AAG Executive Session and Awards Banquet September 17-18, 2009, Edwardian Hotel, London Heathrow Jet Fuel Infrastructure Challenges & Solutions

Size: px

Start display at page:

Download "AAG Executive Session and Awards Banquet September 17-18, 2009, Edwardian Hotel, London Heathrow Jet Fuel Infrastructure Challenges & Solutions"

Rodney Banks
7 years ago
Views:

1 AAG Executive Session and Awards Banquet September 17-18, 2009, Edwardian Hotel, London Heathrow Jet Fuel Infrastructure Challenges & Solutions Presented by FSM Management Group James Fee President Wade Morrell VP & CFO

2 Critical Situation Local jet fuel refinery capability severely diminishing Consumption of jet fuel growing rapidly Existing infrastructure geared towards local supply Securing economic and stable supply more difficult than ever

3 Location of Refineries in Canada Refineries producing jet = 11 Thousand of cubic meters per day

4 VOLUME TREND AT 4 LARGEST AIRPORTS Toronto, Vancouver, Montreal & Calgary 50% increase over past 15 years

5 A Growing Problem Demand growing over time Supply capped and volatile Increasing dependence on imported jet to balance market New Shell Refinery? Project cancelled Projected Jet Demand in Canada Potential Supply New Shell Refinery Imports Current Domestic Supply No jet from Petro-Canada after Oct 2008

6 The Need for Change Lack of internal resources for airlines both big and small Consolidation and bankruptcy of airlines. Alliances Rapid airport development requiring fuel system infrastructure development Economic challenges and state of industry after 9/11 Increased administration of lease agreements/contracts due to privatization of airports More stringent environmental stewardship regulations Difficulty in securing required infrastructure financing in a very unstable industry Lost opportunities

7 Solution The 3 rd Party Administrator A 3 rd party with a host of industry specific core competencies had to be dedicated to improving the security of economic supply issue for all airlines across the country Core Competencies had to include: Engineering & Construction Management Corporate Governance & Business Administration Accounting & Finance Fuel Systems Operation Management Procurement & Strategic Purchasing Research & Development

8 Positive Change The New Toronto Jet Fuel Storage- Pipeline Delivery & Rail Offload Facility Toronto inadequate storage a problem for years 1 day peak storage Administrator tasked with research and development of an economic solution Focus on import capability Establish site location off airport site, 1 st of it s kind Development of detailed budget

9 Positive Change The New Toronto Jet Fuel Storage- Pipeline Delivery & Rail Offload Facility Presentation to fuel committee building of consensus among 32 member airlines Manage complex permitting process including local municipal, provincial and federal government/regulatory bodies Review of financing alternatives long term focus Selection of underwriter and management of underwriting process Success in long term bond financing raise 25 year funds at 5.09% interest = $0.003/litre to members

10 Positive Change The New Toronto Jet Fuel Storage- Pipeline Delivery & Rail Offload Facility Project development & construction management tenders/design/completion New 40 million litre storage = 5 more days of peak storage Rail facility allows for import capability Upon opening 2 new immediate suppliers to Toronto, more to come Lower differentials of only $0.01/litre = 4 year pay back

15 The Future The New Vancouver Jet Fuel Storage- Pipeline Delivery & Marine Offload Facility Vancouver critical storage problem 1 day peak storage Administrator tasked with research and development of an economic solution Major import facility ability to offload Panamax ships First marine offload facility dedicated solely to Jet fuel First phase financed with 20 year amortizing bond - $45 million at 6.60%

16 VANCOUVER FUEL SUPPLY WESTRIDGE TERMINAL VANCOUVER BURNABY VAFFC STORAGE FACILITY YVR KINDER MORGAN PIPELINE TANKER TRUCK DELIVERY SOUTH ARM PIPELINE RICHMOND WILLIAMS ROAD PROPERTY

17 VAFFC MARINE DOCK LANDS

18 VAFFC DOCK FACILITY

19 VAFFC MARINE OFFLOAD FACILITY CONCEPTUAL DRAWING PIPELINE TO AIRPORT 250 mm dia. X 15 km STORAGE FACILITY 6 X 81,250 bbl 110 DIA X 48 HIGH MARINE TERMINAL BARGE & TANKERS UP TO 400,000 bbl

20 KEY TO SUCCESS Airlines working together to identify the problem A consensus to do what needs to be done to solve the problem Not for profit corporation Large airline consortium Long term lease Strong financing covenants Third party administrator

21 FSM Management Group Solve Build Manage

OUR CONVERSATION TODAY

OUR CONVERSATION TODAY Our goal is to raise the level of awareness around the oil supply chain among key stakeholders in order to facilitate positive working relationships and more informed decision making.