CHEMOIL'S plans to build a new storage terminal in Cristobal, Panama, could help the company achieve 'significant savings' in costs, according to its founder and CEO Robert Chandran.
'Panama has the highest terminal cost in our system. Can you imagine, we are overpaying for storage throughput by US$9 per tonne?' he said in an interview yesterday.
Currently, Chemoil, one of the world's leading integrated physical suppliers of marine fuel, leases storage capacity of about 65,000 tonnes in Cristobal, a port located on the western side of the Panama Canal.
The company said on Wednesday it plans to replace the leased facilities with a new terminal with total capacity of 245,000 tonnes.
Mr Chandran added yesterday that the terminal would cost between US$50 million and US$55 million - the company is still receiving the final bids on the project - with the first phase of some 110,000 tonnes to be operational by the third quarter next year.
Currently, poor logistics in Cristobal mean Chemoil runs up US$5-6 million in demurrage costs, or delays, each year, as poor relations between existing terminal operators mean the port operator has started using the single oil dock for loading bulk, a different type of cargo, said Mr Chandran.
The inefficiencies add up - storage throughput costs Chemoil some US$12-13 per tonne, compared with the typical US$4 per tonne of marine fuel, he said.
Chemoil moves some 1.2 million tonnes of marine fuel per year in Panama through Cristobal and Balboa, a port located on the eastern side of the Panama Canal where the firm now leases another over 40,000 tonnes of storage capacity. The new terminal will replace only the leased facilities at Cristobal.
The new terminal, which is nearly four times larger than existing storage, will also create extra capacity in Panama for transhipment, Mr Chandran said.
'Panama is right in the middle of our transport logistics, because Los Angeles is on one side and Houston and New York are on the other. We want to have transhipment capability in Panama, to reship when storage becomes available in other locations,' he said.
The Cristobal terminal will also store diesel and gasoline, which are new products Chemoil wants to sell in the region.
Mr Chandran also spoke about recent volatility in the oil futures market that caused his company to issue a third-quarter profit warning last month.
Chemoil shorts crude oil futures as a hedge against its fuel oil exposure. The two usually track each other closely. With the credit crunch, however, hedge funds, which like to short futures maturing in the near-term and go long on futures maturing a few months later, were forced to reverse these positions.
This meant that they had to buy back the futures near maturity, which caused the price of the crude oil futures to shoot up, said Mr Chandran.
The hedge funds have now reversed their positions and the situation is unlikely to happen again, even if the sub-prime crisis has not blown over, he said.
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'Panama has the highest terminal cost in our system. Can you imagine, we are overpaying for storage throughput by US$9 per tonne?' he said in an interview yesterday.
Currently, Chemoil, one of the world's leading integrated physical suppliers of marine fuel, leases storage capacity of about 65,000 tonnes in Cristobal, a port located on the western side of the Panama Canal.
The company said on Wednesday it plans to replace the leased facilities with a new terminal with total capacity of 245,000 tonnes.
Mr Chandran added yesterday that the terminal would cost between US$50 million and US$55 million - the company is still receiving the final bids on the project - with the first phase of some 110,000 tonnes to be operational by the third quarter next year.
Currently, poor logistics in Cristobal mean Chemoil runs up US$5-6 million in demurrage costs, or delays, each year, as poor relations between existing terminal operators mean the port operator has started using the single oil dock for loading bulk, a different type of cargo, said Mr Chandran.
The inefficiencies add up - storage throughput costs Chemoil some US$12-13 per tonne, compared with the typical US$4 per tonne of marine fuel, he said.
Chemoil moves some 1.2 million tonnes of marine fuel per year in Panama through Cristobal and Balboa, a port located on the eastern side of the Panama Canal where the firm now leases another over 40,000 tonnes of storage capacity. The new terminal will replace only the leased facilities at Cristobal.
The new terminal, which is nearly four times larger than existing storage, will also create extra capacity in Panama for transhipment, Mr Chandran said.
'Panama is right in the middle of our transport logistics, because Los Angeles is on one side and Houston and New York are on the other. We want to have transhipment capability in Panama, to reship when storage becomes available in other locations,' he said.
The Cristobal terminal will also store diesel and gasoline, which are new products Chemoil wants to sell in the region.
Mr Chandran also spoke about recent volatility in the oil futures market that caused his company to issue a third-quarter profit warning last month.
Chemoil shorts crude oil futures as a hedge against its fuel oil exposure. The two usually track each other closely. With the credit crunch, however, hedge funds, which like to short futures maturing in the near-term and go long on futures maturing a few months later, were forced to reverse these positions.
This meant that they had to buy back the futures near maturity, which caused the price of the crude oil futures to shoot up, said Mr Chandran.
The hedge funds have now reversed their positions and the situation is unlikely to happen again, even if the sub-prime crisis has not blown over, he said.
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