It will take a minority stake of 10 percent to 30 percent in the plant, expected to have a capacity of up to 500,000 barrels per day (bpd) and will have one or two partners, including a Chinese oil company and an international refiner, said Evan Lim, the Hin Leong Group’s executive director.

The plant, which will be Singapore’s fourth if given the go-ahead, will help the company expand into manufacturing, complementing its oil-trading, terminalling and shipping businesses.

The city state will stand to gain as well with higher availability of fuels as the government aims to be a high-end petrochemical hub under its Jurong Island 2.0 plan, he said.

“This is the next phase of growth and vertical integration for the Hin Leong group as manufacturing capabilities will compliment the group’s current activities. The facility will also add value to the existing downstream activities on Jurong Island,” Lim said.

“Currently Singapore is lacking the capability to produce sufficient ultra low-sulphur products for export and blending. With the world moving towards ultra low-sulphur products, Singapore needs to increase the complexity of its manufacturing capabilities to maintain its status as a global oil refining, blending and trading centre.”

Hin Leong’s move is in line with a spate of refinery-upgrading projects underway in Asia, including by South Korean refiner GS Caltex which will spend $1 billion to raise its heavy oil processing capacity by a quarter from 2013.

Another 690,000 bpd is also expected to be added by Chinese refiners, from this year until end-2012, Reuters data show.

Lim said the refinery would be built first, and can be completed in 3 to 5 years once approval is obtained. Products from the facility will meet feedstock demand for Singapore’s petrochemical industry, which currently imports fuels such as naphtha.

Hin Leong’s petrochemical complex will be built once the feedstock production is stable, expected to be three to five years later, Lim said.

HIN LEONG TO TAKE MINORITY 10-30 PCT STAKE

The firm is currently in discussion with several Chinese and international oil firms to jointly build the complex, with one or two partners, he said.

Lim declined to reveal their identities, but described the multinational as “an international major that does not have a manufacturing presence in Singapore”, while the two or three Chinese companies have similar manufacturing experience.

Once that is finalised, the group will jointly present a proposal to the government to build the plant on a 10-12 hectare plot of land on Jurong Island, adjacent to where its Universal Terminal is located.

“We have had informal discussions with the government and are preparing a formal proposal. That will be done once we have sorted out the partnerships and I expect this to be some time this year,” Lim said.

“We are cautiously optimistic,” he said adding that several banks and financial institutions had already expressed interest in funding the project.

The construction of the integrated complex was likely to be modelled after Petrochemicals where the refinery was built first to secure the feedstock supply, before moving on to the petrochemical portion, Lim said.

Formosa boasts Asia’s largest single cracker complex with capacity of 2.93 million tonnes per year (tpy), importing about 600,000 tonnes of naphtha as petrochemical feedstock, and refining capacity of 540,000 bpd.

The idea, he added, is to keep both the refinery and the petrochemical complex flexible in terms of being able to utilise the most economically efficient feedstocks.

PLANS FOR TERMINAL IN CHINA, EXPANSION TO UNIVERSAL

To facilitate plans for the integrated complex, Hin Leong is also looking to expand the capacity of its 2.3-million cubic metre (cu m) Universal Terminal (UT), Asia’s largest commercial oil storage and terminalling facility, by a third, or around 750,000-800,000 cu m, Lim said.

The group is also looking to pursue plans to build a larger oil storage facility in the South Chinese province of Fujian, and is in the midst of obtaining approvals from the authorities, he added.

“I’m quite confident that if Universal Terminal is allowed to expand, we will be able to get customers to lease the incremental capacity. They have seen our performance since we started three years ago and they have been asking for more space,” he said.

“The China facility is a big, big project, it’s bigger than UT, but will have a different business model, though it will still be a commercial terminal. We hope to get the necessary approvals this year.”

Lim said the group is also looking at building base oil tanks and lubricant plants as part of its expansion process, with a capacity of 50,000-100,000 cu m, enhancing Singapore’s position as one of the top three lubricants hub in the world.

The capacity will be leased out on commercial basis and will also enhance Hin Leong’s current 50,000-cu m lubricant-blending operations at its Tuas headquarters, he added.

LOOKING AT LISTING POSSIBILITIES

The success of the terminal and the recovering shipping market has prompted the group to re-examine the possibility of listing either Universal or its shipping arm, Ocean Tankers, or both individually.

“We are waiting for the right time, and are doing preparation work now. If conditions are conducive, we will do it, but we have not committed to any timeline,” Lim said.

“To us, listing has always been something opportunistic. We want to go through with it only when we feel it is right. We want each of our business units, for example Universal Terminal and Ocean Tankers, to be seen as an icon within its industry.”

The firm’s shipping arm saw marked improvement in revenue for 2010, versus a year ago, in line with an improving shipping market.

Profits for the entire group, which includes terminalling, shipping and trading, were up by about 10 percent over 2009, while its oil-trading business saw turnover of around $8 billion last year, he added.