So good morning, ladies and gentlemen, here in the venue in Euston and everyone joining via the on demand audio webcast. Welcome to VOBOX Capital Markets Day. My name is Laurent Serraf, Head of Investor Relations. Before we start, I would like to make some safety announcements. So today, no alarm tests are scheduled.
In case of an evacuation, emergency exits are down the hallway to the left. Those will lead you down to the exits on the street, and the assembly point will be in the park in the front of the hotel. This is something to all be aware of. Lastly, a logistical remark. Would you mind turning off the sound of your phone, please?
So then before we start, the safe harbor statement regarding any forward looking elements that we have in our presentation. So this applies to the presentation and also for the Q and A. I would like to introduce the people on stage. So I'll start with Ilco, CEO next to him, Gerard Paulyas, our CFO Fritz Ehlering, COO and Paudo and Simons, Division President of OPAC Americas. The program for today is as follows.
You can see it over here. So we start with a strategy update, then a financial framework to be followed by Q and A. And then we have an update on The Americas. And after lunch, we will visit the Deer Park Terminal, where Chris will give you insights in the major chemical hub that it is. So we structured the Q and A for this morning in two blocks.
So if you have any questions during the presentation, please keep them to the Q and A. And we will use a microphone to see so people can also follow you on the webcast. I think we can start then. So Ilkka, please go ahead.
Thank you, Laurence. Good morning, ladies and gentlemen, here in Houston. It's really a pleasure that you have come to listen to our story. And our story is storing vital products with care. Every day, we use products and consume goods that are vital to our daily existence.
It's either energy to extend our daylight or fuel to be able to move around. We have houses that protect ourselves. We use cars, use our cell phone. And obviously, we have to eat every day in which we use edible oil and use fertilizers to make sure that the soil is fertile. These are all daily products that is knowing every day the world economy ensures that these products are there at the right location at the right time and at the right price.
And Vopak plays a small but very important part in that supply chain. It's how we view the world. We believe that these vital products is something that we have the ability to store in marine locations, and we do it with care because we believe that companies that have the ability to keep the quantity and quality of those products well and keep people out of harm's way have a role to play in these supply chains. And that's really what makes us excited every day. We are world leader at this, and we'd like to stay world leader and extend our lead in playing that particular role to society.
That's the story that we're going to tell you today, and we're going to tell you on what we're going to do in the next few years to ensure that we maintain that number one position. It's all about the strategy execution that has two elements particularly to it. That's the short term execution of making sure that we have our short term earnings in order and it's the long term viability of Vopak. In this Capital Markets Day, which follows the Capital Markets Day in 2016, we're going to spend particularly a lot of time on the time frame twenty seventeen-twenty nineteen. In 2016, we initiated a new viewpoint or a new ambition for Vopak, which was then encompassed in the beyond 400 study, and we set a clear course on where we want to take the company.
We made a promise to deliver on our strategy in twenty seventeen-twenty nineteen. And today, we will give you insight in how we are delivering on that promise. And as well, in the mix, we'll give you a few elements that you can use to already see where this company is heading beyond that particular point. So let me start by making a short introduction on the strategy and how we're executing that. Then Gerard indeed will give you the financial framework, and we'll spend time on our earnings.
And obviously, in the Q and A, Fritz will join us in which we can really encompass all your questions and give you clear guidance on the heading. If there are two key messages that we'd like to leave with you when you leave our Deer Park terminal today, then those are the following. First of all, we radiate confidence in our short term performance and our ability to create value over a longer period of time. And that confidence comes from three particular things. First of all is that we believe we have an exceptionally well diverse portfolio if you compare that to other competitors.
It's geographically spread and it's spread from a product perspective. We believe we have a very strong competitive position when one looks at our capabilities to execute in constructing, operating and renting out these terminals. And thirdly, we have a clear and robust financial framework that gives us the flexibility and opportunity to move as and when required. So that's where the confidence comes from. So the second point that I would like to highlight is that if you take the twenty seventeen-twenty nineteen strategy and you look at it in that particular time frame, after our presentation, I hope that you will see that we are very well on track in achieving those ambitions.
Now let's open the window shades for a second here in Houston and look at the world developments that have taken shape in the years 'seventeen to 'nineteen and that has had an effect on how we think and how we act within Vopak. The first one, and I'm sure that you have seen that and written a lot about it and have asked a lot of questions, is about the storage demand drivers. How will this industry venture in the next decades? We continue to have an undiminished positive view about our role to society and the necessity of maritime storage globally. And that view is supported by long term trends and long term analysis of how the world economy will develop.
If one looks at simple measures like population growth, further urbanization, the rising of the middle class, one can assume that in the industries that we serve, let's say, energy sector, the manufacturing sector and agriculture sector, requirements for these products that we store will only increase. We still see that the world economy is developed through a model that supply and demand are not balanced. We see that refining and petrochemical manufacturing is increasing in its scale, and therefore, the markets need to be connected. So we are still of viewpoint that there are positive long term drivers to be in this sector, particularly knowing that the maritime sector will play a very crucial role ultimately in supplying demand to the markets. The second trend that is there, and that's, I think, undeniably there, is an energy transition that is taking place.
I think after the Paris Accord in 2015, governments and businesses and groups alike are discussing how we can reduce CO2 and how we can make the energy that we consume more sustainable and therefore, emitting less CO2. So the trend is undeniable. I think the only thing that people still debate, and it depends on your viewpoint, is what the speed will be to which that energy transition will take place. So the things that we are looking at is how will the energy transition affect ultimately the portfolio of Vopak. And we see a few things happening there.
First of all, a clear demand for lighter fuels. So that means switching from coal to gas, lighter fuels in the transport sector, lighter fuels, for instance, in feedstocks. So that's undeniably a trend that requires more infrastructure. But also secondly, there might be new energy carriers further on the horizon that might be interesting for Vopak. One of them, for instance, might be hydrogen that also might be an interesting carrier and storage opportunity.
The third thing that we need to consider is the digital transformation. I think with technology that is available today, I think it's undeniably that data will drive a lot of industries. And one of them is where we see that real time data has the opportunity to improve supply chains but also improve businesses. So the question is how do you connect the data that you have to your customers and how do you connect the data that you have to your own business objectives. So that's undeniably a trend that takes place.
You need to have an answer for that in today's world but also in the period to come. And fourthly, which has kept us busy in the period twenty seventeen-twenty nineteen is the competitive landscape. In the last decade, a lot of money has come in, in the oil sector in investing in our industry space. And that has led to a more competitive environment, particularly in the oil sector, where you've seen that the occupancy rates and pricing has eroded. We believe that if you look at the momentum of growth in that sector, it's subsiding.
And also in the in this particular tougher market situation, we see that what a company needs to bring to the table are strategic advantages. So I believe that the pendulum is going to swing in our way again, whereby ability to execute, intrinsic quality of your portfolio and basically the people that drive your business, again, will have the upper hand in the industry. So these are the developments that we see in 2017, 2019 taking shape to which we need to have an answer to and respond to. Irrespective of how the markets will develop and irrespective of how the trends will play out, Vopak continues to look at our strategic framework over and over again in the same manner, in the same way that we've been doing in the past few years because this framework stays relevant in all situations because it really identifies the value drivers that you need to bring on the table and demonstrate to be successful. The first one is having leading assets in leading locations, investing with the right products in the right markets.
Once you're there, it's being best in port. That means operational and commercial leadership to ensure that in that port, you have the highest safety standards, the highest service levels at the lowest costs. And thirdly, you need to be technology savvy because once you have the right location and you've invested to be best in port, technology can bring you the edge. And technology both in IT, information technology, but also technology in OT because we believe that if you have the right technology on your side, you have the opportunity to become safer, improve your service and more importantly, become very efficient. And lastly, the fifth thing that we're focusing on has all to do with our people.
Continuously, you see that leadership within Vopak comes from within. We have long training programs to make sure that also the next generation of leaders is there for Vopak, not only today but also in the future to have the ability to execute on this promise. And these value drivers are all on a very strong foundation of an entrepreneurial spirit that's been there since our founders about four zero two years old four zero two years ago as well as our Vopak values, which are truly ingrained in our company. So these are the strategic drivers that irrespective of how we move will give us guidance on how to act. One of the things that we'd like to ensure having a history of more than four hundred years is that our success is sustainable in the future and not only today, but really a success in the next decades and even centuries.
A popular way of looking at sustainability is using three areas to consider. You need to maintain your profit, you need to ensure that you protect your people and you need to make sure that you protect the planet. So those are the elements that you need to consider in a stakeholder dialogue to see how do I remain relevant for the future. If we talk about profit, I'm sure that in the remainder of the day, and Gerard will spend sufficient time on what we believe is prudent to continue profitability in the future. But if we spend some time on people and planet, what you see is that we continue to have focus areas that we need to keep alive in the organization to drive sustainability forward.
Let's start with people. For me, the most important thing and the highest risk factor in our industry that I continue to drive is safety, personal and process safety. Without that, it will be very hard to sustain our business because that's the promise that we make to society. Unfortunately, again in 2018, we've not been able to keep our promise. We had two very severe incidents, one in Singapore and one in Haiteng with contractors.
We had two loss of life of contractors, which we deeply, deeply regret. That again was a stark reminder of how important it is that we keep safety continuously alive in this organization. If you look at the trend of our personal safety records, you see that we've made a great journey in the last decades. We've sort of reached the plateau, which we need to break down again and move this company forward. So we've taken a decision in Q3 to have a very deep exercise and a new program together with our top leaders in the company, which is called Trust and Verify.
And this trust and verify program goes to the heart of what I believe is required. It's really that every single one, all from the Executive Board to the last one working for Vopak on the jetty takes personal responsibility and leadership on safety. So we started that initiative with the 100 top leaders during our leadership program in Oxford. It will be rolled out next year. And I'm sure that if we commit ourselves to Trust and Verify program, we should be able to prevent severe incidents from happening and also we'll see the personal safety record improving instead of being on a plateau.
If we look at the other part of planet, I think we've looked at what are the major negative effects of Vopak being in this world. In other words, how do we harm society? What's our environmental footprint? And how do we limit that? We've looked at that in great detail.
And you come to a conclusion that although CO2 emittance is relevant for the world as a whole, the relative CO2 that Vopak emits is really very small, almost insignificant. So we've looked at what is the environmental footprint that Vopak leaves behind. And we came to conclusion that it's the emittance of volatile organic compounds that might have a negative effect on society at large. So we've directed our attention towards that goal under the guidance of Gerard sorry, guidance of Fritz. We spent a great deal of time in understanding what it means to emit, where do we emit, what quantities and what effects do we see in society.
And within our sustaining CapEx programs, we now have a very directed and clear intent to address those volatile organic compounds emissions where I think they will have the largest effect. So these are just two areas where you see that we are working on to improve in addition to our Assure program, which you know all has to do with the integrity of our assets to also improve both personal and process safety. On the other side, if you have a sustainability viewpoint on people, plant and profit, it's rudiment, it's fundamental that you have a good dialogue with your stakeholders. And this is a continuous process. And the two things that I can highlight there where you see that we are intensifying the dialogue is twofold.
It's on the United Nations Sustainable Development Goals. These goals were set by the United Nations or gave guidance in 2015 to public at large, so that's business, individuals, governments on what the world can do to improve profits for everyone, save the planet and make sure that people are treated in an orderly and good fashion. We also have identified those United Nations sustainable development goals where we can contribute, and we've started a dialogue with stakeholders alike to inform them how we can basically drive our business forward in which both Vopak and the society is benefiting. And maybe last is the task force on climate related financial disclosures. What you see is an initiative by the TCFD is to see whether they can stimulate companies to be more transparent about what they believe are the effects of climate change on their business, both direct through means of possibly higher rising sea levels or different weather patterns or direct consequences to your business, but also indirect consequences, meaning your portfolio that you own and the portfolio that you have and how whether there's any intrinsic risk what you carry on.
We've signed on to that to the TCFD because we believe it makes perfect sense to have a dialogue about what climate change might have an effect on Vopak. So you see that we also are preparing ourselves to have that dialogue on a more continuous basis. So if you talk about sustainability, it's not about the profit part. It's about having the people, the planet and the profit protected because only then will we stay relevant to society and all stakeholders and drive the company forward in the years to come. As said, we're going to turn our attention to the value creation journey of Vopak, which is twofold: make sure that you perform to your best ability in the here and now, so it's particularly in the time frame 2017, 2019, how do we ensure that we have the best earnings during the cycle And second of all, what do we do within the company to make sure that we create the new creation for the company beyond 2019?
So on the one hand, it's delivering the performance today and is managing value for digital opportunities and growth. Let's turn our attention to the first one and give you a bit of insights on how we believe we are managing through this particular cycle. Let me start by addressing how we see the world today. So delivering performance in current business environment. So how is this current business environment shaped?
So the four segments that we are active in all have a different tagline, which I think signifies on what's happening in the here and now. Let me start with Oil Products first because I think that reached its pinnacle of attention in the year 2018. And our tagline is prepare for the uptick. Everyone around this table knows that the oil markets have been tough for storage. And the reason being is that we've seen that hardly any refineries were constructed, so the liquidity in gasoline, diesel and fuel oil did not increase, but demand increased with world economies demanding more fuel.
And as such, we've seen that the available liquidity for storage and for trading has been difficult to sustain an abundance model in which storage is required continuously. So we had our wind against us. Similarly, we've seen a bit of unsettlement in fuel oil markets, strong backwardation, particularly with the uncertainty of IMO 2020, which sort of exacerbated the situation that we were in. So we've seen, particularly in the hubs, that it was difficult to sustain high occupancy and high pricing levels. This was the opposite in a distribution market, as you can imagine, because without new refineries being constructed in different geographies with an increase in demand for fuel, we've seen basically the throughput in our distribution terminals have actually been doing quite well in the period 2017,
2018, and we expect in 2019 as well.
But we see early signs of change. And this change can be seen in, for instance, the fact that five new refineries will be commissioned in East Of Suez in 2019. We see that possibly the balance between supply and demand might change again because of the unrest in global economies. And we see that the IMO 2020 is actually creating quite a bit of interest from companies that want to sell low sulfur fuel oil in markets, which requires segregation and new storage. So that uncertainty of quality brings again a bit of dynamics into the oil sector.
So as I said again, if you look at how we have performed, we see the early signs, but no proof points yet. So that's why we say we prepare for the uptick, and we are ready when things will happen. Second of all, when we look at gas, our tagline is steady cash flows. That has to do with the fact that we have a wide range of gas terminals by now, both LNG, LPG and chemical gases. And those terminals are rented out already for a longer are rented out with contracts which go beyond 2019.
So commercially, we are already covered for the cash flows. But what we like is that we see that liquidity in gas is improving. We see more LNG flowing through our LNG terminals. We see more propane coming in. So we see that gas is creating momentum on its liquidity, which obviously give opportunities again for us to invest in.
On chemicals, our tagline is focus on operational delivery. In chemicals, the last few years, what we've seen is we've seen a very positive environment for demand for chemicals. So the chemical manufacturers have been able to run their plants at high levels, have high margins and sell into markets to get rid of chemicals for production of plastics or other consumer goods. We've benefited from that. We've seen that our chemical occupancies have been, by and large, quite solid and increasing.
And we see that the throughputs for our terminals in chemicals has gone up. So obviously, for us, this is, let's say, an opportunity for us to see how we can handle these additional throughputs. And sometimes our infrastructure then needs to be upgraded to ensure that we can handle larger throughputs for our same terminals. So that's where you've seen us spending a bit of money on that. So we need to be sure that our operational performance is there to serve the markets.
And second of all, what we see is that governments are becoming more critical about the chemical infrastructure. So you see that if you want to get a permit and license, you need to ensure that you adhere to the latest standards on VOC, the latest standards on firefighting and the latest standards on safety by and large. So therefore, we see that there is a lot of pressure from the industry to reinvest in these terminals. And I think the question there for Vopak is how are we going to charge then these additional investments back to our customers in an environment which positive. And last, which is I think a very positive story, basically in VEGEL and biofuels is really where we are is to reap the benefit of the current market.
We all know how these bio fuel markets and edible oil markets are built up with and where we store it. These markets are very dependent on regulation and dependent on the supply and demand balance. And what we see is that we are currently in an environment where we are at an advantage in storage. We see that there are high throughputs. There's good occupancy there.
And we are just enjoying it because we know that depending on how regulation might change, this might come to an end. So that's basically a positive story on this market altogether. So this is the world that we are living in today when you look at performance. So what are the things that you can do short term? That is, on the one hand, focus on your commercial efforts.
So make available oil that you have is really drive the teams to go out there and hunt for every deal. We have been preparing for the IMO 2020 regulations to ensure that if the uptick comes in 2019, we are ready. Similarly, if you are in an environment for oil that is against you, make sure you focus on costs. So what we've done, we've streamlined our divisional organization. For those who are longer with us, you know that we've gone from six to five to four divisions.
We restructured our pension plan in The Netherlands. And thirdly, we spent a lot of time in the business on how to make our operations and maintenance processes more efficient. And already in the earnings Q3 and the guidance that we've given, you
see that this is taking effect.
Let's turn the page to value creation on the longer term. So what are the things we're doing now which will have an effect post 'seventeen, 'nineteen? Let me start with the digital transformation. If you look at how new technologies in information technology and operational technology can change businesses, there are two ways to look at it. On the one hand, you can look at will the industry be transformed completely, will it be disrupted or will the industry change the way it has been doing business.
In other words, the industry will maintain its presence but will drive the value from within. If you look at the characteristics of our industry, relatively limited amount of suppliers, really limited amount of people that demand tankage. If you look at the physical attributes to our industry, it's unlikely that the maritime sector and the oil and gas sector will be sort of dislocated completely and will sort of leave its existence. So where our digital transformation focuses on is particularly on the second part. Our business can be transformed from within on how we conduct our business because we believe that if you use information technology, IT and OT to your best ability, again, it improves service, it improves safety and it lowers your costs.
So we're making a journey there, and we started this already many years ago, and we're starting to see the effects of the choices that we make. So let me highlight to you what the four steps are that we're taking. First, we started with cybersecurity. If you want to be a digital company, you want to make sure that your house is in order that you have the capabilities to run signals and data over your networks and that your networks are secure. So we are investing and have invested for the last two years a sizable amount in CapEx and OpEx on improving our networks, standardizing it, centralizing it and protecting it.
So we've increased tremendously our response time to cyber attacks, and this is well in progress on improving ourselves to a level that we feel extremely comfortable and that we have our highways in order, I would say, for the digital transformation. The second thing is that we need a digital modernization. And we are still running today an ERP system to support our processes, enterprise resource planning process. We took the decision already years ago that we need to be able to switch off that ERP and become self sufficient because we realized that if you want to make that change, you need to own your own software. Because if you have an ERP, you're too slow in your response and you don't have the ability to make the software really bespoke and make a change in the industry.
So we decided to look at our processes in a slightly different way. Simply explained, everything which is non mission critical to Vopak, we decided to purchase that software off the shelf and we decided to put it in the cloud. So think of HR processes, think of finance processes or even our mails or our service, that's no longer required to be hosted by Vopak and to be maintained by Vopak nor would that bring us any competitive advantage. Those processes which are mission critical to our well-being, we need to own and develop the software ourselves. So we found the right technology to program in.
We started programming. And the areas that we have our attention on is really on the core process of Vopak, that is order to cash, arrival to departure. So think of Vopak. We approximately handle as much oil as Shell produces, but we get it every day in small parcels, thousands of trucks, hundreds of ships, pipeline connectivity. Continuously, we move these products around.
So how you handle these different orders at your terminal is going to make a real difference. And we said we'd like to develop it from an administrative process to a real time process. So that's where all our effort and time has gone into the program. And I have and we are very well on progress because we have not only developed the software, we've implemented it now and we've started actually a rollout whereby Houston, it will be next, Singapore will be following suit. And slowly but surely, in the next two point five years, we're to bring that software to market.
So cybersecurity, digital modernization, well in progress, and we work on that already for many, many years. The third thing we would like to start is digital innovation. We believe that if you have the opportunity to connect your hardware to signals, again, the information it can give you will improve safety, service and costs. Also there, we see that there are technologies now where you can relatively cheaply put in sensors in your terminal either to improve operations and maintenance. So we have we run about 100 proof of concepts within Vopak today.
And we are identifying, as we speak, sort of the technologies that we believe can contribute to the success of our company. So that's another area that we're spending time on. And I'm sure that you'll find in Houston one or two of those examples of proof of concepts that we'd actually run. And then you have an idea on what it means to sort of retrofit and connect old terminals or relatively old terminals, I would say, to digital capabilities. And then lastly, platforms.
We also see that the data we possess will be of importance to supply chains globally. And what you see is that platforms are being developed by ports, platforms are being developed by trading companies, platforms are being developed by shipping companies. But also you see that surveyors, agents, many companies are looking at how to connect themselves. And also there, we are in early phases of developing their thinking. We set up a separate group within Vopak that is poised to pursue this, and we already have an idea and a vision on what Vopak could do and participate on a few of these platforms.
So that is the digital transformation that we are working on. Now let's turn the attention to the portfolio, the growth part. And to make a change in our portfolio is something that is that takes time, requires time because these are capital intense investments to organize, to plan, to construct it, takes some time to get it organized. And in 2016 and 2015, 2016, we changed our thinking on where we needed to go. And what I like is that we see that we have started to move along the lines and the path of our strategy that we set in 2016.
What I like particularly about Vopak is that to make that change, you need to have critical mass. And there are not that many companies in the world that have the ability to look at oil, at chemicals, at industrial terminals, and that's the big advantage that we have. So if you look at our project pipeline, I'm sure that you've seen it, expansion in distribution of oil, for instance, in Jakarta and in South Africa. We've seen some expansion in Sbarroch for IMO and obviously expanded our industrial sorry, our independent terminal in Malaysia. But what I like as well is that we've managed to invest in several large chemical improvements in the different locations that we have.
And what's most striking is that you see more gas coming into the picture, the blue investments and the most recent one that you've announced we've announced this morning to expand our equity stake in Pakistan to participate in the regas in that market. So these are the projects that we've announced in 2017. And you've seen as well and you'll see that when we started in 2017, the total CapEx that we had actually planned to invest is actually increasing, moving to €950,000,000 by now. And we still have a year to go. So what effect does this have on our portfolio?
What you see is that we started to divest already in this period twenty fourteen, twenty sixteen terminals that we believe were no longer part of our strategic thinking. We rebalanced our BD portfolio. We started to move into a new area of more gas, more industrial and more chemicals. And by now, you see that the effects are becoming visible. So you see the relative share of LNG, LPG, chemical, gas, industrial terminals is on the rise if we indeed pursue our Cooper project as well because that also will have an effect.
And the same goes for our portfolio management when you look at different regions. So my tagline here is that we are on the move in making the change in our portfolio, and this is the reality of today. The reality is that if we want to grow, you need to do that in different geographies and you need to do that with different products. And this is a hard thing to copy. So where is our agenda for growth focused on?
Well, first of all, that's the LNG, LPG and chemical gases part. We have by now 2,000,000 cubic meters. The invested capital, obviously, is a relatively high part of this because it's relatively expensive cubic meters. We think we have a strong presence if you compare it to our competitors or independent players in this field. There are not that many that have 2,000,000 cubic meters, and we have a strong business portfolio to further expand this.
Then in industrial terminals, we have 15 to 20 terminals, which are truly dependent on industrial contracts. We are by far leading in this field. We have the ability to execute with all the IOCs and NOCs globally. And the commissioning of PT2SB has been indeed a very, very interesting and very proud moment for us all to receive the first VLCC in Malaysia for Petronas and the refinery, which we started to commission. In those segments, I think for LNG, LPG and chemicals, we expect in the next years to at least one, maybe three new additions in gas.
And the same goes for industrials. We think we have at least one and maybe three additions in industrial terminals. So we have confidence in our ability to further improve on that. Chemical terminals, people don't realize that, but our intrinsic position in chemicals is really very strong. In the ports that we are that we operate, we have a sort of a rough market share between 30% to 40% of market share.
And if we, let's say, have the right focus on not only expanding but making sure that the infrastructure is indeed fit to serve our customers on a service perspective, we have a very good opportunity to expand our position in chemicals. And lastly, oil terminals. We are committed still to oil because we still think that there are some very good opportunities to invest in. But you need to be very clear on where it is that you're going to invest in. And for us, I think the position and we see that over and over again is that the major hubs and the positions that we dominate there give us great deal of strategic opportunities again to move forward, connect ourselves with refineries and be very relevant.
So to wrap it up, I think if you look at the strategy execution 2017, 'nineteen, I'd just like to remind you of the promise that we made to you. I think, first of all, we said we're going to spend €750,000,000 on sustaining and service CapEx. I think we said that we're going to capture growth in that period twenty seventeen, twenty nineteen. We were going to invest in our IT capabilities. And lastly, we said we're going to drive further the efficiency of our organization and drive down the costs.
If you've been following us for the last few quarters, you see that we sort of continuously try to reemphasize and mention that we are delivering on this promise, and we still really have confidence that by the 2019, we should have make whole on this delivery. So where I'd like to end you with is maybe, again, just a thought is that I cannot stress enough is that we have the right portfolio, we have the right opportunities and I think a strategy that's very clear and to take it. But I think the unique part of Vopak, which is not in this room here today, are the thousands of people that actually work for our organization. I can't stress that enough. I think if there's one thing that is quite unique about this company is the commitment and the dedication of the Vopak staff to really deliver on that storing vital products with care.
And for us, I'm sure that you'll see it again in Houston when you're there that it's these people that take on the operational challenge and the growth challenge on a daily basis that ultimately make the success of this company. So I'd like to leave you with that, and I hope that this sort of has given you an idea on where agenda lies and how we think we can execute on that promise. So thank you for your attention. I'd like to give the word to Gerard, who will take you through the next section. Thank you.
Thank you, Hugo, and good morning. I will spend about thirty minutes talking about the financial framework and the some comments in passing on the business environment. And Laurence, if you could operate the slides for me, that would be appreciated. So on the key messages. This year has been about performance delivery.
And today, we share our updated views on the financial framework towards long term value creation and flexibility. In addition to EBITDA as an important metric, we also emphasize more going forward the operational cash flow and our ability to maintain a disciplined approach towards investment and portfolio management through new business development and M and A, including divestments. We aim to generate competitive and competitive compelling returns on the portfolio as a whole and on our individual investment decisions. And we've refreshed our view on capital efficiency with a range for return on capital employed between ten percent and fifteen percent. In terms of the balance sheet strength and flexibility, we updated the target for senior net debt to EBITDA ratio between two point five percent and three And to underline the balanced approach between allocating capital to growth, capital structure and shareholder distributions, I will also say a few words in a few minutes on our dividend policy.
So as I said, we will put more emphasis on the cash flow cycle. We start with cash flow from operations, which is the cash flow that the current portfolio generates. And this, together with the balance sheet, allows us to invest. The investment is recorded through CFFI, which contains the investment for sustaining service improvement and IT and, of course, includes the investment in our growth portfolio. And the resulting free cash flow can be influenced further by M and A and divestments.
Now once we have the free cash flow, we've given you the order of priority in which we look at that free cash flow. Of course, first, we need to service our debt. Then we prefer to invest in growth, in value accretive projects in line with our strategy. And today, you've heard us talk about investment of EUR $950,000,000 for the period 2017 to 2019. And only at the third quarter, that number still stood at EUR 900 because we've just taken some further investment decisions to invest further in growth.
And lastly, an annual stable to rising cash shareholder dividend with a few that we will take on appropriate payout levels versus profits. On the portfolio, our cash generation and performance is driven by Vopak's global portfolio, which is unique. And we are represented in 25 countries and 67 terminals with local and global customer account management. Our global footprint and diversification of revenue sources from terminal categories resulted in strong and resilient cash flow over the last two years, but our cash flow has also shifted. It has shifted somewhat more towards longer term contracts through the shift towards industrial terminals and to the LNG, LPG and chemical space.
Our growth investment will add new cash generation capacity, and we are on track to deliver our cost improvements mentioned by Eelco just a minute ago for 2019. If and when we divest in 2019 the four assets under strategic review, this will obviously influence the distribution of the portfolio further. You will see our oil segment move from 40% to 45% to 35% to 40% of revenue. And chemicals on this presentation includes fetch oils, and we also have an increase in the proportion of gases, LNG, LPG and chemical gases. As said, we will allocate the cash generated and the balance sheet to growth.
We have 3,200,000 cubic meters of capacity under development for 2019 and a very healthy funnel of new business development projects for future investment decisions. We invest CapEx through subsidiaries or invest through funding of joint ventures and associates. And in certain joint ventures, we optimize the funding with project financing. And as an example, we recently refinanced our existing terminal in Jakarta to also fund the growth project that we approved for Indonesia in 2018. In the first nine months of twenty eighteen, more than €200,000,000 was invested in growth projects and we are increasing the investment momentum over the years 2017 to 2019.
We've said it before, our commercial confidence in the coverage of these projects is high, which will drive EBITDA delivery. Obviously, we always say this is subject to market condition and exchange rate movements. Turning to commissioning of the capacity. And here, you see a schedule of when the capacity comes in. This quarter, we are actually commissioning part of the PT2SB in Malaysia facility and also actually the brownfield expansion at Deer Park in Houston, which you will visit today.
New capacity is set to be delivered towards the 2019, and we will also deliver the IMO 2020 capacity lineup towards the end of the same year. Next to the 3,200,000 of cubic meters of growth, we may divest 2,200,000 cubic meters of capacity. And that brings me to the topic of portfolio management. How do we look at portfolio management? We have a balanced approach between free cash flow generation and allocating this to growth, new business development, value creating M and A and divestments.
I will talk you through the quadrants that you see on the page here. We look at the free cash flow profile of individual assets and the level of investment required. The purpose of assets with material free cash flow is to fund the growth of our portfolio and these are the backbone of the CFFO Vopak generates. These core assets may also have good opportunity to further grow and attract capital allocation for investment. Singapore and our LNG joint venture, Gate, but also Europoort, are good examples of these two categories on the right hand side of the four boxes.
Gross assets require cash investment to develop future cash flow. Examples are our Pengerang terminal and the LPG asset in Canada, where currently a substantial investment program is running. Once operational, these assets will contribute significantly to free cash flow and investment levels will reduce. Our Durban facility in South Africa is also an asset that is currently in growth mode to become a material free cash flow generator through expansion as well as adding a new terminal in Lesedi and recently approved gas terminal in Richards Bay. Assets that provide the base cash flow are the aggregate of smaller and diverse assets.
These are perfectly good assets in their own right and they contribute to the aggregated CFFO level and generate overall cash flow and resilience to the portfolio. They probably require operational they require operational attention, but probably less discussion on capital allocation. Furthermore, investments are focused on service and sustain capital and management often supported by a terminal master plan. For instance, the Panjuro chemical service upgrades sanctioned this year. These base assets have the potential to scale up further or benefit from a material change in market conditions momentum.
Examples are our presence in Vietnam and in Colombia. And in addition to the base, we have future options, which are businesses and infrastructure solutions that we are working on but that are not yet fully developed. Future options include what we call Vopak Ventures, where we allocate capital to new initiatives, where Vopak may provide the platform to scale up and develop the investment case of early stage innovative businesses. We expect to make our first investment in Vopak Ventures still before the year end 2018. And now let me comment on the right hand side of the slide, portfolio management.
The leading criteria for an asset is how well does it fit the strategy. After that, we look at do best operator for the asset, can we unlock the potential, how well can we exploit the five leadership areas that Elko mentioned and that we want to excel in? Are we best positioned to increase the occupancy or deploy our IT investments? And next, we look at the valuation and the risk return balance of the assets and we look at the financial performance metric of the total portfolio of assets. As you can see also from the examples I gave and a little talk through the crudence, our portfolio benefits from diversification and size to generate this cash flow and to execute our strategy.
It also, of course, needs to be competitive on the return on capital employed. Now I want to shift to some comments on the business. And here you see a somewhat longer time horizon than what Elko just showed you in terms of our developments in LNG, LPG and chemical gases. As you see, we started early in 2011 with our positions in Gate and in Mexico. And we are now on the far right hand side, not shown on this particular presentation, expanding today our position in gas in Pakistan.
We're increasing our position from 29% to 44%. We expect to close that investment, the first part in the 2018 and the second part in the 2019. We've also set up two new joint ventures for LNG, one in Germany and one in China. And in LPG, we currently have three projects under construction in Canada, The Netherlands and in South Africa. In chemical gases, we have some promising new business development positions.
And we target to lend one to three new LPG, LNG and chemical gases opportunities in 2019 and 2020. Turning to Industrial Terminals. The journey started in Haiteng, which we acquired in 2014. And then you see Chemtank, which our position is our position in Saudi Arabia in the industrial area of Jubail. And this facility serves the $20,000,000,000 Sadara facility owned by Saudi Aramco and Dow.
A solid basis where we now have the opportunity to optimize the business across the two Jubail terminals, Chemtank and Subtank. And we recently started commissioning of PT2SB, the industrial terminal that will serve the rapid facility in Malaysia. Also here, we target one to three new investment decisions in the period 2019 to 2020. The main focus for these developments will be in The U. S, on the Gulf Coast and in Asia.
Turning to another business segment, and much has been said about this already. But here, we make visible what is actually happening in the shift of our fuel oil capacity coverage. If you see the twenty seventeen column, that represents approximately 5,000,000 cubic meters, predominantly in high sulfur fuel oil. We are adjusting that in a short period of time, mainly in 2018, 2019 towards 2020, where we have 1,000,000 cubic meters of high sulfur fuel oil or about 30% of the remaining capacity, which is 3,500,000 cubes. So from almost 5,000,000 to 1,000,000 in high sulfur fuel oil and 2,500,000 in very low sulfur fuel oil and flexible lineups.
We're also adding MGO capacity in Singapore in addition. Now let me return from some business comments back to some financials. And what you see here is what we said earlier, the different pockets of investment. We allocate €750,000,000 to surface and sustain CapEx in the period 2017 to 2019. For instance, in Panjuro, where we are optimizing the terminal infrastructure by automating trucking and shipping operations to serve our customers better and have a better safe operation at Panjuro.
Another example of this category of investment is vapour treatment in Rotterdam, where we are installing vapour treatment units for the JETI facilities for handling VLCCs. In digital, we invest €100,000,000 over the period 2017 to 2019. And I think Ilk already covered the ground on how we are doing that and in what categories. And on growth, we allocate €950,000,000 I've said that before. Gross investments are based on the criteria of returns and cash flow and risk profile.
Sustaining and service will also be influenced by environmental legislation technology investments. And IT investments will be determined by the rollout of our systems and new digital opportunities. On that investment, we need to maintain a certain return on capital employed. And we've given you the range today, which is 10% to 15% range. In the past, we've spoken about CFROGA.
We will discontinue that measure. We will switch into cash management and return on capital employed. CFROGA, I think, is somewhere in between the two. We see emphasis on capital employed, growth investments, return on capital employed, EBITDA and cash flow from ops and portfolio management. Think we have enough measures to communicate with you.
Our capital employed at the end of Q3 twenty eighteen stood at €4,000,000,000 We add growth capital, but we also potentially divest from the announced strategic review of four assets that will change the portfolio and the shape of capital employed in 2019. And by the way, if you were wondering what Elko mentioned Project Cooper in passing, I don't know whether you picked it up, I picked it up. In fact, it's the name that we gave to the strategic review when we were debating initially. That's where the word came from. It's not a new project.
It's the assets that are on the strategic review. So priorities for cash. The first priority remains to service debt. We currently have debt of 1,700,000,000 with an average interest rate of 3.8%. And we recently drew the first €100,000,000 under the revolving credit facility, which we renewed recently to 2023, which is a €1,000,000,000 facility at very favorable terms.
Certainly, our priority is with shareholder dividend and the updated dividend policy. And excess cash is brought back to the balance sheet or invested in next growth opportunities. So what's a robust balance sheet? A robust balance sheet is somewhere in the range of 2.5 to three. Debt to EBITDA net debt to EBITDA, we currently stand at 2.2.
We were even lower at the beginning of the year at about two. So we have a little room to go before we hit the range. It's not a hard line range. We can be in or outside that range without too much difficulty. And therefore, it will be a management view of what's appropriate given the cash at hand, the balance sheet and the distribution profile that we can offer to the shareholders.
It gives us flexibility to manage our decisions and capital choices. The funding is secured. And in terms of debt, I already gave you the profile, but here's the spread over maturities. It's well spread over long and short term of facilities that allows us to realize our strategic objectives and be efficient. Going to the shareholder distribution.
Our dividends have been increasing steadily over the years in the past. We will update our dividend policy with a fuel of a stable to growing dividend and a management fuel on the payout ratio, as I said, between 2575%. And that should give us enough flexibility to give a compelling distribution to shareholders. So let me recap. Our financial framework is there to support our strategy to be resilient, to weather market conditions and to also obviously optimize shareholder value.
We focus on EBITDA, on cash flow generation and on disciplined capital allocation, and we will measure that at the portfolio aggregate level on return on capital employed. Individual investment decisions are not taken on return on capital employed. They are taken on investment rate of return and cash flow metrics. We target a robust balance sheet with sufficient flexibility. We will continue to manage the portfolio to create shareholder value through the allocation of free cash and accretive growth.
Going to a few comments on IFRS, and I will only highlight that these additions are in your handout. I will not talk you through. This is an accounting update where we translate our operating leases into financial accounting. It's cash flow neutral. It's debt confidence neutral.
Therefore, it's more of an item that we need to be aware of than that it changes anything in terms of cash flow management or in terms of shareholder value creation. We will be introducing these numbers for the January 1 next year. And for certain measures, we will no doubt have gross and net discussions or presentations in the numbers so that we don't get disconnected on the trends of the numbers that you need to watch. With that, I will hand back to Elko to lead our Q and A. It's great that you are in good numbers here today.
So hopefully, we have some dialogue and can involve Fritz and Bao as well in the discussion. He'll come back to you.
Thank you. Thanks, Gerard. So we're nicely on time. We have forty five minutes actually to engage in a Q and A session. So that's where I would like to start.
Who can I give the floor to? Who wants to ask the first question? Please.
It's Dominic Hetrich from UBS. Just a couple of questions for myself. Firstly, it feels like your portfolio is moving more towards emerging markets, particularly, obviously, if you go through with some of the transactions you're currently evaluating. Can you maybe talk a little bit about how you evaluate projects in some of these markets? Because I think there's a comment, for instance, on South Africa, where you said that's potentially going to be a cash flow generator in the future.
Clearly, that's there is a lot of volatility in that market. There's also capital controls. So if you could just maybe discuss how you evaluate that, how you finance it for that matter. And then the second question is more on an accounting issue, which obviously an awful lot of your investments also going into the JVs and associates, where typically the amount of information that is given is slightly less. Can you maybe again talk about how we should be evaluating some of these projects and how you see that going forward, I.
E, the contribution, what sort of dividends can come back out of those structures? Okay.
I'll take the first question, and then I think Gerard will lead into the second one. I think you're right is that the investments that we're doing are more and more in what's typically referred to as emerging markets. The way we approach this is no different, I would say, in our business development effort than the OECD countries. So we go through the similar steps of ensuring that all the elements are in place. Once we are there, we will judge it.
We'll judge the investment on the basis of a weighted average cost of capital, which includes the country risk, yes? So that's where we make a difference. So the risk factor is already considered in our investment. What you find, and you'll probably lead into the second one, what you find is that it makes a great deal of sense to ensure the backing of either the resource owner or the major user in these projects. So what you see is that we've teamed up, for instance, in Malaysia is a good example with Petronas, a national oil company, to give you sort of clarity, security on the cash flow generation ability, which again reduces then the risk of investing in these countries.
So for me, the view that we take today is that we are quite comfortable actually investing in these countries, particularly because we have in most of the locations, we already have a presence. So when you look at the emerging countries like China, India, Indonesia, Malaysia, Pakistan, Saudi Arabia, South Africa, we already have a presence and we have partnerships which have proven already to give us clarity on where we can invest in. So I think to answer, to make a long story short, I think we do look at the risks, but we do feel also comfortable with the partners that we have and the opportunities that we see ahead of us.
Gerard?
Okay. A few more comments on the country exposure. South Africa comes to mind, Brazil, Mexico, Indonesia, India, you could have the same discussions. What we do is we look at funding requirement and we will match the currency exposure as best we can, either with a dedicated currency structure or with a hedge to hedge that out. So we will match it.
Secondly, at the portfolio level, we will look at concentration risk. So how much of our portfolio, how much of our equity, how much of our distribution capability is at risk from a certain position and are we comfortable with that? And what helps, of course, is the spread of our portfolio to accommodate that. I will have a discussion with our treasury department every quarter at least, but often every month to go through the entire currency exposure either on the transaction side or the equity side, and we will structure our instruments to match that out. We will take a few on effectiveness of distributions to the mothership, I.
E, the equity return to the shareholder in addition to what is the business environment itself producing as a base return of the intrinsic value of the business proposition in South Africa or in India or in Mexico because there's no good in having that capital locked up. So we will manage that accordingly and we are very conscious of that. In terms of our main exposures in currencies, I've highlighted before Singapore dollar and U. S. Is relevant in this discussion than the aggregate of any of the others.
If any of the others goes above the sort of comfort level we have, we will take care of it. In practice at the moment, it's Singapore dollar and U. S. Dollar. In terms of your second question, the JVs and how do we handle that, we have an amazing connectivity across the world in our relationships regionally and in country and ports.
Therefore, we can partner with the right partners where needed. Obviously, if we had a total free drop and we could do everything the same, I think we would prefer 100% of a good opportunity over a joint venture situation. But that is not how it works. It's not a spreadsheet choice. You can either do this or the other.
It's the opportunity presents itself in a certain manner and that is what it is. But we are blessed with good partners. We are certainly contributing equally to the risk and reward. We profile the structures in such a way that it is a true equity partnership. So it is not one carrying more than the other.
If that was the case, that would be a showstopper for us. There may be one or two smaller deviations where there's an interim arrangement to overcome a certain issue, but that is always very temporary. The way to look at them financially, it is the reality that they flow through in a different manner. As you are well aware, we do give the proportional EBITDA. At your request, we've now also done that each quarter and we will do that.
We didn't do that before, which I we didn't quite feel was productive in the dialogue with yourselves to monitor the development. So we will now always each quarter update you on the proportional numbers and we can go into the dynamics of that. I think that will be helpful for your comfort level with the JVs.
Andre?
And then David? Then we'll go to Mac.
Andre Milner, Kepler. Two questions. On the financial metrics, you changed the CFO guide to the ROCE. Of course, those are completely different metrics. Did you assume any underlying changes in the fundamentals for setting that range?
Well, you've seen our comments on the distribution of the portfolio. So which assets carry what? You also see a different composition in terms of the JVs. You see the country. So we calculated it with a look forward, not with how do I reconcile to the CF broker number.
So in the past, we had this 9% to 11%. I think you will remember, we now have 10% to 15%. It's based on business dynamics. So from that point of view, it's what we think the portfolio can easily produce. It will depend on market conditions obviously, but that's a 10% to 15% range.
It's compatible with a few we also take on how much cash would we need want to generate given our investment profiles and our distribution ambitions and then it goes around with that cash flow cycle. On the one hand, for me, it's a metric for the portfolio, just a return of capital efficiency. It's also a proxy for cash generation if you want.
On also on the dividend, you raised the upper end of that range. Why not lift the lower extreme of that? I cannot imagine how you would get to a 25% payout. Why not increase that to, let's say, percent or 50%?
Yes. You could do that. I think we're comfortable with 75% because it gives us a wide range of opportunities. Typically, these distributions are set before exceptionals. So the range is from that point of view what it is, but it also allows us to make some choices depending on where we want to end up with the dividend.
We are comfortable with the range. I think the stability is with the first part of the sentence, stable to growing and the 20% to 75% gives us sufficient upside to manage that.
Last question related to that. In the past, there was also talk about special dividends. Is that now off the table?
No. I think it's a valid instrument in the toolbox. Distribution to shareholders is dividend based dividend. You could have a discussion about special dividends and you could have a discussion about buybacks. I think buybacks is probably a little bit less high on the pecking order than the other two, but the other two are very valid tools in the toolbox.
Go to David and then Thomas.
David Kerstens from Jefferies. Also a question on the 10% to 15% return on capital range. I understand that's an average over the portfolio, but I can imagine you have completely different return criteria for your various segments, particularly when you look at LNG and industrial terminals where you have fifteen to twenty year contracts and as a result, a much lower cost of capital. Are all these segments within this 10 to 15% range? Or is there actually a large difference between gas, industrial terminals and oil?
Then secondly, on your slide on fuel oil, You still leave 45% of capacity in high sulfur fuel and divested Tallinn. What is your expectation for this part of the portfolio post IMO twenty twenty? Do you still think this is an attractive business? And will this be all based Waltham and Singapore also somewhere else perhaps? And then finally, maybe an update on Project Cooper, what you call it?
Introduced a new name, yes.
Can you give an I think you mentioned a couple of times that those terminals will be divested in 2019. So have you already made that decision? And what level of invested capital is in these businesses? Okay.
Let me start. Tav, let me start with fuel oil. We purposely are leaving a part to high sulfur fuel for the simple reason that high sulfur fuel oil will not disappear over the earth. And that's a very simple way of saying is that we still believe that there are going to be markets where high sulfur fuel oil will be sold into. And it's either conversion of ships with scrubbers so they can take the high sulfur product in or there might be, again, fuel oil being used in industrial sectors for energy production.
We've seen a bit of that happening in, let's say, the last decades. It diminished, had to do with pricing, but that might return because it depends on where the price levels of high sulfur fuel will be set to. What we know for sure is that, again, the call it, the logistics of high sulfur fuel oil, again, will be very centralized or very centered around Russia, Rotterdam, Fujairah and Singapore. That's ultimately where the balancing will take place. So we've taken a market view on the level of conversion from high to low sulfur that just has to look at the refining sector, how much capital is going in there and how much high and low sulfur will be there.
And then we take a balanced view on where we think those fuels will be sold. So to answer your question, it's just a very clear and decision that we've taken on purpose. Yes? On Project Cooper, on the, let's say, the strategic review of the assets that we have in Europe, we said that we are going to, on the one hand, have a strategic review of those terminals and then test the market value, and that's what we've guided on. We said that we would need six to twelve months to be able to come back with an answer on where that project will fall and how we'll develop and the decisions that we're going to take on those assets.
I think that we've announced that approximately four months ago. So we have another two or three months left before the period starts in which we're going to give clarity on what will happen. I don't think it's this is the time and, let's say, and position to comment on the individual steps that we are taking. The only thing I can tell you is that we are, from our internal perspective, are hitting the internal milestones that we wanted to hit. So the project is well underway, progressing well, and we just have to wait for the time to come to give you a bit more information.
Maybe you want to take the first question here?
On the return on capital employed and different segmentation, I'll repeat a bit what I said earlier. Apologies for that, David. The fuel we take on individual projects is on whether we create value at the shareholder level on that individual project, either as a project in its business environment or as a distribution up to the mother ship in terms of cash for the group. And that project, therefore, needs to what we will calculate, beat the weighted average cost of capital. If we would consistently do that in low risk, low return businesses, we would compromise our total portfolio's potential to generate a competitive return for the independent operator that we are.
So we don't want to have a total portfolio which is utility like and therefore in a different bracket. And we need to therefore ratchet the portfolio up to 10% to 15%. So if we allow some more projects, let's say, with a highly bankable, very long term reputable offtaker in a very stable environment, we might take a lower weighted average cost of capital cost for that project and therefore still create good shareholder value because we will beat that, but it might drag us down if we do that too often. So we will mix and match to get in that 10% to 15% range. That is the way it works.
I think if you take an LNG project in Pakistan, it's different from an LNG project in Gates in The Netherlands or in Hamburg. It's good in terms of the fundamentals. It's good in terms of the energy mix. It's good in terms of the longevity of the proposition, but it's a different business environment. And therefore, we would put a different profile on that than we might put in Germany.
That's not because we don't like the country of Pakistan. We like it very much. But the risk profile is higher. So to be true to our shareholders, we need to beef the return up on that project. So it's situational that we will take the decisions.
I think it's fair to say if you generally would have longer term off take contracts and higher credit off takers that you would typically have a lower return than in a higher risk environment.
Isn't that in your strategy to based on the energy transition towards becoming more a utility type company with longer term contracts in gas and in industrial terminals?
No, I think that's the beauty of the discussion we had this morning. If you look at our portfolio and the spread of our assets, the entries we position ourselves to Brazil, to Mexico, Indonesia, Coast here, the uniqueness of our ability to select the site to be best in port to have superior services to the customer allows us to not be a utility. If we wanted to be a utility, we would probably call ourselves utility. We don't call ourselves that. We are an independent storage operator with a global network that is second to none.
I think also what you see in LNG now, which actually Fritz is better skilled to talk about. But the market is coming to us because we've put our credentials in the market. It's a very attractive market. It's very difficult to get your name in that game, but we are there. And there's not many that can do what we do in an independent manner.
But Fritz, maybe you can say a few words more how you manage the LNG business.
Yes, sure. I think what we do in LNG is actually extending the excellent reputation for the reliable cost effective service that we have in the market also to the LNG sector. And so obviously, for us too, that was a journey to become such a world leading operator. It required us to learn the unique tricks of the trade that are there in the LNG business, which obviously is a commodity that requires far more care and sophistication in handling and in storing than some of the other things we store, which is a market that is still, I would say, dominated by very large players both on the supply side where you have important countries that take care of a lot of the supply. And also on the off taker side, obviously, these are all fairly large trading and utility type customers.
So the reputation to be reliable amongst them in every respect from a business values perspective, from an ethics perspective, from a server delivery perspective is essential. And we've managed to basically introduce in that market some of our thinking from our existing business in terms of what sort of services could you offer. And so if you take, for instance, our presence in Gate, we were the first terminal to offer LNG in an easy way for shipping that allowed basically LNG bunkering to take place. We're very fortunate to see that although we were obviously very early in that market, we see a very steady tick up of that market. It's one of the things that then in that market comes back to other players who say, Hey, what you've done in Rotterdam actually to us in a different market is also appealing.
In other locations, we happen to have from our existing business locations, which are key located in certain ports, and that gives us the entry ticket to basically be approached by others if they're thinking of such an LNG project to see if they could do it with us. In other cases, they are basically projects that could have been developed by anybody, but we were the ones that basically were with a consortium the first ones to basically to think of how to tie it all together. And again, there, the history in a way goes back to Gate. It's a project that we did with Gaussun, as you may know, which is a national grid provider in The Netherlands. Could it have been anybody else?
Yes, it could have, but we happen to be the ones that thought of it in time and had the corporate capability to really deliver it. And as a result, we are the ones that are now part owner in that project. And I think that's a history that we see repeating throughout our world today. In Pakistan, we were already partnered with the company that is providing that project. We have a long term partnership.
They very much valued our input into what was then basically the industrial, terminaling and chemical side of our business. And they said, okay, let's also introduce this partner in the LNG as we go forward. So it's those sort of factors which are all, I would say, by themselves a little intangible that collectively make us, I think, a value proposition that is now recognized by these key players in this market.
And are those durations getting shorter? Or are you still able to get those durations in that you had for Gates up to twenty years?
Well, I think what you see there is that it is a mix. So I think in gate type value propositions, we are still able to get very long term commitments. Obviously, there are other players that we for instance, that we've also handled in gate who are wanting to test the market. Based on the strong infrastructure that we have, for them, we are able to offer shorter contracts for them to basically find out how things are working in that market, obviously, with a view to and there are, I think, for instance, of the LNG in shipping, where they test out the market. And if it looks, yes, to them a worthwhile value proposition as they go along, we're looking to obviously enter into a longer term arrangement.
Thank you. Thomas Adolff from Credit Suisse. Just a very kind of top down question. How would you define the sweet spot between value creation and risk for the company? And by that, I mean, is there a size ambition for the company?
Presumably, you want to grow to grow your earnings. And sometimes, it's hard to do just with margin expansion. Is there an EBITDA split that you are targeting maybe for Chemicals and Industrial, 60% or 65%? Is there a balance between greenfield and brownfield? And I guess, finally, it's all good if you're trying to be diversified and reducing the risk, but at the same time, it's easier to manage your concentrated portfolio and enhance efficiency.
So just how you see the company evolve longer term? And then I guess the second question is just going back to your ROCE targets of 10% to 15%. I know there's a lot of moving parts, but it's a very wide range. So I wondered what the key variables are to get you to 15% and what the key variables are to get you to 10%. Thank you.
JESPER Let me take the first question and have a shot at it, and then Gerhard will return to the 10% to 15% range return on capital employed question. As for the sweet spot in our portfolio, we do not have a preconceived idea on what the relative contribution needs to be of every individual segment because we view those individual segments at opportunities in its own right. So in other words, if you look at industrial terminals, we have a roughly 85% market share today globally because we have been the first one to convince customers to work with us on these industrial deals. So that means that they have two choices: either take it in house or they give it to an external party. And if they give it to an external party, we've been very successful in turning that into an opportunity.
So for us, if you look at industrial terminals, for me, it's all about there's going to be roughly 25 to 30 cracker projects globally. So for me, the question is more what can we do within the industrial segment to ensure that we have our proportionate or ideally disproportionate share in growing that business overall. So that's an independent question compared to the others. The second of all, I think that if you look at the chemical sector, I think we also look at if we look at the chemical markets that are relevant to us, we look at what is the relevant market share that we'd like to dictate in those particular ports. And again, we then have a view on if those opportunities come by, we will pursue it individually.
The same holds true for gas. But if you look at the LPG, the LNG and the industrial gas opportunities, we track very meticulously that if constructed, is it either in house by the resource owner or by the one who actually is receiving the cargo, so the buyer? Or is it again with an independent party to who gets it in? So what I'm telling you is that we look at these opportunities within the four pillars, including oil, as we mentioned before. We think that we are, at this moment, not constrained in the ability to attract capital and to pursue these projects.
So I think that if we find the opportunities there and we think that the risk return profile is appealing, if we think that it's doable, if we think that strategic value is there, then we'll pursue it. So we are not almost dogmatic pursuing sort of a real range in those four. And I believe that if you do that, then ultimately, you'll get a portfolio which is nicely balanced in geographies, nicely balanced in different products, ultimately will benefit the strength of the company. So that will be my view on that, Thomas? Yes.
On the 10% to 15% range, again, I think the most simple iteration that you could let loose on that range is the occupancy. So if you would say 85% to 95%, that would oscillate between maybe the 10% to 15%. It is a good get your mind to see where we currently are at 86%. We are actually generating 11.8%. So that sort of immediately denies the logic I just gave you.
But it is certainly one metric that comes into play. The portfolio dynamic that we just announced, we will seek to drive and take individual opportunities and push that those limits up in terms of return on capital employed of the total portfolio. But I think it's a fair range to focus on. I think in terms of our aspiration of do we prefer greenfield or brownfield, I think both have very appealing attributes. A brownfield often is of course very attractive economically.
You play into your existing infrastructure and skill sets. It's not a new market entry. So you have your machine, people, permitting, regulators, interfaces ready. So typically, that would be high economics. Greenfield, typically, you have to work a little bit harder for, but it creates a new foothold.
I think the ultimate question you asked about size, in my mind, is best answered by our actions that we also will let assets go. The four strategic assets that we feel might have a superior value in the market to others, we will let go if that proves to be true. In itself, these assets are actually good assets. They are good either from a state of the art point of view or from a cash flow generation point of view or from a market point of view. But if we want to serve the shareholder well, we should also recycle capital if we can extract superior value.
So we will do that. We will also not compete. This is more the commercial arena of Elko and Fritz and Bauh, but we will not compete for market share for market share sake. We will let projects go if we feel the returns are not appealing.
Yes. Go
to cash first, Abien and then to you.
Thijs Berkelder, Abien. First question on the one, two, three industrial terminals you are looking at. What kind of CapEx or cash out should we reckon with those kind of terminals? Are these existing terminals or greenfields? Then secondly, on leverage and cash returns, let's assume your strategic review succeeds and you are able to sell those terminals for, let's say, euros 1,000,000,000 or higher, that means that your net debtEBITDA falls back below 1x or so and maybe a more triggering situation to indeed decide for a higher cash return.
Can you explain us what your timing planning is in terms of your when do you act on leverage too low or not too low, etcetera?
Okay. Let me dig into question number one. I can be short and sweet about it. All three are greenfield. And I can't tell you more about it because of confidentiality and commercial feelings.
You want to touch the second question?
Yes. If that example, as you just played it out, would be reality and we would go to I didn't check the math, but if we would go down to one, if the example you gave, then I could not very easily see that we would work our way sort of back into the range with organic investments. Now we might, I don't know. But it's less obvious as an immediate response. Our absolute dividend at the moment is $130,000,000 So in the context of the numbers you gave and the numbers we are discussing, even the numbers you can deduct for new investment momentum, etcetera, then you will see that we have space.
And that's as far as I will go.
Luke?
Luke from Bechtel, Petercam. So you mentioned that you see the competitive situation improving for Vopak. Can you give some examples of trends that are coming your way in the competitive field? And I also said that relating to that, you see more opportunities to leverage on your strengths, for example, the locations that you have. And if I look at the types of investments that you're highlighting, then most of those, except for gases, are in brownfield locations.
Will that make it easier to obtain, let's say, a premium return on those strengths of flow pack?
Right, Vim. A few comments on our competitive position, Luke. If you it's first of all, just look at the track record of our competitors in the last twenty four months or eight quarters or so. If you see what they have announced to either support oil, chemicals, gas or industrials. So I think that's where point number one.
You just have to look at sort of what we are currently churning out as growth opportunities compared to our competitors. The second thing, if you look at the relative strength of the balance sheet of Vopak compared to competitors, and I'm sure that there are multiple examples that you can cite that a few companies are have difficulty in maintaining their cash generating ability either to pay dividends or to grow. So that's another one. The third one is that if you look at where the if you look at where a lot of opportunities are currently happening and if you look at the relative consumption of, for instance, LNG, as an example, or propane, if you look at the demand centers East Of Suez, you see that it's not unlikely that numbers like 75% or 80 of growth is consumed East Of Suez. If you look at our relative position of terminals East Of Suez compared to any NexOne competitor, it's beyond comparison.
With the investment program we have today, East Of Suez, we will reach 17,000,000 cubic meters. Just by looking at the alternatives, you'll see how big the gap is. And then what you find is that in the market today, whereby everything is becoming more transparent. That means your safety record is becoming more transparent, your operational performance is becoming more transparent, the way that you construct, the way that you operate, the way that you communicate. Also there, you need to have the capabilities as a company to come up with good designs, to execute on time within budget, within the right safety standards.
And you sort of start building a track record. So these are just a few areas where if I have to look at our relative competitive position, I feel encouraged about that particular ability. So that's where the comment comes from. And I think that if you in today's market, if you do not possess those capabilities, execute, because it's not about acquiring companies now more, it's about executing on your promise in markets that are growing. That's where the benefit comes from.
And I think that we are one of the few companies, and I can cite a few that have those capabilities, but it's not the level playing or it's not the playing field that it used to be. That's the comment that I was citing. Who else? Okay. Quirijn, ING.
Quirijn Mulder, ING, Amsterdam.
Two principal questions. One is about the IT. You have earmarked about €100,000,000 for into 2019. If I look at your projects, there are two in the infancy stage, the digital innovation and the platforms. So maybe you can elaborate on what your plans are for after 2020 because in my view, the platforms and the digital innovation are not ready at the 2019.
So I think it's a returning demand probably from different people? And my second question is about the 10% to 15% ROCE. You didn't use, in fact, a target. So 10% to 15%, in my view, is something between €600 and €1,000,000,000 EBITDA, as I would recalculate it. And that means, in my view, that your spread is so big.
And that's especially interesting because a couple of years ago, at the previous Capital Markets Day, we discussed with Vopak situation that the company is looking for more predictability of the results. And the company has, in fact, realized that by more focus on gas and less on oil, more on chemicals. So I'm interested why you're not going to narrow that range. Maybe you're coming back on the questions of others. But something like 12% to 15% seems to me more ambitious than to say 10 to 15%, which also includes a serious decline of your earnings.
Thanks, Verdain. Herd and Fritz. Fritz first on IT.
Yes. Thanks very much for indeed that excellent question on IT. I think what we've seen over the past years is that what we have done is strategically put our house in order. And that means we have concentrated on getting the right level of cybersecurity in our environment. And we're making good progress, but we're not yet at the end of that because in our case, is not just the administrative system, but it's also the operational systems.
So there have been examples already where, I would say, in the operational automation, there were viruses and hackers active. So obviously, we need to protect for that. And then we've given ourselves the capability, as Elko already said, to develop software and basically really support our key core processes. So where we are, I would say, in this period is that we have invested a lot in that cybersecurity. We have invested, I would say, the significant part in the software that is supporting our core processes and in starting to roll that out.
We also have had some limited investments, as you alluded to, in the next phase, which is basically the business enabling IT that is not just geared at more, I would say, efficiency of our existing processes, but also perhaps at different service delivery capabilities. And I fully agree with you that it is highly likely, if you look, of course, at business in the long term trend and basically the proportion of IT spend is all the time increasing. And it would not surprise me that even though we can, at some stage within the near future, say the big investment of basically building those systems that support our own processes will be behind us. There will most likely be other good investment opportunities coming behind that to expand our capabilities. In that regard, of course, we should be thinking of the Internet of Things.
So more censoring and how is that going to allow us to further optimize our process, quite by choice. Wider service offerings that are more in the digital platform sphere. But also, I expect in our core processes, as we are now starting to convert our entire Vopak world onto that process, we obviously generate an awful lot of daily feedback on how those processes are running and we it becomes, as one of the benefits, extremely transparent at all levels of the company from the operator to his boss to the Managing Director of the site to even me as a COO, where the opportunities for further improvement are. So I also expect that as a follow-up, we will start to tailor those processes in the coming phases even further to allow us to operate even more efficiently. Now having said all of that, that's also known about IT.
You
need to
do it in order to stay competitive, but it's not necessarily so that with all the other competitive pressures that are coming that you can straight away say, okay, because of all those great investments, the net return is going to go up. But for sure, you do know that if you don't do it, you could find yourself struggling and eventually going out of business. So we are trying to keep that balance, but I certainly don't expect that our IT investment in the future is going to be able to significantly drop whilst remaining our strategic agenda as described by Helco.
Thanks, Fritz. Gerhard?
Okay. I think we'll discuss the 10,000,000 to 15,000,000 again. And that's okay because it's an important marker. The way I look at it, Correjn, is not one of saying, okay, I'm hesitant or we are hesitant on the earnings profile. But we are adding a lot of capital.
We are adding capital employed that needs to earn itself into those returns. So I see it more as a momentum on the capital investment side than a statement on the returns. We have not changed our requirements on project returns. We've not diluted our value proposition to creating shareholder value. And in fact, we probably push more on the balance sheet and the distributions and the growth agenda than before.
So if the message that you would take away is that we create some leeway in the 10% in our earnings, that's not the thinking. The thinking is more of adding capital employed, adding new positions, being successful in new business development and in M and A plus divestments rather than a statement on earnings. Of course, it comes back to earnings at the end of the day as well because there are two numbers that make up the return and I realize that, but that was that is not the intent of the statement. I think the profitability of the company is good. The cash flow generation is good.
And our ability to create that shareholder value at the portfolio level is very compelling.
Okay. Thanks, Gerard. I think this brings us to one more question. Here it is. One more question.
It's for Giacomo. Is that how to pronounce it? Giacomo, yes. Very well. Giacomo from Macquarie.
Perhaps just one more question in terms of how do you see the shape of their your capacity under long term contract as you add more investments into the industrial side? How do you see that progressing? And is there a golden ratio you have in mind of balance between capacities under long term contract and capacity capacity that is on short term contracts and therefore could benefit from market shorter term market developments and shorter term demand for storage. And if I may add just one more on the dividend payout range. And just trying to understand a little bit better, do you understand why it's it gives you more flexibility having such a wide range.
But on the other hand, you have been a very stable growth dividend payer. And the 25%, 75% range doesn't really tell that story and doesn't really reassure that this pattern will be maintained in the future. So where is the rationale? And how do you think that benefits investors for having such a wide range?
Yes. Let me deal with that one first and then someone else will take the commercial dynamics of contract structures and tenures, guess. The dividend, as I said, the absolute dividend that we pay is 130,000,000 So in terms of having assurance on whether we have cash flow generation to cover the dividend and to have a healthy growth portfolio, I think doesn't come up in my mind. So the stable to growing is what you already have and which you will continue to enjoy. Then on top of that, we've given ourselves space to look at that distribution profile with a few on the payout ratios.
And now I'm repeating myself, apologies for that. And we have other instruments in the toolbox. We discussed the point that Thijs made on what are you going to do with extraordinary revenues when they come in. And I really touched very lightly on buybacks. And I think in that order, I think I see the distribution to shareholders.
It gives us the room, as you say. It's not a matter of, in my mind, having to assure anyone that we'll maintain the dividend. That didn't cross my mind, to be honest, with the numbers we're talking about. I mean it's not exposed from a cash flow cover point of view.
Maybe on your first question, I'm going to also repeat a few things we just said to Thomas just now. We look at this from an opportunity point of view. So we have the four segments and coincidentally, two are very sort of long term contracted segments. So if we're successful there, then automatically, we are obtaining a pattern where we have more longer term contracts and commitments. That is not something that we sort of particularly choose.
It's just a part and parcel of that particular segment. If you look at the other two segments, and that means the chemical and oil segments, is what we do there is we try to our best ability to steer the tenor of our contracts. And that has to do with the fact that our forward looking view on, obviously, the supply and demand of tanks, We take a forward looking view on the possible curves of oil. And then we see are we going for ourselves, trying to get sort of shorter term contracts to ensure that we can take up the upswing Or can we take longer term contracts to protect us from a possible downswing? So then it becomes a management tool on where we're trying to influence it.
But that's also depending on the opportunity. So it's very much opportunity driven. It's not that we are seeking a particular outcome in the end of the day, yes? I think this sort of concludes at least the session before the break. I cannot thank you enough again for having given us the opportunity to listen to our story, story of storing vital products with care and the position that we'd like to take in this market.
I have to apologize for creating a bit of confusion with Project Cooper. I cannot stress enough that there is no project between us and BMW on any development of a Cooper model. So it's just a name that we've given to one of our projects. But with that, I would like to give the floor back to Lawrence, and then we'll have a short break and move on from there.
Yes, guys. So that wraps up the Q and A. So we take a fifteen minute break. I think we start then at 10:40 Central Standard Time again. Listeners to the webcast, you can just remain connected, and we will start in fifteen minutes again.
Okay, guys. So we're continuing again with the second part of our day. I would like to introduce Baduen Simons, Division President of OPAC Americas.
Thank you. Good morning. My name is Bart van Simons. I worked for Vopak now for twelve point five years. I started off in back then the oil division of Europe, Middle East and Africa as Business Development Director, after which I was Managing Director of the Europort terminals for four years and then for three years Managing Director of Vopak, Belgium, three chemical terminals in the Port Of Antwerp and since the 2016, Division President for The Americas, for North America and Latin America.
What I'd like to do today is take you through the continent, what's happening. And I'll do so by first describing a bit of the market and then going into a number of projects. And underway, I'll also touch on the asset base that we have in The Americas. My key messages for you for today are that there's dynamic markets in The Americas which offer opportunities for in the Northern part of the continent and in the Latin part of the continent for different reasons. North America, already alluded to by Elko, an abundance of resources coming to the market and actually creating a push into the requirement for storage.
In Latin America, the opposite. Actually, there's a large import necessity in the Latin American countries, deregulating markets mainly in Brazil and in Mexico, two major deficit markets, growing populations, also offering storage opportunities. So I see a window of opportunity for Vopak in The Americas for the coming years. I'll touch upon the performance of Vopak Americas, which is which has been strong on the back of these markets in the past years. I'll touch upon growth projects in Americas that are fully aligned with the Vopak strategy, as explained this morning.
And we believe that we have these projects now in execution. There's future opportunities also for Volpak in The Americas, and I will try to explain to you why I think that we are excellently situated to make use of these opportunities. Now if I go into Volpak America, Americas at a glance, then on the left hand side of the graph, you see our present asset base. Four terminals up in Canada. We have three four terminals in The U.
S, Savannah in Houston, L. A, Long Beach three terminals in Mexico, in Altamira, in Veracruz and Quanzacoalcos. Very chemically oriented fuels coming up. We have a large project in Panama and a terminal of Chevron that we operate there, two terminals in Colombia, one in Venezuela and three in Brazil. In quite a large geographical region.
And if I then look at the performance of this asset base, then you see a total injury rate. And I'm always a bit buying, let's say, on two thoughts here. First of all, we're proud of the performance of 0.18, which is a relatively low total injury rate. But on the same hand, we may never be satisfied with our safety performance. We always have to want to do it better the next day again.
Safety is and will be the most important thing that Vopak does and also so in The Americas. Every day again, we have to earn that trust and we have to make sure that people will go back in one piece again and that we do not do any harm to the environment. Occupancy rate, stable at a comfortable level, which also kind of proves stability and, let's say, the maturity of the markets that we operate in. EBITDA, comfortably growing year on year from 13% to 17 Of course, there have been some changes in our portfolio over the years also reflected in these numbers. And also the same goes for the revenues.
But in general, you see a comforting line upwards that we will try to maintain. Now if I look at what's happening, and I'll go a bit deeper in what I explained in my opening sheet. In North America, there you see the shale revolution in the north part of the continent actually determining the market. And two things come out of shale, oil and gas. And in both commodities, the same is happening.
Either it gets exported as raw material or something is done to it and the products either are used here or exported. And these vast amount of products also mean that more products will have to be imported into the region because on the gas side, if it's made into chemicals, then you need all kinds of intermediates for the process to come to an end product. And that creates imbalances and we live off the imbalances in the market. On the crude side, crude is not crude, for instance, coming out of the Permian. Heavy crudes coming shipped in either from Canada or from Venezuela or Mexico.
And the combination of these crudes is a slate that is used in The U. S. Gulf Coast. So let's say these increasing amount of product flows actually push the market and push the requirement for storage. Now if you look at the Latin side of the continent, there you see large national oil companies that have been dominating in monopolies into the market.
We're talking here in Mexico and Brazil. And that has come to an end. You see that these markets have to deregulate, that they have to open up for independent imports and that creates opportunities for a company like Vopak. There's all kinds of knocking at our doors wanting to be able to import their product flows into the country. At the same time, you see in these countries that the urbanization is taking place, which kind of increases the consumption of energy.
You see that people grow out of poverty into the middle classes and it's Latin America, so it's not just one straight line going upwards. There will be volatility. But on the longer run, you see that the dynamics of these markets actually drive the need for storage, drive the consumption of energy and of chemicals. Now taking a bit of a deeper look into the shale revolution. Yes, it's mind blowing what has happened in The Americas in the past ten years.
It started off with the production of shale gas. Everybody knew the resources were there. Nobody really realized themselves that it could actually be won. And I think it's the entrepreneurship of America that made it happen and that from gas to oil in the end developed these shale resources. And by now, is the largest oil producer, largest gas producer in the world, still also imports so much oil.
And about 2021, I think, that the idea is that they will be a net exporter of oil. But the entrepreneurship and the innovation that has taken place in the winning of Shell is actually quite remarkable, and we don't read about it that much. But it's basically as interesting as putting a man on the moon. At the same time, it's not only technology to be able to win these resources. There's also a lot of innovation and a lot of challenges for the logistics.
Coming from Europe, where actually the hinterland is very reachable by waterways, here a lot goes by pipeline, by truck, by train. And it's not only getting the products out of these basins, out of the Eagle Ford, out of the Permian, it's also getting everything into there to be able to win it. You need chemicals, you need water, you need sand. There's a lot needed to win these shale resources. And let's say that the way that the logistics actually match the potential of these fields is also quite amazing.
And that leads to investments. A lot of investments on The U. S. Gulf Coast, investments we listed a lot from public sources. Some of these have already been realized.
Some have been announced. Some are still in the feasibility study. But you see expansions. You see plans for greenfield chemical plants. So there's a lot of, yes, turmoil in the chemical market and also that drives again the need for storage and for industrial storage, for market storage, for export facilities.
But also again, some of the products that these plants will produce also need inbound flows of chemicals to add to the flows of produced chemicals out of shale gas in the country. So this really changes the marketplace logistically and chemically. LPG as a subset. You see I won't go into all the details, but actually what you see is the enormous amount of volumes that America exports in LPG. And I'll come back to that later when I discuss our project up in Prince Rupert in Canada.
But you see that all these exports mainly take place out of The U. S. Gulf Coast. So there's an abundance of LPG available and it finds its way to the market through The U. S.
Gulf Coast. And you see a small dotted line going from up from Canada outwards, that's where I'll come back to later. So if we take that kind of a high overview of what's happening in the market in The Americas, push North America because of resources, pull in Latin America because of deregulation and because of growing population and because of the higher standard of living. Then you see a number of projects that we, at this moment in time, in The Americas, have an execution. Going from top to bottom, and I'll go into everyone in a bit more detail later on, you see RIPET, which is our joint venture with AltaGas LPG export out of Prince Rupert that's on the border of Canada with Alaska, and it finds its way the LPG will find its way to the Asian market.
Deer Park, which you will visit this afternoon, expansion of 140,000 cubic meter of chemical storage Veracruz, enabling fuel imports into Mexico and through Veracruz, it can find its way into the big market of Mexico City Panama, a bunker hub at the entrance of the Atlantic Side of the Panama Canal, serving as a CPP distribution point for the region. Alamoa, ethanol exports and also being able to import fuels into the Sao Paulo region in Brazil. Now Canada. This is an older picture. Actually now already, the dome roof is on top of it.
If you go to the website of the project, it's quite amazing. And a couple of weeks ago, Fritz and I were standing on top of the tank and that is one big tank. That's quite impressive. 1,200,000 tons of propane export facility. The propane will come from the Alberta region by trains, CN, pressurized, will arrive in Prince Rupert, transship it into bullets.
From the bullets, we will refrigerate it in the tank, cryogenic tank. It's been stored in at minus 42 degrees Celsius. From there, it can be refrigerated, loaded into ships and find its way to the market. Now the reason why we are so positive about this location, about this project is if you take this LPG and remember the large amount of exports that take in place for the from The U. S.
Gulf Coast, the alternative is either in Alberta to put it in the PDH plant and make something else out of it or you transport it to The U. S. Gulf Coast, but that's like taking water to the sea because there's already so much there. And if you would like to take this Canadian LPG to the big deficit end markets of Asia, then it's a twenty five day transit from Alberta to The U. S.
Gulf Coast on a ship through the Panama Canal up to Asia. If you take the route from Prince Rupert directly to Asia, ten days. So it's kind of a logistical no brainer to want to export out of your own country and out of Prince Rupert. We're looking into future use of this project site on Ridley Island in Canada, in Prince Rupert, which is very nicely located. Deep seaport, we're looking into methanol, into diesel, into additional LPG exports.
It's all in the feasibility and study phase. We have submitted permit applications and we're still deciding whether we want to do it, yes or no, but we do think it's a location with potential. Panama bunker hub. So the Panama Canal has recently been widened, deepened. The amount of traffic through the Panama Canal is year on year increasing.
The ship sizes have, because of the winding and deepening, have been are larger now. The bunker volumes are increasing. There's congestion within the breakwaters on the Atlantic side of the Panama Canal. We're just outside of these breakwaters. The Panama Canal bunkers approximately 80% on the Pacific Side, 20% on the Atlantic Side.
We think that the balance should change in the future. So we have a lot of confidence in our project here in Panama to be able to bunker. And again, the IMO twenty twenty comes in place where more segregations will lead to more need for storage. And also there's a regional role that this hub can play for kind of break bulk in the region for clear petroleum products. So a very strategic location.
We're building 360,000 cubic meters while we're operating the Chevron terminal that is next to it and that caters for a lot of imports into the also bunkers, but also imports into the Panamanian country. In the course of 2019, this project will come on stream in two phases: first, the first three tanks and in the middle of the year, second half of the year, the latter six tanks. Deer Park, which you will visit this afternoon. So I like this picture. It's kind of one straight line of 10 new tanks and you will see it when arrive in the bus, Then immediately, you see the 10 new tanks, 14,000 cubic meters each.
And that's really for more bulk chemicals. So what we did is it's not that we went out and rented out these new tanks. We with the terminal master plan, we rearranged the terminal. So some products that were stored in smaller tanks than the terminal ended up in these larger tanks, made it possible for us to rent out some of the smaller tanks again for the more specialty chemicals. So this project gave us the opportunity to rearrange and to optimize the terminal.
By building these new 140,000 cubic meters, we actually were able to increase the industrial role of Deer Park to somewhere more than 80% is actually industrial business. Chris, my colleague, this afternoon will go into more of the specific details of the terminal, where there is a number of pipeline connections to the surrounding industry for which we have this industrial function. But it doesn't always have to be a pipeline. We also talk about floating pipelines as Vopak, where barges come in and out if there's not a pipeline possible. But in the end, the barge kind of fulfills the same role as a pipeline in constantly getting feedstock in or products out of our terminal.
Also quite exciting about this project is that as we speak, it's being commissioned. And in a couple of days, we will be ready to receive the first products into these tanks. Brazil Alamoa. Now I very much like this picture, but I first have to say that this is not the end state. This is a project in construction.
So here, you, for instance, see a pump pit where what a pump pit does is you have jetty lines, jet lines from the jetty, you have lines from the tanks, and you kind of let them meet in a manifold where you make connections so that you can pump from a jetty to a tank and also have some flexibility. That's going to be built right over here. And you see that it's quite a congested area where we're building, Area 6. And the way we're building is kind of cool because what we do is you already see the roofs here. And every time, we add a ring and then we jack up the tank a bit and then we add another ring, we jack it up again.
And in that way, the tanks are being raised up to their operational level. And because of the lack of room, actually the ring is all steel plates welded together and is rolled in every time to add a ring. So and they kind of professionalized together with contractor that way of building. And that's the way how we are constructing here. So at one time, 400 or 500 people simultaneously working in an area like this.
Quite exciting. Again, the background of this project is fuels imports, possible ethanol exports. And what we like in Latin America, because if you have in mind fuel tanks, then normally they would be a bit bigger. But what we like in Latin America because of the volatility of the market that we build in a size that would also host chemicals, that will also host edible oils, that will also host biofuels. So these are more, yes, let's say, a standardized set of tanks that we can use for multipurposes.
And that's why there might be a bit on the small side for fuels, but we can in the future, if the market changes, we can also host other products in them easily. Mexico, Veracruz, the other big deficit market, the other big import opportunity in a deregulating market for Vopak. And here you see actually what we did is we reconfigured part of the existing storage into fuel imports. So already now, we are importing diesel for a large American customer into the Mexican market, and that was the first independent imports through a seaborne terminal into Mexico. But we're building on for them.
And what we're doing now is reconverting more tanks, and these tanks down here have actually already been demolished. This tank will add a ring so that it's a bit bigger, and that's for the gasoline. And we're adding two more. So we're now only doing gasoline. We're adding two more tanks.
If this one is raised, it's now 11,000. It's going to be 14,000 cubic meters. We're adding two more tanks to enable the imports of more fuels. And back here, we're going to have a new so here's the existing loading rack, which is being modified now, by the way. But the new loading rack is going to be over here, and that's all part of the project that we're presently executing.
Strong customer interest for imports into the Mexican market. And here you see that fuel terminals is fine as long as it's the right location. Right location, deficit market, bam, we like a project like this. So a lot of opportunities in the future also for Vopak Americas. And I think there was a question earlier where there was a difference between greenfield and brownfield.
Now one of the reasons I think that we have serious growth opportunities in The Americas is that it is easier to expand an existing terminal than to build a brand new one. That has to do with permits, with the land you have available, the people you already know, the operators that are already there. And we are in some very interesting locations and that makes it possible for us. And you saw the Brazil is an expansion, Houston is an expansion, Veracruz is an expansion or reconfiguration. It makes it possible by being in the right location, it makes it possible to grow in an easier way.
It doesn't mean we will shy away from a greenfield. If there's an interesting greenfield like Prince Rupert, we will absolutely step into it. But the speed of growth is easier in a brownfield than a greenfield. There is going to be I showed you the vast amount of chemical projects in The U. S.
Gulf Coast or in The Americas in general, not only in U. S. Gulf Coast. And there's going to be industrial opportunities there. Export opportunities in The U.
Gold Coast, as I explained, because of the abundance of oil and gas, not only as a raw product but also as a more when it's used as feedstock, as a chemical product or as a CPP that delivers a lot of export opportunities, fuel import terminals in the major deficit markets. And there, you also hear, let's say, that it fits the Vopak strategy. So in short, again, the key messages: dynamic markets in The Americas, shale revolution pushes in the northern part of the continent, a pool in the southern part of the continent because of standard of living, deregulation, Strong performance mainly in the chemical market. We have a more chemical footprint than oil footprint in The Americas at the moment, also edible oils. Growth projects aligned with the Vopak strategy.
You heard me talk about LPG. You heard me talk about industrial opportunities, the industrialization of the Deer Park Terminal. And again, because of our footprint, because of the places we are in the markets that we want to grow in, well positioned to capture future growth. Thank you very much. I will hand over back to Ilkow for Q and A.
Thank you, Badri. Let me turn this off. Easy does it. Good. We have another opportunity for some questions, particularly related to Americas after an overview of what we're doing in this part of the world.
So who can I provide the microphone to? Thijs, please. Andre?
Thijs Berkelder, ABN AMRO. Slide 54, growth opportunities. I don't think you're in immigration into The U. S, but the Pacific Coast Of Mexico, what's happening there?
I'm not sure whether I understand your question.
Yes. The growth opportunities gives two bubbles on the Pacific Coast Of Mexico in terms of potential new projects. You maybe explain that?
I think the bubbles you see there are the terminals in the West Coast, so that's Long Beach and Los Angeles.
Yes, that's on the Mexican. Okay. Then it's maybe a misprint. Okay. Sorry.
That's okay. Andre?
Alain Mulder, Kepler. Two questions. You talked about the opportunity for industrial terminals, operation in The U. S. How are you positioned compared to competition?
Because in the past, you said, well, we made competition from MLPs. How is it in this case, in greenfield case?
I can answer the question, Andre. Is that if you look at industrial terminals, it's a concept which was developed by Vopak and was developed in Singapore initially for simple reason that in Asia, there was a real requirement to create economies of scale because of land scarcity and waterfront scarcity in particularly Singapore. So we came up with the concept and said to the Singapore authorities that if you assign to us a piece of land, we will make sure that we will develop an industrial terminal that can suit the needs of multiple manufacturing sites for import of feedstock and export of finished goods. And I think that's where the concept started and where everyone benefited from that particular sequence. Obviously, the Singapore government, because they could save on very valuable land, which to them was scarcity, The manufacturer had opportunities because he or she was rewarded for the economies of scale and could actually operate the tanks and jetties at a lower cost.
And we had a business model which we could then, let's say, set into play and then be rewarded accordingly for our efforts. So what you've seen is that model of industrial terminals has caught on in three different regions. It started in Asia and it started in Asia because of a necessity. And where you see as well that in Asia, government involvement on decisions on ports is at a high level. If you look at China, if you look at Indonesia, you look at Thailand, if you look at so on.
So therefore, it's always a dialogue between governments and the public, let's say, or private interest like Vopak in manufacturing. In Europe, industrial terminals has caught on slightly later but out of a different reason. And that's really to drive efficiencies because the chemical sector in The Netherlands and the chemical sector in Antwerp and in Spain was under pressure from cheap feedstock competition, particularly in The Middle East in the, call it, ten, fifteen years ago. So what you've seen is that people started to look for opportunities to lower their overall costs. And that's where the whole concept of moving more products over the fence became more appealing.
So what you see now in Antwerp and Rotterdam and in Tatagona, you see more of that happening in which old connections are used either to exchange utilities, to exchange energy, to exchange feedstocks and to become basically more competitive. Here in The United States, what you see is that the incumbent manufacturing sites had no real incentive to look for an industrial site. Reason being is that there was an abundance of land available. There was, let's say, pure private interest who are dictating the dialogue. There was no, let's say, sort of state planning or government interference to optimize ports when it comes to the economic model of how it would run.
So this tells you a bit sort of the, call it, the historic perspective. What you see now in new of the new era, the new expansion is you see now that the learnings from Europe and America are being brought back to The United States. So we see now, again and these are again early signals but not yet proof points because we haven't seen any industrial terminal greenfield being announced in North America on the concept, but we see that the dialogue is intensifying. And therefore and that if you look at the capital allocation choices, people are very clear, let's concentrate on manufacturing and leave the industrial side to companies like Vopak. And second of all, also you see that's what happened basically in longer use in ship channel or other ports is that the, let's say, the abundance of products that need to be exported or manufactured as such that also scarcity is becoming an issue.
And that is, for instance, if you go to the used and ship channel now, let's say, availability of good waterfront is something which is scarce. So you see now that I think we're entering into sort of a new era in The United States where these type discussions are becoming more and more interesting. So I think the sharing in The United States has already taken place. Obviously, use the connectivity is there, but I think now independent parties like ourselves are getting more involved. And then you come to the competitive arena.
I think ultimately, it comes down to, let's say, to call it trust and capabilities of being able to perform this. And therefore, in the chemical arena, I don't see us having any particular disadvantage over the existing companies here. So I hope that gives you a bit of a flavor on how we look at that.
Last question is on Houston. Some time ago, said you were looking for possibly adding some fuel capabilities along the Houston Ship Channel to make Houston a bit more comparable to Rotterdam, Fujairah, Singapore. Is that still on or off the table?
No. That's still on, we can show it to you. I think we have a we will visit the terminal, the chemical terminal of Vopak later today. And we have a plot of land, which is not far from where we are along the Houston Ship Channel. That's a plot of land we purchased because, again, because of the scarcity that it possesses.
It has relatively deep water and availability for more docks. We still believe that with the, call it, the liquidity in the market, there's opportunities to create value there. So we're still pursuing multiple opportunities actually to have sort of the first anchor tenant in and start developing that site. So that's not all the tail. Keren?
I have a couple of questions from my side.
Then we'll go to Thomas. I think you raised your hand as well, right?
Let me say on Deer Park and your opportunities in I think the discussion was in a couple of years ago with Magellan, sorry, on the investments in that area. It didn't go through. For whatever reasons, we but I think that's the terrain you haven't used yet, and that's still available? Or is that
That's what Andre was referring to. Yes.
Then with regard to your ambitions in the so is there still room for chemical for expansion in the Chemicals site in the Deer Park, in fact?
Yes. You will see that later today. Krish will give you insight on that.
Okay. That was my question for this one.
Thomas?
Just a question on the occupancy rate. In Americas, it's been fairly stable at around 90%. But I wonder I mean, the way you generate extra returns is by utilizing the existing asset base better. So I wondered if this is the best you can do or if there's anything you can do to further enhance these occupancy rates. What are the restrictions?
A very good question, Bartlett.
We can always do better. So of course, we'll look at trying to push it up. But I don't think there's much more room in occupancy rates because if one chemical customer leaves and the next comes in, you have to clean the tank. So it's going to be out of service for two months. So we are looking with technologies how we can improve the cleaning time and the out of service time of tanks.
Tank maintenance has to take place. So also there, we're looking into, hey, how we make that more efficient? There's going to be a ceiling in your occupancy rate in the end in a terminal and that what you can always do, and that's what we talk about with customers, is trying to increase the throughput. So the amount of turns you do on a tank, if you can improve that by better logistics, by, let's say, shorter downtime on your jetty, by higher pumping rates. And if you can, instead of, I don't know, turning a tank 5x a year, turn it 7x a year, then actually your occupancy rate won't change anymore, but your revenues will go up.
So there's different levers that we can turn on in trying to optimize our terminals. Does that answer your question?
Dominik?
Hi there. Just a question more on Long Beach and the bunkering market Can maybe you just maybe say what you're doing there in terms of fitting into the whole what you're doing elsewhere with the IMO 2020? And also, just given that, obviously, California has got some of the strictest rules on emissions, and they've obviously also got an ECA already. Can you just maybe say any of the lessons that have been learned from the current situation in terms of the 0.1% fuel cap? How that's fitted in?
Because I think a few years ago, there were some issues at Long Beach in terms of low occupancy, etcetera. Can you just maybe give us an update there?
Yes. Customers do come and go. In general, Long Beach is more the chemical terminal and it's LA that is the bunker terminal. But we have and it is true that the environmental regulations are very strong in LA. But I also think that's a reason why we can stand out.
We I'm not saying others are not taking it seriously, but we are taking it extremely seriously. And I do think it's a hurdle for others to also be able to step into that market. So I do think we have trust in that environment. And again, that trust has to be proven every day again, so we have to be on top of our game there. But I do think that we have a stable and good bunker operation out of our terminal because we don't bunker ourselves, our customers do.
If you look at the 0.1 ECA spec, that's a spec that we're also familiar with in Rotterdam, for instance, because of the ECA in the North Sea and the Baltic. It's also on the coastal waters of The U. S, so it's something we're more familiar with in other places. But we did a stress test for all our bunker terminals throughout Vopak and looked what the IMO twenty twenty consequences for these terminals could be. And Panama and L.
A. In our geography participated in the stress test, and we think that we're ready for IMO twenty twenty. And the specific question there is how many segregations do you have? And can you, next to the high sulfur fuel oil, the MGO that is more 0.1, also have the low sulfur fuel oil in the same amount of tanks and still have the same amount of logistic solutions for your customers, so the same amount of loading speeds and, let's say, blending opportunities. So we looked at that for also for LA and we think that we're ready for the IMO 2020 market.
And just maybe as a follow-up because obviously you talked about Rotterdam as well. Has that resulted in the Nortpoint, the ECAs in Rotterdam, has that resulted in a large requirement for bunkering capacity from what you can see?
I think we elaborated on the IMO and the fuel specs quite a bit. I'm happy to do it again. So if you look at Vopak's position, by and large, how we represent it in the larger bunker ports in the world, we take a view that we believe that the specs will change. There will be a demand for all three, low, high and MGO. And we think that where the largest activity is on blending, it's there where the components are.
So we've looked very intensely at, let's say, the refining base and blending capabilities, particularly in Rotterdam, in The Middle East and in Singapore. And we take a view that the products that will be, let's say, stored and consumed in, call it, the peripheral bunker situations like LGZs and others will be there. Let's say, the product will be moved into tank but not blended. So that's this is sort of the view that we've taken on how these terminals are being set up. We had a stress test on again, we've looked at all the refinery setups.
We took a position on what the high sulfur, low sulfur balance will be. And then we had a sort of deep assessment on what infrastructure is required to serve it. We mentioned we need about €40,000,000 to prepare our sales choices in Rotterdam, particularly on the low sulfur part. That, what we've converted, has been rented out on longer term basis. So I think that part at least has been sort of secured.
But we still see interest for obvious reasons as for the high sulfur volumes, which are either coming from Russia or collected in Europe, still need to leave Rotterdam one way or another. So also there, we are prepared to do so. What you find in as a general statement, you see that we will get back a little bit more into bunkering. And let me elaborate on that is that on the major hubs, what we've been doing, we've been entering a business of fuel oil trade or facilitating fuel oil trade in large hubs. So if you look at our terminals, take Rotterdam for instance, we used to have a market share in bunkering of about 40 to 50% that diminished over time to about 10% to 15% because we were heavily engaged in moving fuel oil from Rotterdam to the East.
And that had to do with the fact that there were only two positions in Rotterdam that had VLCC access. Now that you see that the markets are changing again, we are also with an investment moving back into the bunker business. And I think we have a very strong proposition because we can deliver all fuels than own in Rotterdam. So again, we are quite confident with what we're seeing. We're quite confident that the markets will be there.
And so far, we've been proven right in sort of the contracts that we've signed. So this is how we've been looking at the IMO developments taking shape, in particular Rotterdam. Yes. Thomas? And then David, I won.
Just in terms of the IMO again, obviously, the having the flexibility to store different types of products, high sulfur, low sulfur, MGO and having the blending capability, which also enhances the margin, what does that actually mean for your EBITDA margin for that part of the business in 2020 versus today? Should it be higher because of that? Because flexibility and the blending capability comes at a price?
We're not giving guidance on the margin per individual product. We're just radiating, let's say, bit of confidence is what we see in the market happening today is that fuel oil had a very difficult time. It had a headwind. It used to be a refined product where refiners really didn't see any margin, want to get rid of it. So also you see that the refiners are getting into the game because they see that it's now a component where you can add value.
And again, what you see is that companies like ourselves can benefit from that in having the right tanks available at the right time. So I think the thing that we say is that we're signing contracts in Rotterdam, for instance, we expect that the occupancy levels, which we've seen in the last few years, probably will sort of will be reversed and we'll see an uptick of fuel storage again in our tanks.
You mentioned deregulation in Latin America as a potential driver for new projects. In which markets do you expect this to be the most interesting? And are there any projects that you currently have on the development? Is the commercial success dependent on this deregulation? Or are they already largely covered with commercial contracts?
Listen to Baum first.
Yes. I would say the main countries where it's actually happening right now is Brazil and Mexico. But it's not the only driver for, let's say, our opportunities in those countries. The countries themselves, you see that people are getting out of poverty, population is still growing, urbanization is taking place. So there's more drivers in these economies than only the deregulation.
But you do see that in the past, actually, the state owned oil companies, Petrobras and Pemex, had a monopoly on importing fuels into the country and producing the fuels themselves in their own assets in the countries. Now this asset base isn't growing. And they do not, in an economical way anymore, are not able anymore to import these fuels into the country. So you see a big kind of move towards the private side of the business. And now you also have to ask yourself, how is this going to develop?
Because also in these countries, there have been elections, new presidents are coming in. So there will always be some form of volatility in these countries. But on the long run, we believe that this deregulation will have to set itself through because it is unsustainable to keep on going the way it was. So you see that large oil companies are taking positions in distribution stations. The first distribution stations in Mexico City other than Pemex owned are being opened.
You see Brazil actually happening the same. But they're still finding out how it will have to be regulated and how it has to be done. But you do see that it's a trend that is going to be hard to reverse and the basis of other trends that also support the growth in those countries.
And are any of the current projects dependent on this deregulation or?
Well, dependent, I would say they are stimulated by it. So the customers that we have agreements with on the basis of which we are building these terminals, of course, are betting on this deregulation and on the they also have already import contracts into the country. They are talking to distributors. So yes, it is part of the business case of our customers who have committed to storage in our facility.
The playbook is almost similar globally, David. You have a geography which has an old and relatively insufficient or inefficient refining system. You have fairly nearby a huge abundance of refining and conversion capabilities, whether it's Singapore, with Indonesia, whether it's The Middle East, obviously, with Africa, where it's Mexico, The U. S. Gulf.
Then you have basically a choice to make is how you're going to make sure that you get the fuels in your country. If you are let's say, you don't have the capabilities and skills to scale up your refining and have an advantage over your next door neighbor, then the best thing to do is to basically regulate, deregulate your system, allow cheaper fuels to come in and basically give that part of the business to others. And that's the playbook that you see now happening in several countries. Depending again on and they try to monitor that and steer it to their best abilities. We see it in Indonesia two steps forward, one step back, same in Mexico, same in But the playbook is more or less the same.
And it's very unlikely, in my view, that take a company like a country like Indonesia, very unlikely that they have the ability through raising capital actually to really revise and revive their refining sector. Also, sheer scale is just very difficult to achieve.
Maybe, Hilco, if I may, to add extra Maybe if I may, to add one extra driver for all of that is that, obviously, wants stricter and stricter environmental performance of refineries. Also countries that used to be able to refine their own goods are indeed faced with the choice that they really need to invest very seriously in those refineries to attain the modern, I would say, environmental performance of both the refinery itself as well as the fuels that come out of it or to shift. So that's another sort of driver that helps in this regard.
And maybe one more and then we'll stop. Is that if you look at these state owned national oil companies that if they have to make choices and they're coming in a position that they have to make choices, the choice will most probably lean towards exploration and production where the most money will come into the country. So there's more money to be made with exploration and production. So if you want to get these companies, let's say, to a higher level and back into profitability, that's where the primary aim is. And that's also what the new CEO of Petrobras is now communicating, who we appointed on the back of Bolsonaro, who has been appointed in Brazil, elected President in Brazil.
And as for Thijs, we'll get the honor for the last question at least of the morning session. So Thijs, please.
Thijs, ABN AMRO. Coming back on Mexico again. Vera Cruz, did I understand it well? Are you adding 11,000 cubes on the current 114,000? Or you also mentioned 14,000?
Yes. So what we're doing is we're converting part of the terminal from edible or chemical storage into fuel storage. We're increasing the size of one old Molossa tank, which was 11,000 and it's going to be 14,000. And we're adding two more tanks of 14,000. So what we're adding to the size of the terminal is 14,000 plus 14,000 plus 3,000 is 31,000 cubic meters.
That be ready?
Course of 2019.
Okay. And can you maybe indicate what that will mean for the flow? Because I think flow is here maybe more important than the capacity being added. Are you expecting flows to double or so thanks to the capacity expansion?
Well, we do not give any predictions on what the flows are going to be, but obviously they will increase. And obviously, some fuels have a higher throughput range than some chemicals. But so it must have a positive effect on the flow rate of the terminal.
Okay. And then finally, can you remind me on Altamira LNG? Are there expansion opportunities at Altamira or not?
I'll take that one.
Yes. I think what one of the consequences of what Baduen described with all the shale developments is that, obviously, there's a lot of natural gas available just north of the Mexican border in The United States. So Mexico has been investing quite significantly in pipeline availability of their grid. Yet, of course, also Mexico wants to maintain its energy independence to some degree. So what we see particularly happening in the Mexican LNG landscape now is that there is or natural gas landscape is that there is an ongoing discussion about what should be the future master plan of Mexico in terms of its security of supply.
And we believe that also the LNG terminal can play a key role in that. And for analogy, I could refer to The Netherlands. As you know, The Netherlands has been a gas producer, has been very well hooked up to effectively Russian and Norwegian and North Sea gas. Yet, it decided it was beneficial to have an LNG import terminal to be connected to basically LNG from all over the world just to have that flexibility of supply. I see that as an analogy with what the discussions within Mexico are for the ultimate return also.
Does that help?
Okay. And maybe okay. Then I that's fine. I mean, know that ING always wants to have the upper hand over ABN. I'm going to give you a sorry for that.
We have it already. With regard to license to operate in Brazil, I think you lost the terminal a couple of years ago. What's the risk of losing more licenses in the future? And my last question is about the relationship
No, you haven't.
That's two questions, yes. My last question is about your relationship with Chevron. Is there a chance you're going to acquire this, the terminal 500,000 cubic meter someday? And let me say, to operate better than they do, in fact, becoming an independent terminal in Panama, for example?
So the let me start on the Brazil question. We follow the concessions very carefully. And in concession law, things change in Brazil. So it is something that it's forward looking, but it is something that is a changing environment that we monitor carefully and apply in time for extensions of concessions. On the Bolsonaro, I also think that these kind of laws will change and probably to our advantage.
Economically, I think that the country has a more stable outlook with the outcome of the elections. So I cannot actually give you an exact answer there other than that it is a volatile country and that we will monitor it extremely closely because we do not like to lose our terminals.
May I interject one comment? Just also to be to get the facts straight. Alamoa Terminal is on our own land. So there's no risk of losing concessions now to operate. So the terminals that we're running under concession is in Paranaghwa and Altamira.
Oh, Aratun.
What was the second question?
Chevron.
Yes, that's in the future and I cannot give an answer. It's yes, we're happy with the joint venture we have. They chose to select us as an operator. I'm also not going to claim that we do it better than Chevron. We operate their facility and there should be upside for both companies that we operate it later on as one terminal, our expansion and their terminal.
Is one operator who actually operates the total. So there should be a benefit for both companies by doing so. And we both seem happy with the joint venture and the arrangements that we have. And
maybe without directly commenting on this particular situation, in general, of course, what you see compared to the oil majors is that because this is our bread and butter, we are highly specialized and focused on operational terminals versus majors who have to basically be able to operate all the way from oil exploration to eventual marketing and retail. We do tend to find that with our focus, we are able to still add a bit to the competitiveness of running the terminal and therefore value to the customer. Okay. That brings us to
a wrap up of at least this morning's session. I believe that you have listened to our story in which we tell you that the linear path of tank storage, which we used to have a decade ago, has definitely surpassed. And if you look at all the challenges that you have with different type of competition and your strategic capabilities, if you look at the energy transition and the choices that you need to make there and get yourself available in this digital day and age, is much more complex than it used to be. But nevertheless, this actually strengthens our belief that if we have to compete in such an environment, probably we have the goods to make the change in the industry. And I hope that in our session today, if you look at sort of the change that we made after four hundred years in existence in making a clear choice on the direction of the company that you see now in the year 'seventeen, 'nineteen that we are acting on that promise, but also that you have a few very clear pointers to see where this company will move to in the years 2020 and beyond.
So thank you again for listening to us and taking the time to actually travel from all over the world to be here. And I really look forward to engaging in a dialogue now, particularly on the Houston Terminal with Chris and his team so you can experience on hand what it's like to run a chemical facility here in the Houston Ship Channel. So thank you very much.