With demand booming, analysts see enough business for Pengerang, Singapore
Anita Gabriel Straits Times 8 Oct 12;
MEGA excavators are digging. Cranes are in full swing. Drilling rods and countless other pieces of heavy equipment are in action on hundreds of hectares of grey land in the south-eastern tip of Johor.
The vast reclaimed field overlooks a stunning view of the world's busiest shipping channel, the Strait of Singapore.
This is Pengerang, a laid-back coastal village - a 30-45 minute bumboat ride away from Changi Ferry Terminal. Its ostrich farm and cheap jumbo-sized fresh lobsters draw many Singaporeans on weekends.
"Not many realise the property we have," said Dr Ngau Boon Keat, executive chairman of Dialog Group, a Malaysian public-listed oil and gas services firm.
Pengerang's unhurried pace will change dramatically as Malaysia is bent on turning the seaside backwater into one of Asia's top oil hubs, to rival Singapore's Jurong Island, in just five years.
Oil is a sector Malaysia knows intimately - it is a major producer of 665,000 barrels a day.
Sceptics say this may be another lofty idea by Malaysia which will be fumbled on delivery. However, a few factors add optimism.
"This is not a new sector for Malaysia. We may have been short on execution in the past but Malaysia is set to successfully deliver and execute," said Mr Idris Jala, Minister in the Prime Minister's Department and the chief steward of Malaysian Prime Minister Najib Razak's ambitious economic transformation plan.
Iskandar, a massive economic corridor in Johor, drew similar critique at the start but six years on, it has drawn RM95 billion (S$38 billion) of investments.
Fuelling Pengerang's potential are several plus points which Malaysia Petroleum Resources Corp chief executive Emir Mavani notes. It has a natural harbour sheltered from the monsoon with deep draughts to handle ultra- large crude carriers and other vessels - essential traits for an oil port.
Pengerang is blessed with abundant land. The mammoth project, with state-owned oil giant Petronas as an anchor tenant, sits on a single plot of 8,100 ha.
That is a tempting proposition for firms based on Singapore's Jurong Island looking for space to grow.
"For a long time, we have had to say 'no' to customers looking for more space in Singapore. Unfortunately there is no more land for us to expand our activities," said Vopak Asia president Patrick van der Voort.
Vopak has four storage terminals in Singapore and has tied up with Dialog to build a RM2 billion deepwater oil terminal in Pengerang.
"We are not trying to create a facility to compete with Singapore but are simply looking for another location to cater for incremental demand. We are not shifting our business," he added.
Still, if competition is the game plan, it is going to take hard work for the fledgling oil complex to snag market share from Singapore - the world's third-largest oil refining and trading hub after Rotterdam and Houston.
Even as Singapore raises its game with cutting-edge technology - underground storage facility and possibly, floating platforms - Jurong, the oil industry's nerve centre here, is shifting towards higher value-add activities.
"The key is for Singapore to be globally competitive, instead of just being competitive in one area or one region," said Mr Eugene Leong, Singapore Economic Development Board's director of energy and chemicals.
"As the region builds up its capabilities in the energy and chemicals sector, we believe there are synergies for mutual cooperation. We are open to exploring these opportunities," he added.
Indeed, Pengerang can be a strategic fit for Singapore's oil sector, much as Indonesia's Batam is for its manufacturing sector.
"The whole basis of this project is that it's near Singapore, which has already established itself," said Mr Ngau.
But the notion persists that the Pengerang project, with its tax carrots and promise of lower cost, is aimed at luring oil giants from Singapore.
It will not be the first time. The transhipment sector saw brutal competition when Malaysia's Port of Tanjung Pelepas was set up in 1999 to fight for cargo share with Singapore's PSA.
"Similar to the impact that Pelepas had, more competition will force Singapore to up its game and rejig its strategy," said Centennial Group partner Manu Bhaskaran.
Besides, with global oil demand of a whopping 900,000 barrels per day pushing up demand for refinery, trading and bunkering facilities in the region, there could be enough to go around.
"There will be enough growth to keep both Singapore and Pengerang in business. Singapore need not fear competition," said Mr Bhaskaran.
