Malaysia: Pengerang gearing up to become regional oil storage hub

Malaysian firms are committed to investing tens of billions of ringgit
Pauline Ng Business Times 13 Jan 12;

EARMARKED as an up- and-coming oil storage hub for Asia, Johor's Pengerang is expected to see a step up in activities this year, with Malaysian companies led by Petronas committed to investing tens of billions of ringgit there.

A RM5 billion (S$2.05 billion) independent deepwater petroleum terminal (IDPT) project by a Dialog- Royal Vopak joint venture has already gotten off the ground, 5 per cent of the first phase completed as at December.

It will deliver an initial 1.3 million cubic metres (cbm) of storage with seven vessel berths when commissioned in 2014. The IDPT will offer five million cbm storage when fully completed over 10 years.

An integrated specialist technical services provider in the oil and gas and petrochemicals industry, Dialog has a 60-year exclusive mandate to develop the IDPT by the Johor state government which also has a stake in the project. Petronas is expected to be the terminal's main client.

Pengerang has distinct advantages as an IDPT because its 24-metre deepwater jetty facilities can accommodate VLCCs and ULCCs, allowing tankers to collect or deliver crude oil without a costly buoy mooring system.

Moreover, its sheltered harbour next to international sea lanes provides 'captive demand' for tank storage facilities. Other developments are brewing, too.

Integrated marine construction specialist firm Benalec has received an in- principle approval from the state government to reclaim 1,760 acres in the Pengerang area at the southern tip of Malaysia.

Over the coming 10 years, it plans to sell the reclaimed land to fabricators and shipyards in outright land sales or enter into joint ventures with foreign oil and gas companies wanting to set up there.

It has also been awarded another concession to reclaim 3,485 acres along Tanjung Piai, across from the Jurong Island Petroleum & Petrochemical Hub.

The company believes terminal operators will be keen to relocate there in future given Singapore's space constraints.

Plans are underway to work with Rotary International on an independent oil terminal with a one million cbm capacity.

The Johor royal family has a stake in both Benalec projects which are targeted to commence sometime this year.

The growth in Asia's crude oil consumption has boosted confidence that demand will remain strong.

Consumption is projected to grow by 420,000 barrels/day over the five years (2010-2015), Hwang- DBS Vickers observed in a sector report.

To provide further impetus to Pengerang's evolution into a regional oil storage hub, Petronas has plans for a US$20 billion Refinery and Petrochemicals Integrated Development project called RAPID for short.

As a result, the oil major increased its capital expenditure by another RM50 billion to RM300 billion for the next five years beginning 2012.

A feasibility study ought to be concluded by year- end, and if it supports initial findings, will lead to work on a 300,000 barrels- per-day refinery as well as a petrochemicals and polymer complex that will produce differentiated and highly specialised chemicals.

The target commissioning date for RAPID is end- 2016.