But one question is whether demand will be sustainable in the long run
Ronnie Lim, Business Times 10 Dec 09;
A SHORTAGE of oil storage capacity in Singapore - reflected by the eight or so supertankers anchored as floating storage in Malaysian waters by oil traders here - suggests that there is demand for a very large floating structure (VLFS) that Singapore is looking to build. But competition will come from new onshore tank farms planned in Johor.
BT reported last week that Jurong Town Corporation - now in the final phase of a VLFS study - would decide whether to build the floating oil storage structure at Pulau Sebarok once the study is completed in March 2010.
JTC has sounded out oil traders here but has not officially marketed the VLFS, pending completion of the study. 'But we've already received some keen interest,' a JTC spokesman told BT this week.
A tank farm official said: 'Demand for oil storage in Singapore is strong.'
All current capacity is taken up by long-term leases, despite an increase to 5.5 million cubic metres from 2.95 million cu m.
But not all the tanks are fully used, the official said. 'Singapore tanks are now doing an average of about 8-10 turns a year, compared with 12-15 before the addition of the new space.
'This is because traders don't like to share tanks as they want to keep their trading positions secret. They will also deny their rivals the logistical advantage of having tanks here.
'Given the current situation, there will be demand for the VLFS in the short- term. The question is whether demand will be sustainable in the long-run.'
The bottom line for traders will be cost and efficiency.
The VLFS project will also face competition from planned big Malaysian tankfarm projects, such as at Pengerang and Tanjung Pelepas.
For instance, Royal Vopak, one of the biggest independent tankfarm operators here, signed a memorandum of understanding with Malaysia's Dialog Group in July to look at building a 1.4 million cu m oil storage facility at Pengerang, costing some US$1 billion.
International oil traders here, such as Glencore and Vitol, have resorted to using storage facilities in Johor because of the shortage here.
Glencore leased 800,000 cu m of floating space at Tanjung Pelepas, while Vitol committed RM1 billion (S$408.8 million) in September last year to develop a 750,000 cu m terminal at Tanjung Bin.
Another industry player said that while the storage capacity of the 300,000 cu m VLFS is similar to that of a very large crude carrier (VLCC), its earlier-estimated S$180 million cost is more than the US$100-120 million to build a new VLCC.
Because of heavy shipping traffic in the mega- port here, the use of VLCCs for floating oil storage in Singapore waters is disallowed for environmental reasons.
The cost of building a VLFS - estimated at US$400 per cu m of storage - is comparable to or slightly more than the US$300 per cu m cost of building an onshore tank, depending on steel prices, the tankfarm official estimated.
Still, the scarcity of land here, and the strategic value of having VLFS - to cater to ever-growing oil refining/trading needs - are strong arguments for the VLFS, if the economics justify it, he said.
