workers and with a shortcut of engineers?

The dynamic atmosphere that VTTI has been able to create and its strong growth clearly attracts great interest from the labor market. Thus, we had no problem in getting good engineers, financers, or commercial staff. Our people feel rewarded for being part of a growing company that is also part of a larger group without being overly bureaucratic. If you look at big corporations they spend 80% of their time inwardly focused, whereas at VTTI we are 80% of the time looking outwards.

Besides, among the people that we have in our headquarters in Rotterdam we have more than 8 nationalities. The rest of the organization follows this same pattern. This is why even though we are a Dutch company we are mostly perceived as a truly international organization present in the world’s main trade hubs and with increasingly multicultural staff.

What are your main ambitions and expectations for VTTI in the coming years?

In the coming years our main ambition is to make VTTI one of the top five terminal and infrastructure companies in oil with a global footprint. We want to continue to attract the kind of people that can really drive the company in a proactive and dynamic way. And mostly, we want to keep on demonstrating that VTTI’s services are different from the traditional business model of the established players in this market.

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