Oikos Storage is a bulk liquid storage facility based on Canvey Island in Essex, in the South East of England. We have a storied history in the area, stretching all the way back to 1936. With a substantial storage capacity of 300,000 cubic meters, two marine jetties, and vital pipeline connections, in 2023 we play a pivotal role in the energy landscape of the region. According to government figures, last year Oikos handled approximately 5% of the UK’s distillate fuel demand for transportation.
Over its long history, Oikos’s different incarnations have shared the same journey of evolution, consistently realigning the facility’s operations to cater to the changing energy requirements of the Southeast of England. Today, as trends shift towards newer and more sustainable fuels, our desire to remain agile and able to meet future demand is more pertinent than ever before.
Upgrading our site to meet low carbon fuel demand
Along Oikos’s journey to meeting future fuel trends we have developed the ability to blend fossil diesel with FAME (Fatty Acid Methyl Esters), to produce b7 grade biodiesel, which is common on forecourts in the UK, and in a 2021 project, we repurposed several of our existing fossil diesel tanks to accept HVO (hydrogenated vegetable oil).
Our latest project, however, has been our largest – both in terms of spend and its complexity – in repurposing our assets for low carbon fuels.
In September 2022, the UK Government changed bio blend legislation for gasoline from 5% to 10%, in effect, doubling the requirement for ethanol and biomethanol to be blended into fossil gasoline. Our latest project, which we undertook on behalf of a customer, involved repurposing existing assets to safely import, store, and distribute ethanol and bio-methanol to meet the growing infrastructure needs precipitated by this legislative change.
Due to the solvent properties of these grades, we took the decision with the customer to have a segregated system, which involved upgrades to our marine jetty, tank farm, and road gantry – a real ‘end to end’ project through our terminal!
We have now been accepting ethanol imports since the summer of 2023. While the grade has been imported into the UK for many years, this project represents a significant first for Oikos. Looking at the bigger picture, our project also underscores the essential link between forward-thinking policymaking and the work of the UK’s fuel infrastructure, demonstrating how legislative changes can and will flow into the UK’s fuel market and become reality.
While catering to immediate needs is essential, we’ve also set our sights on the horizon, ensuring our facility is adaptable to the changing landscape of future fuels. We’ve upgraded our facility to accommodate dedicated bulk liquid products, meaning we have the necessary flexibility should we, or our customers, no longer have a requirement to import and store ethanol or bio-methanol, in the future.
The future of biofuels
While recent years have shown biofuels taking up an increasing share of the traditional fossil fuel energy mix, there is a ceiling on the upper blend limits on the fungibility of existing technologies. This is why there is such excitement about HVO and sustainable aviation fuels (SAF) – these are drop-in replacements for their fossil alternatives (diesel and jet fuel, respectively) which can overcome blend ratio limits.
From an infrastructure perspective, these fuels can be moved via existing supply chains, which increases efficiencies, reducing costs and long lead times on infrastructural upgrades.
Increasingly, demand for these fuels is surpassing supply, and this is being priced into the product. This is why we’re seeing a push from producers to increase their output, and owners of aged infrastructure talking about repurposing their facilities over the next five years to increase their capacity, as the market moves toward reaching a supply mass balance.
Of course, market uptake will be contingent on the carbon intensity of producing these fuels, the availability of feedstocks, and the narrowing of the pricing between these fuels and traditional fossil derived products.
In the longer term, however, the bigger question will be whether the medium for energy carriers remains in bulk liquid form. You can already see that electric cars will supplant fuels from the traditional retail fuels sector, while there will be technological breakthroughs for alternatives for heavy goods vehicles (HGVs). While it might take a bit longer, you would like to think there will also be technological breakthroughs in aviation engine technology for a non-bulk liquid fuel energy carrier… just don’t ask me to get on a battery powered aircraft any time soon!
The implications of the Government’s latest policy changes
In September, to much contention, Prime Minister Rishi Sunak announced a ‘new approach to achieving net zero’, including postponing the 2030 ban on new petrol and diesel cars by five years to 2035, arguing this would ease the financial burden facing taxpayers. My expectation is this won’t impact the market heavily – the direction has already been set, and the extra five years will give businesses and consumers more time to accommodate the transition. What we may see, however, is infrastructure companies pausing initial changes to their asset mix, as they seek to squeeze a bit more life out of them!
As our recent ethanol project highlights, government legislation has the power to directionally affect change. Given the fuel supply sector crosses over the responsibilities of multiple government departments and agencies, the fuel transition and managing the UK’s overall fuel resilience are tasks that will require joined-up, holistic thinking and collaboration. Decision makers have powers to convene stakeholders from across the supply industry, such as transport firms, energy firms and high fuel users, to increase awareness of current and future options available to the UK and agree on paths forward that ensure the UK’s security of supply.
Our market thrives on clarity and incentives that empower stakeholders to invest for the long term, confidently, and I think our customer pool is still on the fence on underpinning the full energy mix of the next thirty years, which makes it hard for them to make these investment decisions.
Infrastructure projects are typically long in lead time and have small percentage margins, so the economics needs to be robust, and decisions taken early.
The more framework the Government can provide around its policies, the more information will be available to the market to take more decisive, long-term decisions.
The Department for Transport is expected to be publishing an update on the UK’s Low Carbon Fuels Strategy before the end of the year, which will be an important opportunity to assure the sector that there is a clear and coherent way forward. A