Amsterdam-based Trafigura, the world’s third-largest independent oil trader, has been holding so-called clean oil products including naphtha and diesel in the 500 million ringgit ($147 million) facility, which officially opened today in southern Johor state. It’s capitalizing on a global oil market that’s increasingly paying companies to hoard supplies to sell at a later date.
“The storage market is in a healthy state — if you want to find spot storage in Singapore, it’s difficult,” said Victor Shum, a senior principal at U.S. energy consultants Purvin & Gertz Inc. in Singapore. “Tanks have been essentially leased out at high rates, therefore we see traders like Trafigura investing and there are other projects in the pipeline.”
Langsat Terminal is being developed less than 30 miles (48 kilometers) away from Singapore, Asia’s biggest oil-storage and trading center, where Emirates National Oil Co., a Dubai-based refiner, and closely held trader Hin Leong Trading Pte have built storage facilities. That’s a sector usually dominated by tank operators such as Koninklijke Vopak NV, the biggest oil- storage company also known as Royal Vopak.

Storage Bets

Global traders such as Trafigura, which also deals in base metals, are betting on storage partly because oil has been discounted relative to future prices, presenting an incentive to store cargoes for later profits. The company doesn’t have immediate plans to invest elsewhere, Tom O’Brien, a Singapore- based director, said today.
Glencore International AG, the biggest commodity trader, in December agreed to buy a stake in Chemoil Energy Ltd., which operates the Helios terminal on Singapore’s Jurong Island. Hin Leong, the city-state’s most active diesel buyer so far this year, operates Universal Terminal. That’s the first independent oil terminal in Asia Pacific able to receive two fully laden Very Large Crude Carriers, according to Hin Leong’s Web site.
In the Persian Gulf, the trading unit of OAO Lukoil, Russia’s second-largest oil producer, may take up storage capacity in Fujairah in the United Arab Emirates, its chief executive Gati al-Jebouri said in November. Fujairah is the Gulf’s biggest center for the supply of marine fuels, or bunker.

Bunker Demand

“In the last few years, imports of oil products into Singapore increased and so new storage capacity has been used even though the global economy went into a severe downturn,” said Purvin & Gertz’s Shum. “Bunker fuel demand in Singapore continues to increase, bucking the global trend. And bunker fuel has been really the main driver of the storage business in Singapore.”
Langsat’s planned total capacity of 400,000 cubic meters is small compared with Singapore’s. The city-state’s capacity for holding fuels exceeds 8 million cubic meters, excluding space for crude oil, according to Shum. In Singapore, Royal Vopak also own tanks to store chemicals, similar to Emirates National’s facilities in South Korea and the U.A.E.
Trafigura owns a 20 percent stake in Langsat through a unit known as Puma Energy Asia Pacific BV. The project is operated by Dialog Group Bhd., a Malaysian oil and gas services provider, and includes MISC Bhd., the world’s largest owner of liquefied natural gas carriers.
Under a first phase, seven tanks capable of holding 130,000 cubic meters were opened in September last year, “purely dedicated” for Trafigura’s use, according to Dialog’s Web site. Thirteen tanks with 270,000 cubic meters of capacity for storing fuel oil will be commissioned in the middle of next month.

Expansion Plans

A 90 million-ringgit third phase for Terminal One, comprising 80,000 cubic meters “is starting now,” Langsat Terminal chairman Ngau Boon Keat said at a press conference. It will contain products including biodiesel. Terminal Two, with a planned 176,000 cubic meters of capacity will also be mainly for Trafigura’s use, Chan Yew Kai, Dialog’s president and chief operating officer, said on the sidelines of today’s ceremony.
More facilities may be built in Southeast Asia as onshore space gets pricey in land-scarce Singapore, the biggest oil- trading center after New York and London, according to Shum.
“I actually see the Johor facility as complimentary to Singapore,” he said. “Immediate neighbors like Johor and perhaps Batam in Indonesia would be natural extensions of the Singapore trading hub. Barrels stored and traded in those locations would count toward pricing assessments, and that’s important for traders.”