The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Oil Refining Company’s (BORCO) owner has invested $320 million in the two years since it acquired the Grand Bahama-based facility, believing it is an “ideal location” to serve the 20-30 per cent tanker traffic increase projected from the Panama Canal expansion.

New York Stock Exchange (NYSE)-listed Buckeye Partners, in a presentation last week to a Morgan Stanley conference, said BORCO was perfectly positioned to benefit as Latin American oil producers (Venezuela chiefly) were being forced to “find large storage locations with blending capabilities and segregation for multiple quantities of crude”.

BORCO ticked all these boxes, Buckeye executives said, with its deep water berths - able to accommodate the largest tankers - leaving it “uniquely positioned” to capture storage, build and break bulk, and blending business.

On the build bulk side, Buckeye said BORCO could receive heavy fuel oil shipments from Latin America, which were shipped in small tankers, blend these with lighter fuel oil from the US Gulf Coast and then export this cargo to the Asia Pacific region via larger vessels.

For break bulk, which involves breaking down larger cargos into smaller ones, Buckeye’s strategy for BORCO is to receive “clean product” shipments from India and Europe, then reduce these into smaller cargos for distribution in the US, Mexico, the Caribbean and Latin America.

Finally, when it came to blending and crude stationing, Buckeye said BORCO was able to blend fuel oil from the Caribbean and Latin American refineries for delivery to Asia, or clean products that were being shipped in the opposite direction.

Buckeye said: “There is growing demand for blending capabilities at BORCO, including the following: Increasing production of heavy, lower-quality crudes from South America, which require additional infrastructure to blend with lighter, sweeter grades.

“[The] blending of Brazilian Peregrino and Papa Terra heavy crudes with diluent or lighter crudes As international regulations require more use of cleaner burning transportation fuels, there is growing demand for BORCO’s blending services.”

Buckeye added that there was the “potential to add butane and ethanol storage/blending capabilities” in Grand Bahama, too.

“BORCO is the logical, geographical, optimum spot for a new ‘Bunker filling station’,” its owner added.

“The 2014 Panama Canal expansion to allow passage of Suezmax vessels is expected to lead to a 20-30 per cent increase in traffic. BORCO is the location ideal to service the incremental vessels.”

Some 81 per cent of BORCO’s 2012 revenues came from storage contracts, with the balance coming from ship berthing (12 per cent) and ‘other’ sources (11 per cent).

When it came to the break down of BORCO’s leased capacity, Buckeye said some 66 per cent was fuel oil, with crude oil and refined products accounting for 21 per cent and 13 per cent, respectively.

Buckeye has room to double BORCO’s existing storage capacity if market conditions permit.

Touting its achievements at BORCO to-date, Buckeye said it had “constructed ample berthing capacity to allow future expansion without incremental marine infrastructure spend”, and “improved simultaneous operations to move product in and out of the facility at the same time”.

The NYSE-listed firm had also added infrastructure to provide for redundancy and business continuity, and “improved loading and unloading rates to allow for reduced berthing time”.