Hello, and welcome to the Vopak Analyst Presentation HY1 2020. Throughout the call, all participants will be in listen-only mode, and afterwards, there'll be a question- and- answer session. Today, I'm pleased to present Laurens de Graaf, Head of Investor Relations. Please begin your meeting.
Well, good morning, everyone, and welcome to our Q2 and half year 2020 results. My name is Laurens de Graaf, Head of Investor Relations, and today we will host an extended webcast as we announced. That is going to cover a range of topics and we might take one and a half-.
I apologize for the interruption. This is your operator speaking to the call on this line. Can I just confirm your name and company for the attendee list, please?
In which we operate and share our views on the expected short to medium-term developments. The reason for doing so is justified by the current dynamics of these markets. We aim to provide transparency in how these markets influence our performance and how resilient our portfolio is for these dynamics. Lastly, we want to discuss our financial framework, which is unchanged, and update you on the good financial performance we delivered in 2020. We will have quite a number of speakers today, led by Eelco Hoekstra, our Chief Executive Officer. Our other executive board members are dialed in as well. Speaking will be Gerard Paulides, our Chief Financial Officer, and available for questions in the Q&A session will be Frits Eulderink, our Chief Operating Officer.
I'm very pleased that we also have some of our global product directors on the call who will be sharing their reflections on the various product markets. Presenting will be Michiel Gilsing, our Global Director Commercial and Business Development, dialed in from Italy. Ismail Mahmud, our Global Chemicals Director, dialed in from Singapore, followed by Hari Dattatreya, our Global Oil Director here in the Netherlands. Throughout the call, we will be referring to the half year 2020 analyst presentation, which you can follow on screen and download from our website. After we have gone through all presentations, which might take us 50 minutes to one hour, we will open the lines for some questions from our analysts. Before we start, I would like to remind you of our safe harbor for any forward-looking statements. This disclaimer is applicable to the entire conference call, including Q&A.
With that, I would like to turn the call over to Eelco.
Thank you, Laurens. A very good morning to you all joining us in this call here this morning. It's my pleasure to share with you our second quarter and half-year results for the year 2020. Now we'll give a short introduction on the results and the execution of our strategy. Then, as Laurens mentioned, our product directors will provide you on an update on the markets, and Gerard will update you on the financial performance. Let's begin with slide four and the review of the highlights. We delivered good financial performance in a volatile business environment in the first half of 2020. We captured opportunities in our oil storage portfolio, resulting in improved occupancy rates. At the same time, we experienced reduced throughput for chemicals, in particular in Houston and Singapore. We initiated a further response in cost management to protect earnings.
Relative to our original plan, however, we missed some contributions to delays in growth projects and out-of-service capacity as some construction work was restricted in the second quarter. Fortunately, the value of these growth projects is not affected. On balance, we achieved an EBITDA of $403 million in the first half of the year. It's important to note that Vopak's strategy remains unchanged and is proven to be robust. We continue to invest in 2020 and 2021 with confidence and continue executing our share buyback program to increase distribution to shareholders. This year, we have again taken good steps in the delivery of our strategy. We completed a divestment program of some European assets and have taken new capacity into operations in Malaysia, Panama, and Vietnam.
We announced the construction of a new chemical gases terminal in the U.S. and a capacity expansion for an industrial terminal in China, both fully rented out under long-term contracts with reputable customers. Good progress has also been made with the development of our LNG and industrial terminal portfolio. Our digital transformation has progressed well. The rollout of a new cloud-based system for our terminals has continued in an efficient manner. In the second half of this year, we remain focused on the short-term delivery and protection of our long-term value. We look forward to the startup of our projects in South Africa after a long delay. Vopak is well-positioned, and we're keen to grasp opportunities to deliver our strategy execution in the current dynamic market circumstances. Allow me to give you an update on COVID-19.
These are very unusual times. The changes came to us all suddenly and abruptly. Everybody within Vopak has responded very well to keep all our terminals in operation. I sincerely want to thank our employees, our partners, and also our customers, contractors, authorities for working constructively and in good cooperative spirit together in these times. We've been taking effective measures to manage this pandemic. Our first priority is to protect the health and wellbeing of our people, the families, the communities in which we operate, and strictly follow the local governmental instructions. Our strategy has remained unchanged, and if and where possible, we keep an attitude of business as usual in unusual times in order to not procrastinate decision-making. We've put extra emphasis on governance. We continue to manage our performance in line with our original business plan for 2020, despite some growth projects delay and global uncertainty.
As I mentioned, Vopak's strategy remains unchanged and has proven to be robust. Allow me to recap our strategic objectives that we have consistently presented to you over the years. Our key objective is to deliver our strategic portfolio transformation, focused on growing our portfolio towards gas and industrial terminals, and strengthen our chemical position and our oil hub positions. We closed the strategic divestment of five assets in Europe and China at attractive prices, and we've successfully announced significant projects in the last years. This year, we've commissioned 275,000 cubic meters of new capacity from growth projects in Malaysia, Panama, and Vietnam. In the remainder of the year, we expect to deliver more capacity from growth projects in Indonesia, The Netherlands, and South Africa. In new energies, we're expanding our capabilities and aim to allocate capital to this segment.
We've made our first investments in the hydrogen value chain and continue exploring more opportunities. We want to become the digital leader in the tank storage industry and protect our position as the leading independent tank storage company. We continue the rollout of our terminal management system and exploring ways to integrate some of our innovations with our digital setup. These objectives are all geared to manage and to protect the long-term value creation of Vopak. To deliver on the short-term performance, we have provided some metrics and guidance. Going forward, we aim to grow EBITDA over time and replace the EUR 17 million EBITDA from the recent divestments. We aim to operate our portfolio with an occupancy rate between 85%-95%, depending on the commercial and operational circumstances. Finally, we aim to deliver a return on capital employed between 10%-15%.
This year, our financial performance has been influenced by multiple events and actions. Market conditions in the oil markets are supportive with contango and IMO 2020 converted capacity. This is visible in revenue, contract portfolio, and occupancy rate in oil. At the same time, market conditions in chemicals are mixed. Although occupancy rates have been stable, revenues were impacted by lower throughput activity levels. We will manage our costs further down this year with operating costs at some EUR 600 million in 2020, a reduction beyond our original intent. In the second quarter, we have increased our available operational capacity as out-of-service capacity was managed down. Available capacity is however still below the original plan. We fell short of expectations since we were impacted by governmental work restrictions in, for instance, Singapore. As a consequence of improved oil market conditions and lower out-of-service, occupancy rate improved.
We achieved on average 88% occupancy rate for subsidiaries and 90% proportional occupancy rate in the second quarter. Similarly, delivery of some growth projects have been delayed, and as a consequence, we've seen a EUR 10 million setback in our EBITDA performance in the first six months due to delays in South Africa and Indonesia. It is good to note the value of this growth portfolio and commercial coverage is not affected. It will contribute later to the performance of Vopak. We'll co ntinue to grow EBITDA over time, and we made a good start in the first half-year. However, there have been many influencing developments this year, which you should take into account when listening to our presentations today.
Our global product directors will update you in detail on the developments in 2020 and the impact on Vopak and provide their views on the expected short to medium-term developments in these markets. I will quickly create the framework for this dialogue. Our strategy is centered around our well-balanced portfolio with a focus on four terminals or four types of terminals, being gas terminals, industrial terminals, chemicals, and oil terminals, and our aim is to add new energies in that mix on the longer term.
Capital allocation to these assets is based on thorough analysis and understanding of the supply and demand dynamics in these products and long-lasting customer relations and partnerships. That is the reason why we want to provide some insight into the current market dynamics and share why we have such strong confidence in the portfolio that we have built over the last decades based on our insights.
Starting with chemicals. The chemical industry already faced the start of a down cycle in the second half of 2019, which was exacerbated with the impact of the pandemic. Impact on the demand for chemicals varies widely between durable and consumable goods. Thanks to our portfolio, we experience relative stable occupancy rates at our chemical terminals. Throughputs have been lagging, impacting the variable component of our revenues. In the oil markets, we've seen extremely high volatility in price, supply, and demand. The market structure has been supportive for storage, which resulted in increased interest in oil storage capacity globally. We've been benefiting from contango and the IMO 2020 converted capacity, and virtually all operational oil capacity has been rented out. In the gas markets, COVID-19 and the dynamic oil markets had its influence.
Natural gas prices dropped to historic lows, providing positive momentum for regasification due to the increased price competitiveness. On the other hand, LPG demand surged due to residential demand, while supply was curtailed from U.S. producers. Demand for Vopak's gas infrastructure has been resilient and is supported by long-term contracts providing stability to earnings. Moving on to new energies. Global growth and production of renewable energy has been resilient in the COVID-19 pandemic. Going forward, the speed of the transition to new energies could be further influenced by the government stimulus. Opportunities for Vopak will emerge for storage of renewable electricity in liquids or gas. Therefore, our new energy strategy focuses on hydrogen and other liquids to store energy. Last quarter, we announced feasibility studies to explore ammonia as a possible alternative fuel for the shipping industry, and we explored the viability of LNG-to-power infrastructure in Singapore.
This year, we aim to start a pilot to supply hydrogen towards the ARA region using LOHC technology with partners in Europe. To sum up, a dynamic business environment in which we delivered good financial performance and improving the occupancy rate of our terminals and keep developing new opportunities. That having said, I would like to invite our global product directors to share their view on the markets in detail. Our first presenter will be Michiel Gilsing, our Global Director, Commercial and Business Development, who will elaborate on the gas markets. Michiel, please go ahead.
Thank you, Eelco. A very good morning, ladies and gentlemen. My name is Michiel Gilsing. I'm the Global Director, Commercial and Business Development for Vopak. I'm based in Rotterdam normally. Today, I will dial in from Italy. I will provide you with a brief update on the gas markets today. First, I would like to frame the gas markets for Vopak from a portfolio perspective. Gas terminals contribute 10%-15% of our proportional revenues, and this segment has been growing in the last years. Gases that we typically store are LNG, LPG, and chemical gases that include, among others, ammonia, ethylene, and propylene. For today, the main focus will be on the most important gases, LNG and LPG. We see good growth opportunities in gas all across the globe and would like to make this segment even more sizable for Vopak.
Let's begin with some key messages on slide 12. First of all, both the LNG and LPG markets have been very much influenced by COVID-19, leading to very dynamic market circumstances. However, storage and handling demand of LNG and LPG has remained strong at most of our terminals. Moreover, it's important to note that our gas terminals often have long-term take-or-pay contracts ranging from 5- 25 years. Our expertise in handling and storing gases dates back more than 40 years. Since then, we have been building a global gas network with a proven track record of safe, sustainable, and reliable operations. Our growth and new business development projects are on track, although uncertainty as a result of COVID-19 may affect the speed of some of these projects. Going forward, we expect healthy gas infrastructure demand supported by strong global gas fundamentals.
Let's reflect on the developments in the gas markets in the last half year, starting with LNG. In summary, LNG demand reduced and oversupply deepened. The LNG market was already in a state of oversupply due to the relative warm winter and a wave of liquefaction projects coming on stream. Global lockdowns have reduced industrial and power consumption further, lowering LNG demand and its prices. Spot and oil-linked LNG prices dropped to a record low spot price levels, touching $1 per MMBtu, a historical low level. All FIDs for new liquefaction capacity have been postponed beyond 2020 as the pricing environment is putting pressure on these investments. Low LNG prices have also resulted in increased levels of coal to gas switching, especially in Europe. LNG inventories have been building and are at a record high level in Europe. I will move to LPG.
LPG demand, on the other hand, has been strong due to a surge in residential demand amidst lockdowns and strong intake from propane dehydrogenation plants. Countries like India, Indonesia, and Brazil, which depend heavily on LPG for residential cooking, saw high LPG imports, especially as domestic refineries were running at low rates. PDH plants, mostly in China, saw run rates rising from below 70% in March to above 90% in June. The main driver was the strong demand for the plastic polypropylene used in medical supplies such as face masks. Price sensitive LPG demand at steam crackers was significantly reduced due to a tight LPG supply demand balance, and in combination with low naphtha prices. The LPG supply was more tight due to U.S. shale shut-ins and upstream production cuts. Naphtha LPG crackers typically increase their LPG intake when LPG prices are below 90% of the naphtha prices.
However, low oil and subsequently low naphtha prices have made LPG cracking largely uncompetitive over the past few months. Vopak global gas footprint. Vopak has developed a strong, well-diversified global gas network of terminals, which are facilitating imports and exports of gases. Beginning with the Vlissingen terminal in the Netherlands. This terminal is predominantly offering services to Northwest Europe for imports and exports of LPG, as well as chemical gases as feedstock to industrial complexes. With the Gate LNG terminal, also in the Netherlands, Vopak services the LNG market in Northwest Europe for importing natural gas. In addition, we also have several positions in China, which are linked to industrial complexes in key petrochemical parks. Our latest addition is the Prince Rupert terminal at the West Coast of Canada, facilitating LPG exports to the attractive Asian markets.
In total, today, gases are stored at 18 of Vopak's terminals worldwide, spread across 12 countries with a total capacity of 2.2 million cubic meters. We consider this an attractive global gas portfolio, which is underpinned by long-term take-or-pay contracts from our customers. Growth developments in gas. We aim to grow our gas exposure in the Vopak portfolio beyond today's 10%-15% proportionate revenues. Our focus is on growth in LNG regasification, LPG imports and exports, and industrial use of LPG and chemical gases, mainly for the petrochemical industry. In LNG, we have a number of projects that we are developing in Germany, Pakistan, China, and Singapore for storage and regasification of LNG. In Pakistan, for instance, Vopak already has an FSRU in partnership with Engro. The FSRU is currently being expanded, whereby we will replace the existing FSRU with an FSRU with increased capacity.
At the same time, we aim to develop an onshore terminal since we believe that this market holds promise for even more LNG demand. In LPG and chemical gases, we continue to see import opportunities in Northwest Europe, and as a result, are currently constructing a capacity expansion in Vlissingen. Growth of industrial use of chemical gases is proven by our last announced projects. First of all, an expansion in Houston in the U.S. at our joint venture Vopak Moda, and secondly, our joint venture Vopak Shanghai Caojing in China. Both projects are covered with long-term contracts with decent customers. On top of these developments, Vopak is exploring opportunities for green ammonia as a marine fuel in Singapore. In the short-term, we see a supply-driven LNG market as it is in a state of oversupply. In a low price environment, access to regasification is then key.
Low LNG prices might persist as European gas inventories are at record high levels and might even be full by the end of the summer. The global arbitrage opportunity closed in May with the TTF, the European gas hub price, falling below the Henry Hub, the U.S. gas hub price. The LNG market is expected now to grow by more than 20% in the next five years. We, as Vopak, have the position and experience to service the infrastructure needs of the market. On the LPG side, LPG production depends on the oil environment. LPG is a by-product, and its supply is therefore driven by oil and gas demand. Market expectations is that oil price and demand recovery might take one to two years' time. A recovery in oil and naphtha prices will be good for LPG's competitiveness and will increase the demand for LPG as a cracker feedstock.
The growth in supply, exports, and demand, the imports, will ultimately require more infrastructure to support the growing seaborne trade. In short-term, Vopak's gas performance in our global network is expected to be resilient due to the long-term take-or-pay contracts. We continue to see opportunities in LNG and LPG and chemical gases, and aim to further grow our global network. We would like to make gas a relatively larger part of our portfolio going forward. With this summary of the gas market dynamics and our portfolio, I will hand back to Eelco.
Thank you, Michiel. Our next presenter will be Ismail Mahmud, our Global Chemicals Director, who will elaborate on the chemicals and industrial terminal markets. Ismail, please go ahead.
Thanks. Thanks, Eelco. Good morning, ladies and gentlemen. My name is Ismail Mahmud. I am the Global Chemical Director of Vopak, based in Singapore. It's indeed a pleasure to speak to you all again. I hope you are well and keeping safe. Over the next 8- 10 minutes, I will share my views on what's happening in the chemicals market and what developments that we see. This is what I call a fairly complicated and a changing chemicals market, especially these days due to the pandemic. Today, I will be speaking mostly about industrial and chemical terminals that make up about 50%-60% of our revenue portfolio. With our focus on industrial terminals projects worldwide, I do see this business growing over the coming years. Let me begin by presenting a few key messages that you may wish to take away from my talk today.
Due to the significant production capacity build-ups in recent years, added by the COVID-19 impact, and further by a low oil scenario leading to low chemical prices, the chemical industry as a whole is under significant pressure. Margins have been squeezed. Profits have fallen. This has been reflected in quarterly results of major chemical companies in the first quarter, and also expected shortly in the second quarter. Changes in consumption patterns due to COVID lockdowns across the world have impacted demand. Markets have behaved what I may call strangely, and I will help explain. However, having said that, demand for storage and logistics is still holding up. Although throughput activity levels are down, occupancy is okay. This is expected to continue in the short-term. In the medium to long-term, trade flows are expected to recover as demand slowly absorbs new or excess capacity.
In our conversations with our customers in the long-term industrial project activities, we see the same sentiments. Let me go into a little bit more detail. After having witnessed eight very profitable years growing at about 6% per annum and peaking in 2018, the chemicals industry in 2019 started to move into a typical petrochemical down cycle. This is shown on the graph on the left. This, due to the large plant capacity increases we have witnessed over the last several years, coupled with weakening demand due to trade war, China's self-sufficiency, not to forget China being the largest chemical market in the world, political concerns, and others. Some experts had already predicted a typical down cycle, seeing a weaker, slower 2020, 2021, and not expected to recover until 2023. A typical multiyear cycle. This was impacted in first quarter by COVID-19 and low oil prices.
The downturn may have been expected, the COVID and oil crash only accelerated the decline and deepened it. On the right side, you see global base chemical capacity outpacing demand. This is visible already in 2018, where 20 million tons of new products came on stream, 25 million in 2019, and this year in 2020 alone, 40 million tons of additional capacity is expected to be commissioned. The market is in a very interesting situation at this stage. Let's take a look at the end markets and see how consumption patterns may have changed, in particular due to the COVID situation. Change in consumer behavior during the lockdowns has impacted demand, and end markets have behaved very differently to what we have seen in the past. Products that are typically longer lasting, they're called durable goods, such as automobile, construction, furniture, household, and textile.
These end markets saw a swift decline. These are shown in the red arrows pointing down. Products that are once used or of consumable nature increased in demand substantially. These are packaging items like food packaging in particular during the COVID-19 days, lockdown days, online shopping, including personal care, pharmaceutical, and healthcare. These are all markets that moved really well and actually peaked in demand during these COVID-19 days. Very strange happening is what we saw in the market. Producers who are operating in durable markets have been greatly affected, and those that could balance their output by shifting away from durable to non-durable or consumer products, have been able to manage much better. When we look at our own storages and products that we handle for our customers, benzene, isocyanates, methanol, even base oil stored at our chemical terminals, were more affected.
While glycols, caustic, xylenes, alpha olefins, among others, producers have done much, much better. Looking at Vopak's global industrial and chemical footprint, we believe we have a balanced portfolio. As shown in the pie chart in green on the left, 50%-60% of our proportion of revenues comes from industrial terminals alone, which are based on long-term contracts, typically 15- 20 years of duration, although we do have some contracts that are short-term. 80% of that revenue from industrial terminals is based on fixed, guaranteed payments. The remaining chemicals portfolio, typically hub terminals and distribution terminals, have shorter duration, they still maintain a portfolio with about 50% of their contracts that last for three years or more. This has brought some stability during these times, especially, what we're experiencing these days.
On a regional perspective, 55%-65% of our industrial and chemicals businesses is located east of the Suez, and we expect this proportion to increase given the opportunities and the exciting business development work we are currently doing. Given the market conditions due to all three aspects, which is the down cycle, petchem down cycle, the COVID-19, and oil price movements, our occupancy looks fairly stable at this stage. This is due to the way our industrial contracts are structured, on guaranteed revenues, and a three-plus year contract portfolio at our hubs and distribution sites, which will help us ride this industry downturn. We are keeping very close to our customers, increasing our communication, and especially with those that maybe are in a more difficult durable product market or those who struggle to shift end markets easily.
For some, volumes have increased, while for others, inventory is piling up and throughput falls. Our overall volumes are about 6% lower than first half 2019, and we are watching market developments very closely. Let me summarize our view of the chemicals market and what we could expect in the future. It seems we may have bottomed out in Q2, although the COVID-19 situation is still unclear due to a threatening second wave. Short-term industry margins are challenged and will remain so until the next two to three years as new production capacity is fully consumed. The longer-term sentiments in the chemicals industry is still optimistic. Projects are still moving ahead, and a few new ones have been announced in this period. Looking at Vopak and our performance, demand for storage is expected to remain fairly stable in short to medium- term.
A balanced customer and contract portfolio should assist Vopak to ride the downturn successfully. Finally, our large business development projects are continuing, and we are very excited to see the opportunities that are out there for us. I'd like to leave it there, and thank you very much for your time and attention. Eelco?
Thank you very much, Ismail. We go on to our next presenter, that's Hari Dattatreya. He's our Global Oil Director, and he will elaborate on the oil market. Hari, please go ahead.
Thank you, Eelco. Ladies and gentlemen, good morning. Nice to see some familiar people on the call. You have seen this slide before. We are going to talk about oil, an interesting commodity, especially given all the developments we have seen and will see in the coming period. We will be going through the following items. The current markets and the amazing developments we have seen this year, like high volatility in oil prices, parallel with major swings in demand due to COVID, but also supply. Our hub and distribution terminals. Hubs are in logistic trading and refining centers and have seen the positive impact of volatility and the supportive market environment. Distribution terminals focused at large deficit markets with, so far, a relative limited impact of COVID on throughput. The future, always a question.
With the current uncertainty, oil markets are expected to remain volatile for the next one to two years. The past six months have been unprecedented. As you can see, the oil price, the black line, started this year at approximately $70 per barrel, dropped to $20, and is currently close to $43 a barrel. Looking at underlying drivers, we started the year with the focus on geopolitics and trade disputes and the discussions within OPEC+. Since then, a number of well-known events occurred that had a direct impact on the oil market and drove volatility. The market structure, the red and green bars, responded to the oil price and future outlook. It was a pretty exciting time, and we were in constant contact with our hub teams, talking about the latest developments and what our sensing of the market was.
Being globally connected and deep in the local markets, these discussions are fascinating. We focused on capturing the opportunities, while appreciating long-term relations with customers. Oil markets have been recovering, and we are currently in calmer waters, but there is still uncertainty with regard to the speed of economic recovery, but also supply. Think about OPEC+ and shale. We expect that uncertainty, but also volatility will continue into 2021 and 2022. There has been a lot of debate on the total oil storage capacity in the world, where it is located, and how much there is. Now it is complex to estimate given the fact that there is underground storage. It's not always clear how much can be stored in a tank, at the so-called working capacity, and whether a tank is still able to be used. Therefore, we use estimates with a range.
There is a different split for crude and products. For crude storage capacity, the main part is strategic and production-based, followed by refinery storage with commercial capacity as the smaller segment. For products, it's the other way around. Vopak is primarily active in the commercial segment, with most capacity used for products. Commercial storage is located in the prime hubs, secondary locations, and in distribution locations. Vopak is active in three prime hubs and market leader in ARA, Fujairah, and the Singapore Straits. Hubs strategically located at the crossroads of international trade are important for oil markets. Refining, logistics, blending, and price discovery. Hubs will see an additional importance when older refineries are closed and supply is taken over by new world-class facilities that are being developed east of Suez. In distribution markets, Vopak is focused at large growing deficit markets like South Africa, Indonesia, et cetera.
Meeting long-term demand growth is our prime approach. Following the outbreak of COVID-19, demand for crude, the orange line, dropped and it took some time before supply, the blue line, following the OPEC+ agreement responded. The additional barrels of oil needed to be stored, a massive stock-building of crude and product, that's the gray bar, was the result. With demand recovering expected to exceed supply in the third quarter, stocks will be drawn. Floating storage as the most expensive way of storing is the first that is drawn. Looking forward, fundamentals look positive with the future recovery and demand in line with structural demand post the immediate pandemic effects and limited supply growth. COVID will remain a prime factor with regard to demand and on supply the main wild cards are the consensus between the OPEC+ parties and the development of U.S. shale production in a lower oil price environment.
For crude, reducing production to balance markets resulted in prices starting to rise from recent lows. For products, there is a different story. Since refinery capacity is a given and lower demand leads to lower utilization rates and in many cases, margins. Some of the least competitive refineries are under pressure and the market may see some closures. With the closure of a refinery, the end markets need to be served from alternative locations, and hubs are well-positioned to take that role. For petroleum demand, there are differences per product with currently an outlook that is primarily driven by COVID, but also consumer behavior. The table shows demand and outlook on a per product basis. As you can see, demand for gasoline was initially strongly affected due to the lockdowns around the globe.
Demand for gasoline is bouncing back rapidly and one of the key questions will be how this will develop in the coming period. Avoiding public transportation and flights has the potential to boost driving and gasoline demand. Jet fuel and gasoil diesel are so-called middle distillates. Demand for jet fuel dropped tremendously due to COVID-19. With limited long-haul flights that consume a large portion of jet fuel and uncertainty on recovery, demand is expected to be constrained for the next two years. Gasoil and diesel have, in general, a direct link to transport of goods and industrial activity. In general, less correlation to passenger transport and recovery is more dependent on economic developments. Refineries have, in some cases, the ability to shift yields from jet to diesel. Jet fuel can also be blended in gasoil, and as a consequence, lower jet demand affects middle distillates as a whole.
Given the high middle distillate yield of new refineries and depressed demand, a longer-term period of surplus is expected, which drives demand for storage of middle distillates. A few words on IMO. The drop in demand from the marine sector was so far relatively limited. The shift to lower sulfur fuels as a result of IMO 2020 was relatively smooth. In the first months of the year, stock building of VLSFO, very low sulfur fuel oil, in 2019 in anticipation of the new sulfur cap ensured that sufficient material was available, whereas COVID resulted in sufficient supply to meet low sulfur bunker demand. At our terminals, the transition went as planned, given the ongoing marine transport demand, the outlook is in line with our views. With regard to naphtha, the attractiveness as a chemical feedstock in a low oil price environment can be noted.
Now wrapping it up, we have seen an unprecedented market with a high level of volatility. Given the uncertainty with regard to COVID-19, but also the supply in oil markets for both crude and products, we expect dynamic and volatile markets that drive trade and provide a supportive basis for our business. Our hub terminals, with leading positions in ARA, Fujairah, and the Singapore Straits, are positioned to meet long-term and sustainable demand for storage services, and our strategy is to strengthen our position in these hubs. Well, it has been an exciting journey, and it will be interesting times ahead. Thank you for your time.
Many thanks again to Michiel, Ismail, Hari for sharing your views on the different product developments. We can bring this all back to our purpose, which is storing vital products with care. We take a long-term view and perspective on our portfolio of products per geography. We've made significant steps in our portfolio to create long-term value aligned with long-term trends. We've chosen for a portfolio with focus on industrial terminals, gas, chemicals, and oil. The current market dynamics underscore our belief we are making the right choices and we made them at the right time. Let me expand on that point first. The current market dynamics have a lot of companies question their portfolio. We, as Vopak, have already made these choices. In the last five years, we kept the core and directed business development efforts towards new priorities. Our choices proved to be the right ones.
Our gas terminal positions, which is now 18 across the globe, sit well in a growing gas market, but also provide the key capabilities and relations for new energy possibilities. Our chemical terminals, including our industrial terminals in chemicals, will remain an attractive growth market. Not one that captures huge upsides, but equally has proven to be resilient in a downturn. Chemical growth is expected to take place predominantly east of Suez. We've invested decades long in the Middle East and Suez and are well presented in the main growth areas. This is an excellent point of departure. Lastly, remain committed strengthening our hub positions. We believe that oil conversion, and in particular refining, will be concentrated more and more in large refining centers. We've redirected our oil terminal portfolio in those locations.
With that in mind, you need to have the right location and the right capabilities to deliver the value. Therefore, looking at the current trends, our portfolio is in an excellent foundation from which we can further work and expand. Simultaneously, we need to deliver the short-term results and manage the company during any particular market situation. I think that's an excellent bridge to Gerard, who will update you in great detail on the actual performance delivery of Vopak in the first half of the year.
Thank you, Eelco, and a very good morning to everyone. We have a unique portfolio and strategy and are actively positioning in the energy transition and digital developments for the periods ahead. This makes our investment exciting and also part of the new economy. Meanwhile, our portfolio needs to perform in the dynamic world of 2020. I will now update you on the financial performance. For more details, I refer you to our 2020 half year report as published this morning. Vopak has proven to be able to adjust quickly in the changing business dynamics of 2020. Our governance to manage our business has performed well at all levels. Earnings over the first half of 2020, post the recent divestments, were good, and EBITDA came in at EUR 403 million, despite delays in projects.
Corrected for foreign exchange movements and divestments, an increase of EUR 18 million, or 4%, reflecting a mix of COVID-19, contango, and cost and commercial management. Earnings per share came in at EUR 1.31 post the divestments. These results are good. Foreign exchange movements and the delay in growth projects held back the EBITDA performance with more than EUR 10 million compared to our expectations at the start of the year. Our financial framework and capital allocation priorities are unchanged. We continue to invest in growth, service, and our digital infrastructure and data management. We distributed dividends in April, we continue the EUR 100 million share buyback program with 65% completed today. Our balance sheet flexibility was further optimized with a EUR 500 million equivalent debt capital transaction in July. That was more than nine times oversubscribed by investors. This confirms market interest in Vopak's business and our disciplined approach.
The transaction supports our capital structure to deliver performance and create value. Looking ahead, we aim to grow EBITDA over time with new contributions from growth projects, cost and revenue management to replace the EUR 70 million EBITDA from divested terminals. We continue to strengthen our cost culture and operating expenses will be further managed this year to be at some EUR 600 million for the full- year. During these unpredictable times of the pandemic and turbulent markets, we made a good start in the first half-year. We adjusted quickly using our digital capabilities and governance discipline to manage the company. All our 66 terminals worldwide continue to operate. We are alert to actively manage delivery of performance and to create value through new business development. Let me recap our financial framework. That is unchanged.
You are familiar with our financial framework, which is aimed to support our strategy with flexibility to manage market conditions. We remain focused on operational cash flow generation and maintain a disciplined approach towards investment and portfolio management through new business development and M&A, including divestments. Our aim is to generate competitive and compelling returns on our individual investment decisions and on the portfolio as a whole, with a targeted return on capital employed in the range of 10%-15%. In terms of balance sheet strengths, we aim for senior net debt to EBITDA ratio in the range of two and a half to three. This results from a balanced approach between allocating capital to growth, a robust capital structure, and shareholder distributions. Let's look at the balance sheet. Our total debt position at the end of June was EUR 1.9 billion, excluding lease liabilities.
Senior net debt to EBITDA ratio was 2.81 for the end of June. In the target leverage range of 2.5- 3 and compared to 2.75 at the start of this year. With our portfolio performance and robust balance sheet, we are well-positioned to support growth investments in 2020 and to fund the buyback program. Last week, we signed agreements for a new debt issuance, confirming our ongoing competitive access to relevant capital markets. This demonstrates Vopak's resilient business model and disciplined financial framework also during the turbulent markets of 2020. Funding of the transaction will take place towards the end of this year and will further align the well-spread debt maturity profile of the outstanding debt and will provide maximum flexibility under the current EUR 1 billion revolving credit facility. Continuing with capital disciplined growth.
In the last years, we've announced and delivered a significant number of projects focused on growing our portfolio towards industrial gas and chemicals terminals. Created value by allocating capital to attractive growth projects. The growth project investment portfolio for the period 2017- 2022 has and is being constructed with an attractive average investment multiple of around 7x EBITDA. Individual project investment multiples vary depending on the type and the size of the projects. As promised, we've also in 2020 increased our shareholder distributions. This is a rising annual cash dividend and the share buyback program that we are executing. We covered strategy, financial framework, and market dynamics.
Now let me take you through our 2020 performance in a bit more detail. As said, EBITDA post divestments was EUR 403 million, an increase of EUR 18 million, reflecting growth, contango oil markets, lower chemical throughputs, IMO 2020 converted capacity, as well as cost and commercial management. Strong performance in the Americas division was supported by the good contribution of new assets in Canada, Panama, and Brazil and cost management.
The LNG division benefited from growth of the portfolio as well through the acquisition of the LNG facility in Colombia last year. The Asia Middle East division and the Europe and Africa division, post divestments, performed slightly better than last year. Oil hub terminals in Rotterdam, Fujairah, and in Singapore Straits benefited from IMO 2020 capacity and the improved market structure and bringing capacity back into service. At the same time, we experienced reduced throughput for chemicals, in particular in Singapore.
Furthermore, we had elevated out-of-service capacity for maintenance and inspections in Singapore and in Rotterdam at the chemicals terminal in Botlek and in Europoort. China and North Asia performed in line with last year. This included the early lockdowns in China and South Korea and shows how well the division performed. Global functions, corporate activities, and other included costs related to IT and business development. In aggregate, the portfolio delivered a return on average capital employed of 11.8% in the first half of 2020. Turning to the divisional performance trends. The Americas division continued its upward performance trend benefiting from growth and occupancy improvements. Although throughput for chemicals in Houston was weaker. The Asia Middle East division performance has not yet benefited from the contango performance in full. Occupancy rate remained impacted by out-of-service capacity as construction work was still restricted in the second quarter.
Also, lower chemical throughput in Singapore impacted the results. The China North Asia division benefited from increased spot opportunities driven by continued supply chain uncertainties and performance of Europe and Africa reflect a new asset lineup post last year's divestment and an upswing in occupancy in the oil segment. The LNG occupancy rates have been strong and in line with the long-term take-or-pay commitments. Comparing the quarters, Q2 versus Q1. The EUR 202 million EBITDA posted for the second quarter reflect resilient performance influenced by contango out-of-service capacity and lower chemical throughput levels. Contango oil markets contributed to the performance of the European and African division, as well as Asia and the Middle East division. Lower chemical throughput activities were impacting the results as well, mainly in the Americas and the Asia Middle East division. Both these divisions have performed well on cost management.
The EBITDA potential for the second quarter was higher. Currency translation and project delays have set back our performance compared to plan. This quarter, we, however, still delivered good overall financial performance, as I have already explained. Let's go to the occupancy rate developments. Occupancy rate for subsidiaries of 88% in the second quarter and trended up following support from contango markets. Out-of-service capacity reduced to 1.4 million cubic meters, though behind schedule due to work restrictions from governments in various locations. In the last call, I commented on four tanks of 60,000 cubic meters in Laurenshaven in Rotterdam that we were preparing for the contango market. These have been delivered and are back into operations in this quarter and are fully rented out.
At our Botlek chemical terminal cluster in Rotterdam, we continue our service improvement program and have taken further decisions to invest in infrastructure to strengthen our chemical storage position. Therefore, the out-of-service component continues at Botlek. Delays in bringing back out-of-service capacity is mainly noticeable in Singapore due to governmental work restrictions related to COVID-19. Our reduced fuel oil capacity of 3.5 million cubic meters continued operating at high occupancy levels after our interventions last year. Panama is now also completely filled up. Our proportional occupancy rate for the quarter was 90%. This number includes the performance of subsidiaries and of joint venture asset terminals. The increase in the last quarter was mainly the result of good performance of joint venture oil terminals in Asia and the Middle East, continued strong performance of our joint venture gas and industrial terminals.
Proportional occupancy is becoming more relevant as the share of joint ventures and associates in our portfolio is increasing. Moving on to our cash flow performance. This year, we delivered a solid cash flow from operations of EUR 410 million. Sustaining service and IT investments were EUR 132 million and include investment for maintenance and inspections of out-of-service capacity. Our cash momentum in 2020 is mainly driven by the cash inflow from the divestments of Algeciras and the additional gain for the 2019 divestment of the joint venture terminal in Hainan in China, received in 2020, and the EUR 85 million repayment of our preference share capital in the industrial terminal in Malaysia. Investment in growth projects resulted in EUR 238 million investments this year. We can confidently say that we expect growth investments for the full year to be up to EUR 500 million. Turning to proportional results.
Performance of joint ventures and associates is becoming increasingly important with our joint venture assets in Canada, Colombia, Pakistan, and Pengerang fully operational. Today, capacity under joint venture management has reached approximately to 12.5 million cubic meters. Capacity in subsidiaries has reduced to 18 million cubic meters with the successful divestments of Algeciras, Amsterdam, and Hamburg. Another 4 million cubic meters is managed by Vopak as operator. Proportional EBITDA is almost EUR 250 million this quarter, of which proportional EBITDA from joint ventures is more than EUR 100 million. Our proportional occupancy rate was 90% and reflects good performance and continued strong performance of our joint venture gas and industrial terminals. Divisional proportional occupancy rate performance is well within the 85%-95% range. Divisions with strong joint venture performance are Asia and the Middle East, China and Northeast Asia, and the LNG division. Let me recap the key messages.
We've proven to be able to quickly adapt to the changing business dynamics of 2020. We delivered good financial results with a mix of COVID-19, contango, commissioned assets, and cost and commercial management. Our financial framework is unchanged. We further optimized the balance sheet with new debt issuance, which was oversubscribed nine times. In these unpredictable times of the pandemic and turbulent markets, we made a good start of the first half year of 2020, somewhat held back by project delays and also influenced by currency movements. Looking ahead and closing out, we aim to grow EBITDA over time. Growth investments for 2020 could amount up to EUR 500 million. We continue to strengthen our cost culture. The outlook for the year 2020 is an operating expenses level of EUR 600 million.
We are prepared to respond to different economic scenarios. We are alert to actively manage delivery of performance and creating value through new business development. Thank you. I will now hand back to Eelco. Eelco?
Yes. Thank you, Gerard, and thank you all for listening to us for this hour and five minutes. Before we go to Q&A, let me just very quickly summarize the key messages before we start. I think, first of all, we delivered good financial results in a volatile business environment. Second of all, our strategy remains unchanged and has proven to be robust, and therefore we continue to invest in 2020 and 2021 with confidence. Lastly, and I cannot repeat this enough, but we are really very well positioned and have a really irreplaceable and unique global portfolio that is fully aligned with the long-term trends. With that, I would like to open the lines for questions that might have arrived, and we're happy to answer them to our best ability.
I know the global directors are on the line as well. They can support us in giving you the details required. I hand it back to the moderator.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. We have two questions in the queue so far. The first is from the line of Thomas Adolff at Credit Suisse. Please go ahead. Your line is open.
Good morning. Thanks for the presentation and all the detail. My first question is just on how the business will evolve longer term, and I'm sure you have an idea, and you haven't given any numbers. Let's say for by 2030, how much of, in terms of share of revenue, will come from the new energies division? How much more will oil products drop? If you can talk about the moving parts, that would be great. The second question I have is more specific on 2020 and maybe the guidance for EBITDA this year. We've seen the first half of this year and how much EBITDA you've generated. I'm sure you have an idea about the second half, at least the visibility is better than when you reported 1Q results.
You did mention your plan is to grow EBITDA over time and to offset the disposals made last year. Is it fair to assume that on that basis, in absolute and on reported basis, that your EBITDA this year is going to be lower on a year-on-year basis? My final question, if I may. You talked about oil contracts to be largely rented out, the oil terminals, thanks to contango. Maybe you can talk about the contango duration. Does it extend into the early parts of 2021? Anything on that would be great. Thank you.
Okay. Thanks, Thomas, for taking your questions. I will answer the first one, then Gerard will take the EBITDA outlook, and then maybe Hari can give us some insight in his views on the contango volatility. First of all, really like your question 2030, because that's, I think, indeed where you need to have your mindset on if you look at long-term value creation. I think it's hard to make a clear prediction on what the contribution will be percentage-wise. We've taken a view that we cannot see a world function without the maritime sector. We think the maritime sector will be used to redistribute oil chemicals and gas across the globe. Even in 2030, we expect all three, let's say, commodities to play an active role in our global economic model.
If I would look at where we've been trending the company towards, it's a more industrial type of layout. What you've seen is we've invested heavily in industrial terminals, we will continue to do so. I would expect the industrial terminal part to grow. We have momentum in LNG and LPG, which we mentioned, so expect also that part to relatively grow. Therefore, if you look at the relative contributions, if you look at new capital being deployed in the next 10 years, it is likely that it will be more in industrial chemicals and gas than it will be particularly in growth in oil. I'm not excluding investments in oil because we still believe that there are some good opportunities there. If you look at simply to reuse the cash that you earn, it will most likely be in that scenario.
If we go to new energy, I think, just like we've done with LNG. If you take LNG, 10 years ago, we made the first investment in Rotterdam, which was the Gate terminal. If you look at where it contributes now in our portfolio, it's about 10%-15% contribution. I think if all goes well, Thomas, one could say that maybe in 10-15 years, we have a 10%-15% contribution in new energy. Again, that depends on regulations and opportunities that arise. I hope this gives you a sense of at least where our mindset sits when we look at long-term capital deployment. With that, I give it to Gerard on the outlook of EBITDA in 2020.
Hi, Thomas. Thanks for the question. We always, as you know, careful on not really giving guidance on EBITDA, but I'll give you some of the moving parts. We gave you the outlook for the cost, and we said for the full year, EUR 600 million. If you look at our year-to-date, that is more or less twice the year-to-date number. Hopefully, we can do a little bit more. The main swing factor in my mind for the second half of the year is, if I look at Q2, which had its own dynamic versus Q1. If I look at Q2, the main dynamic going forward is the delivery of new projects, our continued, hopefully, outperformance on cost, and also whether the throughput levels will play out.
I think in terms of occupancy, we've seen an acceleration of utilization of our assets in a positive way during Q2. It's also fair to say that the June number was the best of the quarter. It's trending up. It's positive in my mind. The timing of the replacement of the EUR 70 million from divestments in many ways is, in our mind, ahead of schedule, so we're doing pretty well on that. It will depend on the factors that I've just mentioned.
With that, we go to Hari.
Yeah. Thank you. Well, maybe to go back to your question, I think primarily, if you look at our hubs, they are focused at meeting long-term demand for our storage services. I mentioned a number of the elements like its refining centers, logistic roles, think about price discovery. That is the key driver of our business in the hubs. If you look at contango, that is supporting the demand for storage. I think if you look to the coming period, what we expect is volatility and the fluctuations in price that go with it. If you take that, you will see that the contango will increase. It can shrink at a certain time.
If you ask the question on the outlook for 2021, 2022, you can look at the screen and see that there is a contango, but it's very much also depending on how the contango is at a specific moment. The reason to mention that is that if there is a solid contango for a year and a half, that could drive a customer to take the decision to lease a tank at a specific moment. Even if that market structure changes a bit later in the time, he still has his position, and he is fully covered. That's a bit how we look at it. We will see some volatility in the forward pricing, as we has always seen in these markets.
All right. Thank you. In terms of what you have secured in the second quarter, presumably they're a little longer lasting than a quarter. Do these contracts that you secured in recent months, how long do they extend? Do they extend into next year, or is it just a 2020 phenomenon?
Some do. We see, in general, markets that expect volatility and dynamic markets. Others, they have options to renew, so not very special in that. It's what we see more of.
Thomas, if I would have to look for this particular year compared to the years before, if you look at 2019 and 2018, I think it's very safe to say that this volatility drives opportunities for trading. We see substantially more confidence in trading houses trying to take positions to be well positioned to capture those opportunities. I think that's what we try to bring across, is that the environment for oil storage momentarily is advantageous.
Okay. Understood. Thank you.
Thank you. Our next question comes from the line of David Kerstens at Jefferies. Please go ahead. Your line is open.
Good morning, gentlemen. Thank you for the detailed presentation. First question for Ismail. I think you mentioned during the presentation that you think chemical demand might have bottomed in the second quarter. What does that imply for throughput? How quickly do you think throughput can recover? Will there be a V shape recovery in the second half or in 2021 or more U or L shaped, and will it take much longer to come back? Second question for Hari on the oil storage capacity fully booked. To what extent will there be a further ramp-up in the second half of the year from those bookings coming in? What percentage of the potential oil storage recovery that you foresee was already realized in the second quarter? Maybe a final more strategic question for Eelco and Gerard.
Do you see any changes in the competitive landscape in the current environment, potentially attracting more investment in oil storage after all the reports that there was such a huge shortage of storage capacity? Thank you very much.
Ismail and Hari, if you can be so kind to answer the questions of David.
Sure. Thanks. Ismail here. In terms of the recovery timeframe, it is of course difficult to predict, I have to admit that. If we look at our inventory levels, they're slightly higher than they have been in the past. What is happening now is, with prices down, the market has started to move again. We are seeing some results coming in already. A couple of results have been quite drastic from the results of the chemical companies, while some of the others are a little bit more optimistic. We do expect that there'll be some demand recovery. This is going to take the better part of 2020. I expect a slightly slower recovery. I'll leave it there for now, Eelco.
Thank you. Hari.
Yeah. From the oil part, I think we saw the real change in the markets starting in March only. If you talk about the contango storage has been ramping up in the second quarter. It's coming into more fuller force from here on, if you talk about the tanks that are deployed for that service.
Yeah, David, on the question of the competitive position, I actually think that our competitive position has strengthened in this environment. Let me elaborate on that. Firstly, I think what you see is, I made that comment, I think people are looking to see in which commodities they would like to be long-term. There are a lot of portfolio choices that are made, and we have already gone through that particular cycle. If you look at where people would like to invest in, which asset class, it's more gas, it's more industrial, it's more chemicals. If you look at least the communication from our competitors, you see that they will have a similar view on where future opportunities will lie. The incumbent player that has those positions has an advantage from the start.
The second thing is that if you want to play well in these markets, you need to have certain capabilities, and these capabilities are obviously technical and operational, but equally, on the digital side, that you have capabilities to execute, and I think these are, again, attributes that we've been developing over time. I also noticed that in the dialogue that we're entertaining today, for instance, I think a good example is that you hear in the press momentarily that manufacturers are looking at outsourcing possibly tankage, and get it off their balance sheet in this period of time. We are uniquely fitted to be on the other side of that dialogue because we have that industrial base, we have our industrial terminals, and we have the capability to execute on that.
You would find me actually in a position that I'm actually strengthened in our capabilities than I was probably a year or two ago because of the unique circumstances that have been imposed on us.
Okay. That's great. Thank you very much.
Thank you. Our next question comes from the line of Andre Mulder of Kepler Cheuvreux. Please go ahead. Your line is open.
Good morning. Yeah, a couple of questions. First one on throughput and chemicals. That is lower. I also heard a volume decline of 6%. Is that, let's say, the size of change that we see for throughput? Second question on annual capacity expansion in the chemical side. How does the pipeline look for 2021 and 2022 compared to this EUR 40 million for 2020? Third question on the page 34, the multiples that you mentioned there. I see a multiple of 10, but I also see a multiple of four to six. Lots of questions, firstly, on out-of-service capacity, currently 1.4. Where do you see that at the end of this year? Probably you will also have always some capacity out-of-service. I'm looking for, let's say, sort of normalized level there. Lastly on CapEx. Growth is EUR 500 million.
What's your view on total CapEx for the year?
Well, Andre, we are normally pretty quick on our feet, this was five questions in a row. Let me see if we can recapture that. I think you had a question on the throughput levels of chemicals. You say, "How should I look at the 6% decline in throughput? How should I normalize that in typical cycles of chemicals?" This is how I understood your question. The second question was on the, what I understand, the BD portfolio or the pipeline of projects in chemicals. Is that correct?
That's right.
The third question was on page number 34, and I know that people here are frantically looking for page 34 on the multiple. We will lean into that. After that, I'm sure that Gerard will have a view on that. Out-of-service capacity, where it stands today and how that will trail for the remainder of the year. I think also Gerard can take that, and I think the EUR 500 million CapEx. What was your question on the CapEx?
Yeah, growth is EUR 500 million. What is the feeling for the total CapEx for the year?
Total CapEx, got you. Okay. We'll work through it one by one. Let's start listening to Ismail on the first question on how we should sort of normalize that 6% decline in throughput. Ismail, could you give some guidance on that?
Yeah. Typically, throughput levels are fairly flat as we go ahead. Six percent is slightly weaker than we would normally see that, but it's not a disturbing factor at all because in the fourth quarter usually, companies manage their volumes a bit quicker to obtain commercial advantages. I think we should see this pick up fairly well towards the end of the year. I'm not concerned at the 6%. I think we should be okay when we look forward.
Graaf, you want to take the second question?
Thanks. No, we'll take question three, four, and five first. I'm going to ask Gerard to give some guidance.
The multiple, what we try to illustrate here is how we deploy capital. If you see, we indicate a range indeed, as you point out. The higher end of that range you would typically see in, let's call it, an acquisition in the North Americas, or possibly in a Singapore market where you typically see higher multiples in the acquisition range. We also see that we will not always be able to compete in those markets because of those high multiples that sometimes are posted in M&A transactions. We would occasionally sell into those markets, if it really is at the very high end, it's harder. If you have a brownfield expansion in your existing terminal where you make an improvement or an expansion, you could invest at the multiple of, at the very low end.
You gain a lot of extra EBITDA for relative little capital. That is what is the extreme ends of the range that you see. In terms of capital spend, we did say initially in the year, EUR 3 million-EUR 500 million for growth. We now indicate we will be at the high end of that range, which is positive, because then we can invest at these multiple levels, as we indicated. The other elements of surface and IT investments have not changed from what we've said before. The ranges we've indicated before, over a three-year period of EUR 750 million-EUR 850 million and for digital, EUR 30 million-EUR 50 million, are unchanged. Let me just see what else.
Out of service.
Out-of-service. What was the question there?
Where it stands today and how they should look at it for the remainder of the year.
We still have some out of service, which we had hoped would move a little bit quicker, but which was impacted by the limitations in the supply chain following the governmental lockdown interventions. Some of that we've seen also in Singapore. We've taken some extra decisions in Europoort. We've decided to continue with improving the services bottleneck. There is a level of normal out of service activities that will continue. That typically drives, ultimately, the high end of the 95%. You have the 5% left to do this type of work. There's still probably, what is it? 1.4 million cubic meters at the moment, which is out of service. In the second half of the year, we would see that drop by maybe EEUR 300 million, EUR 400 million.
If I remember it correctly. If I said that wrong, I will come back to it in a second. I think it's reducing somewhat in the second half of the year. Yeah, I think I'm right there, EUR 300 thousand to EUR 400 thousand.
Would you say that that's the normal level, 1 million?
Yeah. That would then be the normal level. It's about right.
It's about 5% of the 20 million cubes that we have in subsidiaries. That's about the right level.
Yeah.
Of course, all of this depends a lot on how much progress we will be able to make in places like Singapore in the second half of the year, where currently still, there are massive restrictions on working with contractors.
That, I think, sums up a little bit the quarter performance. We're very pleased with the performance because we know we could have done a lot better if we had delivered the projects on time as per our original plan. Due to the lockdowns, that performance was impacted and to a certain extent, the maintenance. At the same time, we've been able to be very responsive in the oil markets, bringing back capacity. All of that is in the mix. I think you had one more question on-
Yes, we have one more, Andre. I need your guidance because you mentioned you wanted to know more about the business development pipeline for chemicals, and you made a number of 14-20. I just try to understand what it was that you were alluding to. Could you help me there?
It was about the capacity expansions in chemicals. You said that supply would be increasing by something like 40 million tons for this year. I'm looking at how the pipeline is looking for 2021 and 2022.
I think on that, you know that we do not give any guidance on particular projects, Andre. What we've done is, and you know by 2016, we've made a review of our portfolio. I'm repeating myself. Chemicals was one of the areas where we wanted to grow, particularly industrial. As you've seen, more than 50% of our chemical terminals today come from industrial terminals. We've started to fill that pipeline. We're looking at, first of all, where can we expand in brownfields, because we already had a good position globally. Second of all, which industrial opportunities are there at this moment in time? What you find is that when you look at brownfields, we started to develop brownfield expansions, for instance, in Vietnam, in Singapore, in Rotterdam, in Houston, basically to strengthen the backbone that we already have.
The second thing that we've been doing is looking at industrial, and you've already seen a few announcements. The most notable one has been the one in the southern part of China, which is under construction today and is already disclosed and put into the numbers, and which will contribute in the timeframe mentioned. I think what you can expect us to do, without going into detail, you can expect us to maintain that rigor on these industrial opportunities. What we see is that there are multiple expansion programs for large chemical complexes still ongoing. We are in dialogue with several chemical manufacturers to see how we can support them.
What I mentioned previously in the call is that there's a new element brought to the mix, is that already also existing facilities are being reviewed now by chemical manufacturers, which also offers, I would say, a new opportunity for us to enter into. Without giving you growth number on CapEx spend and contribution, I can give you a qualitative assessment, is that I'm pleased with the relative position that we command in that dialogue globally.
Okay, thanks.
Thank you. Our next question comes from Thijs Berkelder of ABN AMRO. Please go ahead. Your line is open.
Two types of questions on pricing and again on CapEx. Can you maybe explain whether clients at this moment in the chemical sector are being under pressure now for more than a year, are indeed not only looking at potentially divesting storage assets, but also renegotiating their contracts at potentially lower prices? Similar to that, or vice versa, in oil, to be honest, the oil storage effect, the positive effect is clearly visible in the numbers in Americas, but in the other regions, not so much. What can we expect there? I believe you once communicated a potential EBITDA uplift of, let's say, EUR 50 million- EUR 100 million. Far, we have seen maybe EUR 20 million. When can we expect the rest?
Your oil capacity, well, it's now fully booked, but is it fully booked for the coming six months, for the coming 12 months, or for the coming 18 months? You're not floating oil storage, but your land storage are looking at more long-term contracts. Can you maybe shed a light there? The other topic, CapEx. Can you maybe explain the planned EUR 500 million growth CapEx, roughly what is the mix there, the percentage mix there per segment on industrials, chemicals, gas, and oil? On CapEx related, we've seen a nice slide on all the new LNG and LPG projects being planned. Can you give a rough timing on the FID for various new gas projects? When do you plan the FID for German LNG, for LNG project in China, for LNG to power in Singapore, and why is Hong Kong LNG not in that picture?
You already made some remarks on New Energy CapEx. What kind of startup costs are we already seeing going through the P&L, for taking the time of planning New Energy segment to start up? When, more or less, can we expect the first project, let's say, larger project in this segment being launched?
Okay, Thijs. Again, I think we're on the right questions, and if not, please intervene. Let's start with the first question, which has a lot to do about pricing and contract structure in both chemicals and oil. I will start it, and maybe I'll ask Ismail and Hari to complement my remarks if I've missed out on anything. First of all, on chemicals, I think that was in the presentation of Ismail. I think you need to remember is that more than 50% of our chemicals is in industrial locations, meaning that these are long-term contracts which have been locked in for a longer period of time, far exceeding an up and a down cycle.
Second of all, I think if you look at the term of our contracts for chemicals, and if you take our hub and our distribution terminals also there, the majority of the contracts is longer than three years. In addition to that, if you look at our customer portfolio, we have a very long relationship. I think about 80% or so of the contracts that we have has been with us for more than 10 years. The dynamics in chemicals are such that the relationship is there, and there's always a balanced approach to how we enter in the new phase of service. We have not seen, at this stage, and I don't expect it, any chemical customers that have come back to renegotiate existing positions. That has not happened in the industrial sites, that has not happened in the hubs or in the distribution sites.
I think that what you see is that if there is an effect up or down, normally in chemicals, it takes a while sort of to enter reality. As for the oil storage, I think indeed, all but the last few cubic meters of our oil tanks have been rented out. What we see is that normally two things happen in the cycles. First of all, we see occupancy go up across the globe. Second of all is that when renegotiations take place, you have an opportunity to discuss pricing. Judging from my comments previously, I think that we are in a situation that now that occupancy has gone up, we expect actually for the next few periods that we should have an interesting discussion on pricing, which is already visible in our renewals today. Our contract portfolio in oil is everything between zero to three years.
You can expect that as we renew these contracts, sort of 30%, 35% every year, you have an opportunity again to engage on tenure and price. I can tell you that the effects that we have on our renegotiations now in the second quarter already have an impact on 2021. We're not discussing contracts of three to six months. We're discussing contracts over a year, maybe in certain instances, two years. That's where the confidence comes from in our portfolio there on pricing and contracts. Maybe Hari and Ismail, I'm sure that you have maybe other views on that, but please amend anything that I've said.
Yeah, sure, Eelco. Thanks. I'll take the chemicals one first. I think you covered it very well. Just a comment I'd like to add here is the reason I mentioned in my presentation about the pre-COVID situation of the chemical market. It's very important to address that because we were going into a petchem down cycle. Some of our customers who are just those few, like Eelco presented, it's long-term contracting, not up for discussion. Some three-year contracts, not up for discussion. It's those that may have expired or are expected to expire in the coming weeks and months. That's where you might have a conversation. Again, I think we need to really try and separate the pre-COVID petchem down cycle impact from the real COVID impact.
That's a conversation that we tend to have, but it's relatively smaller compared to the larger portfolio, so the impact is not that great. Surely customers will ask for relaxations, but like I said, this is a very small component of the overall conversation. Again, I think, in these situations, you do find a balance. We have relationships with these customers for a very long time. You tend to sort of work with them, so we can show our commitment to their somewhat pain that they might feel. This is relatively small and no real major impact. I think we have been able to secure longer-term contracts renewals for another three years, even during this period of time. People are willing to maintain their positions, especially in hubs, because hub locations is not easy to get a hold of, because these are more sought-after places.
Singapore, ARA region, Houston, these are important locations. On the distribution side, again, there's an impact of competitiveness. How saturated is the market, and how competitive is the market? I think we do have a leading position in some of these places as well, where we are price leaders. The conversation is okay for now. I've been in touch with most of the locations, and I think they're quite okay. I'll pause there, and I'll leave it to Hari to comment on the oil. Hari?
Okay. Thank you, Ismail. Maybe to go back, in line with Eelco's comments, I think we see some proof points where we are renegotiating some contracts and both the rate level but also the duration is being extended at this time. That is really underlining the outlook from quite a few market parties that the near future for 2021, 2022, will see the volatility in these dynamic trading markets.
Fantastic. Maybe Gerard, your view on revenues.
Yeah, there was a question on revenue on oil in particular and the feasibility of that. In the Americas, you're right, that is mainly the startup contribution from Panama that you see coming in. The commercial success is mostly about developing a new bunkering position and obviously in the context of contango, but in essence, it's a new business development result that you see coming through in that revenue line. The other one is actually Europe and Africa, because on first inspection, it looks like revenue in oil is dropping in Europe and Africa. Of course, that's the effect of the divestments. If you clean the divestments up out of the revenue, then you see a significant step up, an increase in Europe and Africa relative to a year ago.
Can you explain what the increase is?
Well, the decrease from last year from the divestments is about EUR 45 million, and therefore the increase is about EUR 15 million.
Yeah. Okay. Clear.
If you clean that up. The one that didn't show the same momentum is Asia and Middle East. Although we did see a more or less unchanged revenue in oil in Asia and Middle East. You see positive contributions from, for instance, Fujairah, PITSB in Malaysia, but you also see a held back oil revenue in Singapore Straits because of the out-of-service capacity that we couldn't fully bring back in yet. That is a bit counterintuitive that Singapore oil didn't show the same as Europe and Africa and the Americas.
Exactly. Two things left, Thijs. I think you wanted to know the LNG portfolio. I think Frits will give you a comment on that, and then you would like to know how the split of CapEx is for EUR 500 million in growth between the different segments. First, let's go to Frits.
Yes, Thijs. On the LNG portfolio, if I look at that, I think across the board, we have a very nice range of opportunities. Some are, I would say, fairly close to FID, others are still very much long range. If I go a little bit through the portfolio, let me start with Hong Kong, which you asked about. In Hong Kong, we are currently a technical advisor to the project, but the project per se has already taken FID. In other words, the power contract has been given to our partner there and the construction will start imminently. We have an option to discuss with them if we want to take a wider role than just technical advisor in that project. In China, as we reported near Zhangjiagang, we have finished constructions of the base, of the jetty.
I would say things are progressing well. When can we take FID for that? As always with an LNG project, a lot of things need to align. I think in the case of China, we are mostly doing the, I would say, the technical work that will allow all the permits, et cetera, that we need to mature. Once the timescale is there, I think the chances of taking a positive FID are very appealing. If you go to German LNG, there I think we're still in the middle of a feasibility study. It's by no means an easy call whether ultimately long-term, but also the Nord Stream pipeline that is coming to Germany, an LNG terminal is a long-term requirement there. We do get quite some support from customers that are interested. We are in the middle of that study.
I don't anticipate that that FID will be within the next year.
Okay.
If you look at our existing sites in Pakistan, we have very interesting possibilities for further expansions. Again, hard to say when that FID will come because a lot of stars need to align to take FID. Certainly, I would say, a good promise. I would say in Keppel, together with Keppel in Singapore, we're very excited. That project is still in the very early stages of the study, but what makes it to us extremely interesting is that the idea is also to longer term look at hydrogen there. There, not only do we have the usual LNG, I would say, studies to do in order to be able to take a positive FID, but also at the same time, we're already looking at this future potential and how to best incorporate that in what we do in the first phase of the project.
That gives you a bit of a sense, I hope, of where these various opportunities sit.
Thanks, Frits.
Clear.
Thijs, if we go to the relative contribution of projects vis-à-vis the EUR 500 million CapEx, I'd like to turn your attention to page 51 of the presentation, because that gives the geography, the terminal, but also the product type.
It gives you the cubic meters capacity in our ownership. I think we've mentioned it before, I'm afraid that you need to do the work yourself, but if you take roughly EUR 500 per cubic meter for oil, roughly EUR 1,000 for chemicals and EUR 2,000 for gas, this is not the exact numbers, but gives you a proportion. I'm sure that you will get a fair assessment of what falls in which category. Then I would suggest you call Laurens and see whether your assessment is indeed on the money. Then maybe the last question. We had one last question recorded. Yeah, it's the start of cost on new energy. Your question is how much is in the P&L for new energy? I think I would like to give it to Frits to give an insight on that.
I think it's currently, I would say, a highly efficient and very agile and small team that's working on it. I think we are literally involved with, I would say some 20 projects right now worldwide, but this is all done by a very small team. I think at this stage, I would say our pre-investment costs are still relatively modest in this. Obviously, as we are getting more excited about the opportunities and as this matures, that cost, I expect to go up over the coming years. For now, it's still a fantastic effort by a relatively limited group of people within our company, leveraging a lot of what we have in the rest of our business, for instance, LNG knowledge and other capabilities on the commercial and technical front.
Okay, clear.
I think that in the P&L, you won't be able to find it. It's just too small in terms of expenses at the moment. The most noticeable money we've spent is probably in Vopak Ventures, where we've taken several positions in equity participations in interesting companies. That's not only new energy, but that's also digital software, industrial applications. You're talking, again, small amounts of money. Expenditure-wise, it's not a big deal at the moment. It's commitment, skills, people, management time. That's where the effort goes. From that point of view, the money, I don't think is representative to the actual progress we've made because we feel pretty good about it. The funnel has some real realistic opportunity to get into the new energy exposure with either pilot plants or scale-up plants or full industrial applications.
Clear. Thank you.
Thank you. Once again, if there are any further questions on the phones, please dial zero one on your telephone keypads now. Okay, we've had one further question come from the phones. Apologies, this person didn't record their name. If you can announce your name and company and then ask your question, please. The next person in the queue.
Yeah, Keren Rolla from ING.
Hi, Keren.
Good morning, everyone. On the telephone. I have a couple of questions for all the divisions. First, to start with chemicals. You have discussed Houston and Singapore, where there was some effect of the throughput due to the downturn. We have heard about Botlek, 1.4 million, let me say, most is the capacity outage in Botlek. What about the chemicals in China? Maybe you can give me an idea about the trends there and the developments. With regard to oil, if you look at the clients for, let me say, trying to benefit from the contango situation in March, April, and the overflow, is that a new sort of client, or is that an existing client, let me say, typical IOCs also adding that to the portfolio?
Then with regard to the LPG business, are you expecting to make major steps there, given the fact that the outlook for LPG in general is quite positive, given the high demand, especially in China and, let me say, the overproduction in the U.S. related to shale gas? Maybe you can say something about it. Then on cost savings, maybe Gerard can elaborate on what sort of cost savings he might have in mind in the coming period. The 600 million is a yardstick, but maybe you can look at further down 2021, 2022 for further cost savings. Does it also include, for example, benchmarking and looking at further opportunities in IT? Those were my questions.
Okay. Keren, we'll make sure to end at 11:00, so we'll give you short answers, and then you can follow up with Eulderink if required. First of all, Chemicals China. Chemicals China is performing very well. We've seen occupancy going up, demand for tanks has increased. We've experienced there that in the distribution terminals, the occupancy has gone up, throughput has gone up, and equally, we've seen that the industrial terminals are performing well. No concern in China. Second question is for LPG, and maybe Michiel Gilsing, if he's still on the line, can give a short reply on that.
Yeah, sure. Eelco, still on the line. In general, for LPG, the portfolio of business development opportunities is relatively rich, I would say. What we see is that there are some delays in executing these projects due to the COVID-19 environment. Although longer term, and I think also the dynamics are positive for China indeed, where we see quite a few PDH opportunities and the many projects on the table in the different chemical parks there. More related to shale gas, what we see in the U.S. that it is more difficult to execute projects at the moment, given the environment. There are still opportunities on the table, but it will take a bit more time. That's what we expect.
For our Canada West Coast export terminal, we still are working on an expansion of that facility because effectively the exports are running ahead of schedule, to be seen how it will develop over time. Still very positive on the development. In general, portfolio is sound and solid. Takes a bit more time. Still very good value creation opportunities.
Thank you, Michiel. As for the contango customers and the oil customers, I think I can be very short for that. There's no change in our customer portfolio. We've seen sort of our usual large accounts and key accounts, which we have a long-standing relationship with, who have been able to engage in a dialogue with us. These are the usual large oil accounts that we serve. For costs.
Yeah, cost. We had an existing outlook for the year in our budget, which of course you can't see. You only know what our actuals are. In our budget, we had the new projects coming in. We had inflation, of course, into account. You take a few on your new business development. In aggregate, what we say is we wanted to compensate inflation for 2020. Now that resulted in a certain number. We've now intervened in that number and gone for a substantially lower number of EUR 600. Although it's not a straight comparison, the total cost number of last year was EUR 633. You can see a delta in cost. Now, it's not like for like, but it is bottom line, a delta.
If you look forward, we always feel we are on top of cost, but then when you see what we actually can do, we continue to see that we have space to manage our cost down further. I have an ambition, or we have an ambition to continue to at least compensate for inflation. For the rest, we'll see how it goes. What sometimes distorts the number is our positive investment in new business development. Those are good costs, and we're more than happy to spend those.
Thanks, Gerard. I think this concludes our presentation and prepared remarks for you today. I think we were very happy that we had some extended time with you here. We took the decision in light of COVID-19 and the difficulty to really understand how markets are behaving, that we thought it was time well spent to give you additional insights in the markets. We do appreciate that it's still a complex environment, and I hope that you have taken away the most important lessons of at least what we've experienced and how we view the markets going forward. We hope that this was seen as a valuable time spent. I think how we leave this call, and I think that probably comes from the results, is that we unfortunately missed the icing on the cake in the second quarter. I think that we've performed well.
I think the business is running well, but unfortunately, we were not capable of delivering the projects in time, which would have made the cake complete. We still believe that the value is there in the quarters to come. We leave this quarter with confidence. There, I would like just to bid you farewell for hopefully a good holiday and a break, and obviously stay safe and healthy, and we'll see each other again in the second half of the year. Until then, thank you very much again for listening. Bye-bye.