Asia's top refiner, China's Sinopec, has started work to build
Southeast Asia's largest oil storage terminal at the Batam free trade
zone in Indonesia, the company and industry sources said, in an
$850-million investment aimed to boost petroleum trading.
Sinopec Kantons Holdings, a unit of the Sinopec Group, will hold a stake of 95 percent in the PT West Point Terminal
project covering the construction of storage for up to 16 million
barrels of crude and refined fuels, the company told the Hong Kong
Exchange in a filing on Tuesday.
This would be Sinopec's first
facility of such a size near Singapore, Asia's oil trading hub, where
the Chinese refiner has established its presence over the past 15 years,
trading refined products with a team of 50.
"It should boost
Sinopec's trading opportunities...and Singapore has run out of space to
build such facilities," said a crude oil trader based in Beijing who
deals with Sinopec. Sinopec's Asia crude teams are based in Beijing and Hong Kong.
"Sinopec
has a trading presence in Singapore and I imagine having a storage
terminal in Batam, bordering Singapore, would be used to support their
trading activity in the region," said Victor Shum, managing director at IHS Purvin and Gertz in Singapore.
"I think the terminal has very little to do with energy security for China. It is a commercial decision."
About
360 hectares of land in Batam's Free Trade Zone has been set aside,
with a refinery and petrochemical project being considered in the second
phase of development, a source familiar with project details said.
Indonesian officials were not immediately available for comment.
"For
the moment, the immediate priority is to get the storage facility
built, the refining and petrochemical projects are not at the execution
phase yet," said a second industry official.
"This has been a
project which they (Sinopec) had been thinking about for a while now ...
OK, at least two years in the making, this project is on a cluster of
islands where some reclamation has taken place."
The project
edges the Chinese oil major closer to domestic rival PetroChina, Asia's
largest producer of oil and gas, which has a stake of 35 percent in the
14-million-barrel Universal Oil Terminal on Singapore's Jurong Island.
Industry
sources said the project was originally planned as a joint venture
between the Chinese refiner and OilTanking, a unit of privately held
Marquard & Bahls, but did not work out.
"The deal fell
through after Oiltanking decided to go ahead to build a storage facility
in Karimun (Indonesia)," an industry source said. "To be honest this
came as a surprise. It's happened all very quickly."
An invitation sent to select industry executives said Indonesian president Susilo Bambang Yudhoyono would preside at a ground-breaking ceremony set for Wednesday.
The
new storage facility is likely to take anything between 18 and 24
months to build, industry sources said. It will complement Singapore's
role as the region's top trading hub.
Singapore, which is about
three and half times the size of the U.S. capital, Washington D.C., has
been struggling in recent years to meet the region's expanding demand
for oil storage.
The reluctance of the Economic Development
Board, its main agency for economic strategy, to free up more land to
build oil storage facilities has triggered a series of oil
infrastructure projects in southern Malaysia over the past 24 months.
In
late 2011, Vopak, the world's largest independent oil storage operator,
began construction of a terminal project at Pengerang, a seaside town
at the southern tip of Malaysia's Johor state.
The 1.3 million cubic metre (cu m) facility, being developed with Malaysia's Dialog Group, is estimated to cost up to $700 million and be fully operational in 2014.
Earlier
this year, Vitol, the world's largest independent oil trader, kicked
off operations at its $290 million storage facility at Tanjong Bin in
southwest Malaysia. -
Source: Reuters (10/10/2012)
