Jurong Island underground caverns run into delays

Ronnie Lim, Business Times 5 Jun 08;

(SINGAPORE) The $700 million first phase of the project to store oil in underground caverns beneath Jurong Island has been held up, with full-blown construction now expected to start at the end of this year or early 2009.

The hold-up surfaced when JTC Corporation called this week for tenders for an insurer to cover the design and construction of the first phase, comprising five caverns to hold 1.485 million cubic metres of crude oil, naphtha, condensate and gas oil.

Government agencies here usually appoint insurers ahead of construction of major underground projects - especially one this big that involves several parties. So far, construction is under way on two 130-metre vertical shafts to allow surface access to build and operate the caverns.

Tenders for construction proper - called last November - are still being evaluated, a JTC spokesman said yesterday. And the indications are that an award may be made only at year-end.

Sources suggest JTC needs more time to evaluate the tenders, given the demanding design and engineering requirements.

Still, the delay is a surprise, given that JTC indicated in a pre-qualifying tender in April last year that it expected the first two of the Phase 1 caverns to be operating by December 2010. Sources say despite the hold-up, JTC still wants to meet this target date, though it will be difficult to do so.

The market for oil storage is clearly not a reason for the delay. There is no lack of demand or excess capacity here, despite new players like Emirates National Oil Company and Hin Leong's Universal Terminal starting up recently.

'Demand for oil storage in Singapore is still strong,' an industry official told BT. 'Everyone is running full, including the new tank farms.'

JTC said last year there was strong interest in the underground storage caverns. An official said in October that Jurong Aromatics Corporation, which plans a US$2 billion complex here, will be one of the first customers.

Industry observers feel the initial delay may be due more to technical or construction issues - like competition for engineering/construction expertise amid the local building boom, including the construction of two big petrochemical complexes on Jurong Island and the two integrated resorts (IRs).

Four of the five Phase 1 rock caverns will store 330,000 cu m each, and the fifth 165,000 cu m.

The caverns and associated tunnels will be constructed by drilling and blasting sedimentary rock, JTC has said.

In all, Phase 1 involves 'about 7km galleries and tunnels for an excavated volume of about 2.5 million cu m beneath Banyan Basin', it said.

A planned Phase 2, adding another 1.3 million cu m of storage, would double the project's capacity.