Multiple European tank storage operators are being prepared for sale amid one of the greatest shocks to oil markets in history. The Iran war creates some uncertainty but could boost the value of strategic storage. 

This year, the stars were aligning for many infrastructure investors that were planning to sell their European tank storage companies.

Market conditions for these businesses, which store liquids from jet fuels to chemicals, were benign, with most companies seeing a steady rise in revenues after the uncertain years of Covid and the Ukraine invasion.

Interest from buyers, particularly strategic players and US infrastructure investors, was also increasing and recent deals were encouraging.

In 2024, Ardian, APG and PGGM sold their transatlantic storage business LBC Tank to Mitsui for a healthy multiple after a competitive auction. Last year, Macquarie and APG also found buyers for their stakes in Spain’s Exolum, which had previously been hard to sell.

Then, on 28 February US President Donald Trump decided to bomb Iran.

As Iran retaliated by shutting the Strait of Hormuz, one-fifth of global oil supply was suddenly curtailed and crude oil prices soared by more than 50% to over USD 100 per barrel within days.

Infralogic reported in recent days that discussions had just started for at least three new full or partial sales of major tank terminal operators worth billions of dollars among them – IFM-backed VTTI, which is a global operator, as well as Igneo’s Evos and I Squared’s Tepsa, which are focused on Europe. A fourth deal, for the sale of the Nordic terminals of Brookfield-backed Inter Pipelines, had been in the making since late last year.

One oil and gas advisor tracking these deals said many conversations suddenly went quiet after the war broke out, with dealmakers going into a “wait-and-see mode”.

Yet the mood is not entirely gloomy.

The oil and gas advisor says at least one more European sale process that was already underway is continuing, and despite the headlines, investors continue to believe the sector to be attractive.

For some, it may even bring new opportunities.

“There are two scenarios,” says the advisor. “One is that these [storage] assets become critical and have huge value if more product comes from the US and the North Sea, especially if the UK starts drilling again. In the other scenario, particularly in the short term, you will have less volumes coming to these sites, and this will impact cash flows. We’ll have to see which one plays out.”

Assets ripe for M&A

Between 2019 and 2021, several infrastructure fund managers ranging from IFM to Goldman Sachs acquired control of large numbers of tank terminals worldwide, which led to a spike in the number of M&A deals, according to Infralogic data (see chart below and table at the end of the article).

During Covid, when energy prices plummeted, the oil market entered a record phase of contango, a term that indicates when future prices are higher than current prices. Contango creates more demand for storage, as traders tend to buy cheap oil and store it until they can sell it at a higher price.

Infrastructure funds also saw a longer-term opportunity to invest in energy transition, buying oil-heavy storage companies with a plan to turn them into more diversified businesses with greater exposure to green energy or chemical products.

After the war in Ukraine sent energy prices soaring in 2022, however, M&A slowed down to a trickle, Infralogic data shows.

The oil market entered a period of steep backwardation, when prices are expected to fall in the future, meaning traders had fewer incentives to store oil to turn a profit. Strategic storage became more important as Russian supplies were cut off, however, and tank terminal operators generally remained resilient.

Investors focused on refinancing their assets. Debt deals globally spiked in 2024, when 22 refinancings totalling more than USD 11bn took place – five times as much as the previous year, according to Infralogic data.

Market conditions improved steadily in the past couple of years. The crude oil futures curve flattened, meaning the market entered a period of relative stability, with good incentives to store products.

Many infrastructure fund managers also returned to consider more favourably oil and gas investments, while enthusiasm for renewables cooled. Meanwhile, electric vehicle adoption slowed down, implying demand for diesel and petrol (as well as their storage) will remain resilient for longer.

“There are more than 250 million cars in Europe,” says the oil and gas advisor. “You have at least 15 to 20 years of solid [demand] that it is not going to be dented.”

This meant that by 2025, “terminals became fashionable again”, says the advisor, just as the investors that bought assets during the 2019-2021 years started thinking about selling again.

Opportunities in the crisis

The Iran war suddenly sowed doubts on the positive outlook.

Oil markets are now expected to go into “pronounced backwardation, as is typically the case during acute supply shocks”, says Francois-Xavier Delenclos, a partner and head of infrastructure at EY-Parthenon, who has over a decade of experience in liquid bulk transactions. This may generally reduce incentives to store product.

The chances of recession in Europe are higher, and if this scenario materialises it could lead to lower demand for fuels and their storage, adds an energy investment banker.

Even if the US bombing campaign against Iran were to stop soon, the influential International Energy Agency (IEA) has said implications On.Ene markets are likely to outlast the conflict.

Despite these challenges, market players who spoke with Infralogic say European tank storage operators — including those currently tipped for a possible sale — could be attractive investment targets for various reasons.

The first is that the Strait of Hormuz blockade has made reliable storage capacity more valuable for strategic reasons, to protect from abrupt and painful losses of oil supply.

“Heightened volatility and geopolitical uncertainty increase the value of ‘optional’ storage — as a risk-management and security tool, as well as for the new arbitrage opportunities that may ARISE,” says Delenclos.

Tepsa for example benefits from a sizeable contract with SAGESS, a French company owned by a large consortium of oil groups that guarantees most of France’s strategic oil stockpile obligations.

“Tepsa is not a contango business,” says Mohamed El Gazzar, senior partner at Tepsa’s owner I Squared. “The terminals are mostly full regardless of the commodity price environment, underpinned by long-term take-or-pay contracts serving stable regional demand.”

The importance of strategic storage came in full display on 11 March, when the IEA announced the release of 400 million barrels of oil from reserves in response to supply shortages – its largest ever emergency release.

“When governments release strategic reserves… those volumes need to be moved through terminal infrastructure to market. This generates incremental throughput revenue for operators,” says El Gazzar. “Once released, volumes need to be replenished, supporting a further cycle of demand.”

The magnitude of the crisis may also force tank storage customers to reconsider their business models more profoundly, and push them to choose to store more oil “closer to end markets”, meaning to the final buyers and consumers, to avoid depending too much on timely deliveries from the Middle East or elsewhere, adds Delenclos.

“Refiners, traders and end-users will reassess just-in-time models and increase domestic or regional inventory buffers to reduce exposure to external supply shocks,” he says. “This ‘near-shoring’ of inventories would enhance the strategic value of European storage hubs.”

Renewed momentum for diversification

Over the past years, several terminal operators have increasingly sought to diversify the type of liquid products they store, which is likely to have made their businesses more resilient to the current oil shock.

Evos and Tepsa in particular have invested more heavily on chemicals and green fuels, while others including VTTI have bet on the liquified natural gas (LNG) market to grow and reduce oil exposure.

To be sure, diversification is no silver bullet, as products other than oil can experience volatility too.

Chemicals were seen as a promising new area of growth a few years ago, for example, but more recently demand for their storage has been weak, particularly due to the global trade tariffs war, as Vopak, the world’s largest independent terminal operator, pointed out in a recent presentation.

Nevertheless, the “structural case” for boosting chemicals storage capacity in Europe remains strong, as more chemicals are produced in lower-cost regions like the Middle East and North America and imported to Europe, according to I Squared’s El Gazzar. Focusing on specialty, rather than commodity, chemicals also helps combat volatility.

“Supply chain uncertainty tends to increase the need for storage, as customers seek flexibility and hold more inventory to manage disruptions,” he says.

LNG supply has been heavily disrupted by the Iran war too, raising questions over LNG import terminal demand. Qatar, which supplies a fifth of global LNG, has stopped production and export due to the conflict and Iranian attacks risk constraining long-term supply.

But even in this case, diversification appears to be a safe strategy for terminal operators.

LNG terminals are typically backed by long-term take-or-pay contracts, which reduce usage risk, according to the oil and gas advisor. More LNG supply is coming online from the US, Latin America and Africa, which should reduce the risk of over-reliance on the Gulf.

In addition, demand for green energy sources such as sustainable aviation fuel (SAF) and biofuels could grow if their price gap with traditional fuels narrows.

Ultimately, the appeal of each individual tank storage company could vary significantly depending on the location of its terminals and the mix of products it handles, as well as the type of clients it serves and the contracts it relies on, according to Delenclos.

This means the fate – and valuation – of each M&A deal may vary significantly depending on how exposed their individual assets are to Gulf disruptions.

In some cases, the analysis of whether certain specific terminals are good investment opportunities is likely to be fraught with difficulties.

VTTI’s Fujairah terminal in the UAE is one example. On one hand, the facility might become strategically more important as it offers one of the few ways to transport oil out of the Gulf without transiting through the Strait of Hormuz. On the other hand, it may become more vulnerable to Iranian attacks for the same reason, as it has already been targeted since the beginning of the conflict.

“The first hit on Fujairah Terminal – albeit of modest scale – was a sharp reminder that the wider region is subject to disruptions even if technically outside the Strait of Hormuz,” says Delenclos.

It might take a few weeks, or even longer, to understand whether there are favourable conditions for a new wave of tank terminal M&A deals.

Early indications suggest that selling storage assets will still be possible, but selling aggressive business plans might be much harder, as uncertainty is here to stay.