Singapore digs deep to boost oil storage facilities

Business Times 22 Feb 11;

(SINGAPORE) Beneath the seabed west of Singapore, hundreds of labourers are working round the clock to carve out a network of tunnels and caverns that will eventually provide an enormous, secure storage space for oil.

So far, they have built 2.1 kilometres of tunnels at a depth of about 120 metres below the Banyan Basin off Jurong Island, a mostly artificial land-reclamation zone that is home to much of the petrochemical industry of Singapore.

They are starting on the first of five caverns planned for the first phase of the project, which is scheduled for completion in 2014.

As one of the world's largest bunkering ports and oil trading centres, on one of the world's busiest shipping lanes, Singapore has benefited from steadily rising demand for oil storage facilities, thanks to booming trade and economic growth in Asia.

But it is reaching its physical limits, leading it to create new spaces, like the Jurong caves, to continue to expand its storage business.

Manohar Khiatani, the chief executive of JTC, the company charged with the project, said underground storage was more secure and more space-efficient than surface tanks.

Building an equivalent storage volume above ground would require about 60 hectares of land which is scarce in Singapore.

'We are a small city- state and we have to look at creative ways to optimise our land resource,' Mr Khiatani said during an interview.

Singapore's oil storage capacity is now about 20 million cubic metres, of which about eight million cubic metres is held by independent oil terminal operators and the rest owned by refiners, said Kelvin Wong, a programme director at the Economic Development Board.

The Jurong Rock Caverns project was conceived in 2001 and construction started in 2007.

At a cost of $950 million, the first phase will offer storage for 1.47 million cubic metres, or about nine million barrels, of liquid crude oil, condensate, and products like naphtha.

A possible second phase, with six additional caverns, could add an additional 1.32 million cubic metres at an as-yet unspecified cost.

Mr Khiatani said potential users had already signed letters of intent to lease 30 per cent of the first-stage capacity, but he declined to identify the companies.

In addition to the rock caverns, JTC has also recently concluded a technical feasibility study to build a 'very large floating structure' for oil, based on similar fuel-storage platforms in Japan.

'We're now talking to one or two players to see whether they would be interested, because we're not building this for ourselves but for the industry,' said Heah Soon Poh, JTC's director responsible for chemical industry operations.

The floating storage barge, with a capacity of 300,000 cubic metres, would probably be anchored near one of the smaller islands off Singapore, like Pulau Sebarok, which is now being used by Singapore Petroleum.

Mr Heah said a decision on building it would be made sometime this year; if it went ahead, construction would start next year and would probably take two years.

Malaysia, meanwhile, has also recently announced plans to expand its capacity.

Last month, Prime Minister Najib Razak announced oil and natural gas projects worth RM20 billion ringgit (S$8.3 billion).

The plans included a RM5 billion, independent, deepwater crude oil and product terminal in Pengerang, in southeast Johor state, near Singapore, with a storage capacity of five million cubic metres, one of the largest in Asia, to be completed in 2017.

'There will be incremental demand for storage in this region for both petroleum products as well as crude for the next decade,' Emir Mavani, a senior Malaysian economic planning official, said in an e-mail.

'Asia's appetite for crude oil is continuing to grow,' he said, with average daily demand projected to rise year-on-year by 420,000 barrels, for years to come. -- NYT