03 August 11 The Business Times by Ronnie Lim
(SINGAPORE) The tide has turned against allowing floating oil storage in Johor. This is the signal emerging from the latest Malaysian move to order out VLCCs anchored off Pasir Gudang, with the tankers used largely by Singapore-based international traders to store oil, industry sources here say.
One reason behind this is the new, on-shore storage terminals being built on both Johor's east and west coasts, 'with some lobbying apparently underway to get the floating storage users to start thinking about heading for shore', an industry official reckons.
Another is pollution of the waters, an industry analyst said, citing previous instances of fines meted out to oil traders using such floating storage.
They were commenting on reports yesterday which cited an unnamed senior Malaysian official confirming that a directive had been issued for seven very large crude carriers to leave Pasir Gudang waters by the end of this month. Together, the seven have the capacity to store about 1.9 million tonnes of crude or fuel oil.
But this is just the tip of the iceberg as 'there are as many as 15 to 18 VLCCs off Johor at this time', the industry official told BT. Oil traders who have made use of such floating storage previously include players like Titan, Glencore and Vitol, just to name a few.
'The reason for this is that the Singapore storage terminals are all 100 per cent full, and this has been the case for the last decade,' he said. This is despite new independent tankfarms built here recently including Hin Leong-PetroChina's Universal Terminal, Emirates National Oil Company's Horizon Terminal and Chemoil's Helios Terminal.
There is no more land available at Jurong Island for more above-ground oil storage, so JTC Corporation is now preparing to call construction tenders for very large floating structures off Pulau Sebarok by the year-end.
The shortage of storage capacity in Singapore's oil trading hub had led international traders here to either make use of VLCCs anchored off Johor, or start on-shore tankfarms there.
On the eastern coast of Johor, there are three terminal projects. The oldest is Far East Oil Terminal at Pasir Gudang with 230,000 cubic metres of storage, which is operated by Feoso and Cosco.
The second is Langsat Terminal at Tanjung Langsat operated by Dialog Group, Malaysia's MISC and oil trader Trafigura. The first two phases - offering 400,000 cu m for storage of naphtha, middle distillates, diesel and fuel oil - are in operation and recent reports say it is planning to add a 80,000 cu m third phase.
'But both suffer from shallow drafts of about 12 metres, and this restricts the size of tankers that can go in,' one source said. This is probably another reason why the VLCCs off Pasir Gudang have been ordered away, so as to enable some dredging works to improve access to the terminals, as well as to the upcoming Petronas refinery.
Vopak, one of Singapore's biggest independent tankfarm operators, together with Dialog, is also building a huge 1.3 million cu m oil storage costing US$1 billion at Pengerang, which is expected to be ready in 2014.
On Johor's western coast, oil trader Vitol and MISC are also building the 841,000 cu m Tanjung Bin terminal to store fuel oil and middle and light distillates. This is scheduled for completion in March next year.
Industry sources reckon that while the Malaysian move to drive out floating storage from its waters has started, it will likely not be done all at one go, given vested interests (like licences held for the floating storage) of some local parties.