Malacca eyes slice of Sin­ga­pore’s oil ship­ping pie

The Sun (Malaysia) - - SUNBIZ -

KUALA LUMPUR: Once at the heart of the global spice trade, Malacca is pump­ing nearly US$3 bil­lion (RM13.2 bil­lion) into an am­bi­tious plan to put it­self in de­mand in a dif­fer­ent hot com­mod­ity – oil.

Malacca is re­claim­ing land along the Straits of Malacca to build a port that can han­dle the big­gest tankers on the planet. The tar­get: a slice of traf­fic sail­ing on to nearby Sin­ga­pore, the top but con­gested trad­ing hub in a re­gion with US$600 bil­lion in an­nual oil trade – a third of global oil de­mand.

Funded largely by Chi­nese in­vestors, port op­er­a­tor TAG Marine and de­vel­oper Linggi Base are build­ing the RM12.5 bil­lion Kuala Linggi In­ter­na­tional Port (KLIP) to of­fer stor­age, re­pair and re­fu­elling ser­vices.

At Sin­ga­pore, 200km away, ships can spend costly time just wait­ing to de­liver or take on goods, re­fuel or un­dergo main­te­nance work.

With Sin­ga­pore’s port rules also ban­ning float­ing stor­age and ship-to-ship trans­fers, the po­ten­tial for sav­ings and stream­lined busi­ness is clear for KLIP users like trad­ing com­pany Agri­trade Re­sources.

“Through our clients who are oil ma­jors and oil traders, we see a com­pet­i­tive edge in lo­cat­ing our floaters (stor­age fa­cil­i­ties) in KLIP re­sult­ing from lower costs and less con­ges­tion,” said Ng Xin­wei, CEO of Agri­trade, which owns three su­per­tankers.

Us­ing 620 acres of re­claimed land, KLIP this month launched con­struc­tion of a port with 1.5 mil­lion cu­bic me­tres of oil stor­age ca­pac­ity, and dry docks to han­dle the big­gest of oil tankers, hop­ing for com­ple­tion within a decade.

KLIP is aware busi­ness is now dwarfed by Sin­ga­pore, which han­dles well over 100,000 ves­sel calls a year, com­pared to KLIP’s few thou­sand per year. KLIP did not pro­vide tar­gets, but an­a­lysts es­ti­mated it could han­dle three times cur­rent vol­umes within a decade.

“Many of the ship­yards in Sin­ga­pore have been fully booked for three years,” said Sai­ful­lah Noor, CEO of TAG Marine. “Given the close prox­im­ity, we aren’t com­pet­ing with Sin­ga­pore, but are ac­tu­ally com­ple­ment­ing them.”

Of­fi­cials in Sin­ga­pore did not com­ment on spe­cific de­vel­op­ments in Malaysia, but have pre­vi­ously said that growth in oil mar­kets is strong enough to war­rant fur­ther in­vest­ment.

That’s a view shared among ship­ping in­dus­try ex­ec­u­tives, though some also see sig­nif­i­cance in Malacca’s pro­ject be­ing backed by Chi­nese in­vestors.

“I see this as a mainly China-led real es­tate in­vest­ment pro­ject, un­der the ‘belt-and-road’ um­brella of Chi­nese eco­nomic ex­pan­sion into South­east Asia,” said Ralph Leszczyn­ski of ship­ping bro­ker­age Banchero Costa.

The pro­ject is the lat­est in a string of de­vel­op­ments try­ing to cap­ture a piece of Asia’s ris­ing oil de­mand. But while the wa­ter­ways along the Straits of Malacca and Straits of Sin­ga­pore – some of the busiest in the world – have cre­ated huge de­mand for port ser­vices, suc­cess is not guar­an­teed.

Malaysia’s Asia Petroleum Hub pro­ject, to the west of Sin­ga­pore, launched in 2005 but was wound up in 2012 amid bal­loon­ing costs. – Reuters

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