Singapore’s Jurong Port, which is offering the new land for development, is expected to convert its current multi-purpose general and bulk cargo terminal into a liquids terminal, industry sources familiar with the plan said. 

The additional 4 million barrels of storage capacity would allow the island nation to step up the pace of energy trading by adding about 6 percent to Singapore’s onshore commercial storage capacity of about 60 million barrels, Reuters data shows.

Potential developers, which included private trading companies and commercial storage operators, were invited to bid for the redevelopment of Jurong Port sometime in 2011, the sources said, though the selection process had been delayed.

A decision on the project is expected within a few months, sources familiar with the bidding process said. 

Malaysia Developments

In late 2011, commercial storage operator Vopak began construction of a terminal project at Pengerang, a seaside town at the southeastern tip of Malaysia’s Johor state. The 1.3 million cubic metre facility, being developed with Malaysia’s Dialog Group, is estimated to cost up to $700 millon and be fully operational in 2014.

The Vopak project is being built in the same area where Malaysia’s Petronas is eyeing construction of a $20 billion integrated petroleum hub that includes a state-of-the-art oil refinery with capacity of 300,000 barrels per day (bpd).

This development will include a 3 million tonne per year (tpy) naphtha cracker that can produce ethylene, propylene and olefins, as well as highly specialised chemicals.

Later this month, Vitol, the world’s largest independent oil trader, will kick off operations at a new $290-million storage facility at Tanjong Bin, in southwest Malaysia.

The Geneva-based trading house is a major player in the Asian market, with a current combined storage capacity of more than a million cubic metres of both dirty and clean products in commercial terminals in Singapore.

Land Shortage

Industry sources estimate up to 3.15 million barrels of storage from the redevelopment of Jurong Port could be used for oil, with chemicals filling the bulk of the remaining capacity.

A typical storage project of this size takes 18 to 24 months to complete, industry sources said.

“There will be no shortage of takers for this project, they will have the tanks filled well before the project is even completed,” said a Singapore-based trader.

“It is so tight at the moment, traders who are big in the pricing game will grab whatever they can get their hands on.”

The contract for the project was originally to be awarded in December 2011.

“We had expected an announcement at the end of last year, but from what I gather there is an internal debate going over the best pick from the shortlist,” an industry source familiar with the bidding process said.

The tiny island, about 3.5 times the size of the U.S. capital, Washington D.C., has been struggling to cope with the expanding demand for oil storage in the region.

The reluctance of the Economic Development Board, Singapore’s 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 18 to 24 months, the sources said.

“Let’s face it, if there was land in Singapore we’d prefer to be building here, but we have no choice – the government will not release new land for oil storage,” a senior executive at an independent oil storage company, who declined to be named, as he was not authorised to speak for his company, told Reuters.

“If our demand continues to grow, we will have no choice but to look at Malaysia,” he said.