Liquid bulk storage depots
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This section applies to premises offering liquid bulk storage facilities traditionally in mild steel or stainless steel tanks.
1.2 Products stored typically include crude oil, petroleum and chemicals as well as potable liquids, edible oils and fats within large storage tanks.
1.3 Receipt and delivery of these products takes place by means of sea, road, rail and cross country pipeline. Products stored can be owned by the terminal operators or third parties. Smaller depots generally do not own the products they store.
1.4 The storage of petroleum and its products is required at various stages of production and distribution, from feedstock for refineries and petro-chemical plants to installations and depots which form part of a complex system of distribution of finished and semi-finished products. Distribution can originate from a refinery to regional installations and then down to smaller depots from which the customer or retail outlet is supplied.
These hereditaments fall into 2 types:-
a. Major storage installations (MSI), often located at or near a refinery or port facility with a dedicated jetty, and having substantial storage capacity and ability to blend products and additives. The product is then distributed in smaller quantities within a marketing area
b. Secondary storage depots, on a smaller scale receiving supplies from the main installation, storing smaller quantities and distributing to a more limited market area. It would also include airport fuel farms
The industry also provides additional services, such as heating, blending and transformation of these products for a variety of customers.
2.1 List description: Liquid Bulk Storage Depot and Premises IX
2.2 SCAT code: 157. As a split Class the appropriate suffix letter should be either V (for Major Storage Installations (MSI) valued by NVU), or S (for Depots valued by Unit Valuers).
3.1 Responsibility for the valuation and referencing of this class of property is split as follows:
- Major Storage Installations (MSIs) are dealt with by the Industrial and Crown Team within the National Valuation Unit (NVU).
- Smaller Depots (featuring few large tanks and generally lacking a purpose built dedicated jetty) are dealt with by Valuers within the Non Domestic Rating Business Units.
4.1 Responsibility for ensuring effective co-ordination lies with both NVU and Non Domestic Rating Business Units. In addition Rating Manual Section 1, Section 1, para 3.6 sets out requirements for keeping the Unit head informed of major issues and litigation concerning individual high profile hereditaments.
4.2 Given the wide variety of Liquid Bulk Storage Premises in operation it is difficult to draw up a hard and fast rule for splitting the class between major installations and smaller depots.
4.4 In the 2010 rating list a major storage installations would generally be expected to have an assessment in excess of £350,000 RV with the majority of value upon rateable plant and machinery. Occasionally some assessments below this figure might still be handled by the NVU, where typically they once formed part of a much larger NVU site or adjoin other larger NVU sites.
4.5 Queries relating to allocation should be directed to the class leader within the NVU to ensure that the assessment is managed in the most efficient and consistent way possible.
5.1 Given the nature of the industry, Health and Safety legislation is a major consideration in the operation of Liquid Bulk Storage Premises. Furthermore, following the explosion at the Buncefield Terminal additional measures were introduced.
- 2008 policy on Containment of Bulk Hazardous Liquids at COMAH Establishments gives a brief summary of the current requirements.
- The storage of flammable liquids in tanks - HSE176 gives guidance on the design, construction, operation and maintenance of installations used for the storage of flammable liquids in fixed tanks operating at atmospheric pressure. It was produced after the 2005 Buncefield explosion.
- Additional subject matter can be taken from the HSE booklet Safety and environmental standards for fuel storage sites The main purpose of this report is to specify the minimum standards of control which should be in place at all establishments storing large volumes of gasoline.
- COMAH regulations concerning Secondary and Tertiary Containment
Basis of measurement for Buildings at Liquid Bulk Storage sites is GIA. Guidance for information sought in respect of plant and machinery and civil items should be taken from the VOA Cost Guide.
6.1 Safety on Site
- All Liquid Bulk Storage sites contain serious safety hazards, so extreme care is required when carrying out inspections
- Members of the VOA visiting this type of property for an inspection or other reason should check in advance with the site what PSE is required and what may be supplied on site.
- Recently several operators have required visitors to wear fireproof overalls and gloves. Occasionally the site may make this available, but if not alternative arrangements will have to be made. Failure to do so may limit your inspections to the gatehouse. Staff should ensure they are aware of all the VOA guidelines on health and safety and as a minimum requirement attend with safety boots, gloves and glasses, high viz clothing and hard hat.
- Sites will have a formal health and safety induction process, this must be undertaken and allowed for when fixing appointments. Individuals should comply with all safety rules and precautions prescribed by the site operator without exception.
- Mobile phones, electronic measuring tapes and other devices with batteries should be left in vehicles. Key fobs should be left in the gatehouse on arrival.
- Oil is obviously slippery and staff should beware of wet surfaces and shallow bunds which present a trip hazard. Whenever using staircases ensure one hand is on the railings to prevent accidental falls. Care should also be taken when crossing roads and yard areas for HGV’s
6.2 Plant and Machinery
See RM section 4:3 for general advice on identification of rateable plant and machinery forming part of the hereditament. Rateable plant and machinery is identified in accordance with the provisions of SI 2000 No. 540 in England and SI 2000 No. 1097 (W.75) in Wales.
6.2.1 Storage Tanks
Tanks are specifically mentioned in Class 4 of the Regulations and are rateable provided they satisfy the size (400cu.m) and structure requirements of the Class.
Cylindrical storage tanks have long been used for the bulk storage of petroleum and its products and nowadays the types and sizes of such tanks have largely become standardised, 5,000m3 & 10,000m3 being the most common.
For most purposes vertical tanks are preferred and these are of all-steel construction with butt welded shells and lap-welded bottoms and roofs. They are constructed in capacities up to 160,000m3 (35 million UK gal). Horizontal tanks are also used, especially where tanks have to be buried, but tend to be small.
Non-volatile, high flash point products, such as gas oil, and lubricating or fuel oil, are stored in tanks at normal atmospheric pressure but in the case of volatile, low flash products such as gasoline or certain chemicals, it is necessary to reduce the vapour space of the tank by the use of an internal floating roof (effectively blankets). The internal floating roofs are not deemed to be rateable even as supports under Class 4.
Fixed roofs of standard tanks are conical and self-supporting, i.e. there are generally no internal columns supporting the roof which restricts their size to less than 50,000m3.
Access to the roofs of tanks is required for inspection and maintenance and is provided by either spiral staircase, back cage ladder or walkway from adjacent tanks. The costs in the VO Cost Guide are inclusive of access and no further addition is required.
Crude oil and certain limited other low flash products were traditionally stored in tanks with floating roofs. The roof structure is supported by pontoons or a double deck over the whole surface of the tank. The roof floats on the surface of the liquid and rises or falls with the level of the products in the tank. It is been argued that floating roofs are no longer the modern requirement for such products. Should this argument be advanced the facts should be notified to Class leader of the Liquid Bulk Storage class at the earliest opportunity.
Standard tanks are not suitable for the storage of LPG owing to the very high pressures required to keep it liquid, about 85 lb/in2 (6Kg/cm2) for butane and 250 lb/in2 (18Kg/cm2) for propane. Pressure vessels are used, either long, heavily built, small diameter horizontal tanks with rounded ends (commonly known as bullets), or spheres. Spherical tanks are of specialised construction and examples to be found include simple spheres, plan Horton spheriods and noded Horton spheriods, which are supported internally by ties and trusses (RCG series 215B01-12)
Where chemicals have to be stored, tanks may be constructed in stainless steel or with stainless steel or other special linings. Often the linings are only to the base and bottom 1m depth of the tank. Costs for linings can be found in (RCG series 215X01-24)
To facilitate pumping of viscous products, such as bitumen, tanks are often fitted with steam heated coils near the base of the tank and the tank itself will probably be lagged or insulated. Strap on lagging and insulation should not be regarded as a rateable as it not an integral part of the tank.
A large modern tank will be constructed of plate varying in thickness from bottom to top depending on pressures to be resisted. Whilst costing is affected by the weight of steel employed in construction, adjustments should only be sought in exceptional circumstances where supporting evidence substantiates doing so.
This Section deals only with the more usual types of tank to be encountered and in the event of specialised tanks (e.g. for cryogenic and low temperature storage) being encountered, reference should be made to NVU Industrial & Crown Team.
Due to the lack of recent tank building whenever new tanks are encountered costs should be pursued. Caseworkers should approach the Class leader within the Liquid Bulk Storage class who will generate and issue Forms of Return for cost evidence used to substantiate the basis.
6.2.2 Tank Foundations
Historically vertical storage tanks did not usually require concrete foundations and were built upon what is known as a ‘bitsand base’. This will usually consist of consolidated rubble covered with a layer of sand about 10 inches thick finished off with a 2 inch layer of sand bitumen mix which seals the foundation against weather erosion and protects the underside of the tank bottom against corrosion. More substantial settings comprised a ring of concrete around the perimeter of the tank. It was only upon the very poorest soils, where concrete rafts and/or piling was added.
It has been industry best practice for some time now and a post Buncefield requirement to install tanks on ‘’appropriate and sound foundations.’’ Thus concrete rafts with an impermeable bentonite membrane are now the norm.
Up to the 1995 Revaluation, where survey details of the base were unknown, a shortened approach was to adopt - an addition of 10% of the tank cost to reflect a limited concrete foundation (RCG 215J01). This was increased to 20% where the tank was piled.
Where there was only a bitsand base formed into a cone, 6% of tank cost was adopted (RCG 215J02).
The most basic setting comprising a sand only base was reflected by a 2.5% addition (RCG 215J03).
With the substantial increase in steel costs reflected in the 2010 Revaluation this would now be excessive and approximately 7% should be adopted for the first example. The preferred approach would always be to cost the actual setting using plans and quantities.
Where the volume of concrete is known use RCG series 215V60-63
Where the volume of concrete is not known caseworkers should use RCG series 215V50-53
2010 Revaluation introduced costs for tank foundations based upon the diameter of the tank (RCG 215J04-14) to replace the bitsand only % described above.
For saddle style supports to horizontal tanks see VOCG series 215V80-86
There are a variety of additional options in Rating Cost Guide to enable the valuer to cost tank foundations. Site circumstances will dictate which is the most appropriate.
Additions for piling should be in accordance with RCG series 3000F1-9
6.2.3 Tank Compounds or Bunds
A bund is an enclosure designed to contain fluids should they escape from a tank or vessel inside the bund. Bund walls offer what is known as secondary containment on sites and tend to be constructed of concrete or clay.
Post Buncefield the bund should have sufficient capacity to contain the secondary containment and will also provide limited storage capacity for firewater management. Typically this is 110% of the capacity of the largest tank within the bund and is required to be constructed of fireproof impermeable materials. The floor of the bund should be concrete or other material substantially impervious to the liquid being stored, and with drainage where necessary to prevent minor spillage collecting near tanks. Stone chippings and similar materials may be used providing the underlying ground is impervious.
The actual cost of retrospectively upgrading bunds to Buncefield compliant standards is very high, however the rating hypothesis assumes a greenfield site. Accordingly RCG series 33U40A-T should be applied.
6.2.4 Internal Pipelines
Internal pipelines, which are required for moving products from points of discharge to storage tanks and from storage tanks to filling points can account for a large proportion of the cost of an installation or depot and economy in design and lay-out is essential. Moreover the system must be flexible and it should be easy to pump products from tank to tank and from any tank to any given filling point. Such internal pipelines are usually laid above ground both to save cost and to simplify maintenance.
6.2.5 Rateability of Internal Pipelines
A pipe, or system of pipes which form part of the equipment of a petroleum storage depot and which is situated wholly within the depot, is not rateable. See Class 3 (g) of the Valuation for Rating (Plant and Machinery) Regulations 2000.
For a pipeline not to be rateable, not only must it be situated within a depot but it must also form part of the equipment of the depot and it is necessary, therefore, to examine closely the use to which a pipe is put. For example, a pipeline running, for convenience, straight through a depot without being tapped would be rateable (being part of the equipment of the pipeline rather than part of the equipment of the depot).
The valuation of pipelines is dealt with in more detail in RM 5:780.
7.1 Survey data for Liquid Bulk Storage Premises (NVU) is recorded manually in binders in the custodianship of the NVU’s caseworker support team.
7.2 Survey details for other Liquid Bulk Storage Premises are held on the Non Bulk Server and in EDRM.
8.1 The preferred method of valuation is the contractor’s basis. This should be the primary method for those hereditaments where the majority of tanks are rateable.
8.2 For those hereditaments where the tanks are not rateable because of the size limitation under Class 4, the site may be valued on a rentals approach having regard to the local tone for storage land.
9.1 Valuations for all Liquid Bulk Storage Premises are held on the Non-Bulk Server (NBS).
- Those handled by the NVU Industrial & Crown Team are stored under: Liquid Bulk Storage (Incl Petrol & Oil) (National Scheme).
- Those handled by the Non Domestic Rating Unit Valuer teams are stored under: Liquid Bulk Storage (Contractor’s).
1. Market appraisal
1.1 Levels of economic activity will directly affect supply and demand for a wide range of products, including oil. This in turn will have a direct impact on storage and handling requirements. Allied to this, levels of oil refining undertaken in the UK will affect demand for oil and petrochemical product storage capacity.
1.2 One of the most significant factors in demand for oil storage is whether oil production is in a ‘contango’ or ‘backwardated’ market.
1.3 Backwardation is when the current price of oil is higher than a future cost of oil. It is seen as a sign of higher immediate demand. Conversely, contango is when the futures price of oil is higher than the spot delivery price.
1.4 Since the Antecedent Valuation Date (AVD) of the 2017 Rating List (1 April 2015) reports indicate that the market has been in contango, but from late-2018 it was moving into backwardation. This trend was reversed when the global pandemic hit and demand fell sharply, however market reports from early 2021 indicate returning demand and the market moving clearly towards backwardation. (Further commentary on these matters can be found in VOA - Practice note: 2023 - oil refineries.
1.5 Continued low levels of new tank construction are observable, with most changes being confined to replacing existing facilities and/or bringing previously redundant capacity back into use.
1.6 Required overall tank capacity is therefore tied to current levels of demand, although it is also normal practice for depots to have extra tankage available to provide capacity to respond to cyclical demand fluctuation, and to allow flexibility to respond to market opportunities as they arise. Care should therefore be taken when considering any claim for “overcapacity” in the tankage at any particular depot (See also section 4 below).
2. Changes from the last practice note
2.1 There are no material changes to the valuation approach set down in the R2017 Practice Note.
3. Ratepayer discussions
3.1 For the 2017 Rating Lists the Stage 1 costs for fixed head and floating head mild steel tanks and stainless-steel tanks were agreed with the leading agents acting for the liquid bulk storage and refining industries.
3.2 Discussions with leading agents acting for these industries for the 2023 Revaluation have concluded, and it is anticipated at the time of writing that a Memorandum of Agreement covering these matters will be signed in due course.
4. Valuation scheme
4.1 This class of property does not let in the open market therefore the valuation is by reference to the contractor’s basis.
4.2 The stage 2 age allowance scales detailed in Rating Manual VOA - Part 3: Practice note 1: 2023 Revaluation 2023: The contractor’s basis: Age and obsolescence allowances para 7.0 should be adopted but having regard to the following:
4.2.1 If a non-riveted tank is in use at any particular material day it will be valued at stage 2 with an age allowance up to a maximum of 40%, unless the tank has had significant renewal of floor plates/annular ring in which case see 4.2.3 below.
4.2.2 Riveted tanks will be valued at stage 2 with a maximum age allowance of 60%. Allowances should therefore increase by 1% per annum above the maximum 40% illustrated in the above-mentioned scales until the riveted maximum of 60% is reached.
4.2.3 When a tank has undergone extensive works of renewal (e.g., new floor plates/annular ring), upon completion it should be valued with a stage 2 allowance equivalent to a tank built 10 years later than its original built date.
1. Market Appraisal.
The past six years have been dominated by global recession from which the UK has only recently recovered. The downturn in economic activity during that period affected supply and demand for a wide range of products, particularly oil. This had had a direct impact on storage and handling requirements. Perhaps one of the most significant developments for oil storage in the past few years has been the switch from a contango to a backwardated market.
Contango is a situation where the futures price (or forward price) of a commodity is higher than the expected spot price. In a contango situation, hedgers (commodity producers and commodity users) or arbitrageurs/speculators (non-commercial investors), are willing to pay more [now] for a commodity at some point in the future than the actual expected price of the commodity [at that future point]. This may be due to people’s desire to pay a premium to have the commodity in the future rather than paying the costs of storage and carry costs of buying the commodity today.
The opposite market condition to contango is known as normal backwardation. A market is ‘in backwardation’ when the futures price is below the expected future spot price for a particular commodity. This is favorable for investors who have long positions since they want the futures price to rise.
At the height of the recession, when supply outstripped demand, levels of oil in storage rose as traders sought to maximise the commercial benefits of buying oil at low prices and then storing it for future delivery. The return to a backwardated oils market in mid-2011 has seen oil inventory levels drop, leaving some storage terminals facing the prospect of empty tanks.
In addition to this change, economic pressures on the European refinery sector have been affecting storage capacity. Storage has a key role to play in oil trade flows and in helping to address regional imbalances between refinery supply and demand. The continuing closure of refineries in the UK could, therefore, increase the importance of UK storage facilities for handling imports of diesel, for example, to meet local demand. Additionally, as refinery operations across Europe decline, new super refineries in Asia and the Middle East are now emerging. This development, together with the prospect of larger tankers to transport oil more economically around the world, is also likely to have an impact on storage infrastructure in the UK and mainland Europe. Three refineries have closed in the past six years (Murco, Milford Haven ceased refining in November 2014, Petroplus, Coryton closed in 2012 and Petroplus, Teesside closed in 2009).
Whilst the Refineries may have closed liquid bulk storage specialists have taken over some of the tankage. In 2012 Shell, Royal Vopak and Greenergy set up a new joint venture (Thames Oilport) to offer import and distribution from part of Coryton Refinery. Whilst the location in South East is very good the adaptation and conversion of the Refinery has proven complicated and the project has been delayed. Originally expected to start operations by the end of 2013 it is yet to open (Oct 2015).
Murco, Milford Haven now operates as a bulk liquid storage depot.
There has been a very limited supply of new tanks constructed since 2008. Those which have been built tend to be for specific products or reflect how certain operators are looking to adapt to the changing commercial and economic conditions. Some sites have looked to diversify into chemicals, biofuels and waste liquids. For example, Simon Storage (now rebranded as Inter Terminals) has maintained utilisation rate around 95% since 2009.
It should be stressed however that in any event it is normal practice for depots to have extra tankage available to provide capacity for seasonal demands and normal refinery shutdowns, and to allow flexibility during strikes, emergencies and so on. Care should therefore be taken when considering any claim for “overcapacity” in the tankage at any particular depot.
2. Changes from the last Practice
There was no R2010 Practice Note.
National Valuation Unit Industrial and Crown produced a beacon valuation for guidance of caseworkers involved with the property class.
The Stage 2 age related allowances on tanks were challenged during the 2010 List. A revised agreement which also embraced circumstances when tanks would be taken out of rating and adjustments to allowances for refurbishment was agreed with the leading agents. This effectively replicated the existing practice which was agreed in 1990 and carried forward since.
The guidance on tanks allowances contained in section 4 below has regard to the current interpretation of the law on “repair” following the Court of Appeal decision in Monk v Newbiggin.
3. Ratepayer Discussions
For the 2010 Rating Lists the Stage 1 costs for fixed and floating mild steel tanks and stainless steel tanks were agreed with the leading agents acting for the Liquid Bulk Storage and Refining industries.
Discussions with leading agents acting for the same bodies for the 2017 Revaluation are ongoing.
4. Valuation Scheme
This class of property does not let in the open market therefore the valuation is by reference to the contractor’s basis.
The Stage 2 age allowance scales detailed in Rating Manual Section 4: Section 7: The Contractor’s Basis of Valuation: R2017 Practice Note: Stage 2 - Age and Obsolescence Allowances should be adopted but having regard to the following:
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If a non-riveted tank is in use at any particular material day it will be valued at stage 2 with an age allowance with a maximum of 40% irrespective of it being built prior to 1976 unless the tank has had significant renewal of floor plates/annular ring in which case see 3 below.
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Riveted tanks will be valued at stage 2 with a maximum age allowance of 60%. Where the tank was built before 1976 the allowance should increase by 1% per annum above the maximum 40% illustrated in the above mentioned scales until the riveted maximum of 60% is reached.
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When a tank has undergone extensive works of renewal (e.g. new floor plates/annular ring), upon completion it should be valued with a stage 2 allowance equivalent to a tank built 10 years later than its original built date.
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Where a tank is out of use and requires or is undergoing repair, an age allowance relating to its actual age should be adopted until the repairs have been completed.