Massive potential
Dialog needs to double Pengerang capacity for regional oil hub plan to bear fruit
PETALING JAYA: Dialog Group Bhd’s RM5bil Pengerang terminal in Johor may need to double its total storage capacity to 10 million cu m if plans to turn the area into a regional oil storage and trading hub were to bear fruit.
Dialog executive chairman Ngau Boon Keat told StarBiz that the oil and gas multi-discipline technical service provider was conducting studies on the potential demand for liquefied national gas (LNG) storage at the terminal.
Ngau said the natural deepwater and strategic location of Pengerang had attracted the attention of potential oil and gas investors from Taiwan and other countries recently.
“Pengerang has the potential to be bigger than what we anticipated originally. If done properly, the petrochemical industry in Pengerang and Singapore’s Jurong Island (combined) can be bigger than Rotterdam in the Netherlands. In 20 years, Pengerang itself could surpass Rotterdam,” said Ngau.
To recap, in Pengerang, Petroliam Nasional Bhd (Petronas) has plans for a RM60bil integrated refinery and petrochemical complex, known as Rapid, which is expected to be commissioned by the end of 2016, while Dialog, together with Netherlands-based Royal Vopak group, are developing an independ- ent deepwater petroleum terminal.
The independent deepwater petroleum terminal will provide storage, blending and distribution services for oil products and will be capable of handling ultra large crude oil carriers.
The terminal, to be completed in the next six years, is presently planned with a total storage capacity of five million cu m covering 500 acres reclaimed land.
According to Ngau, the Pengerang terminal has the advantages of having deepwater (24m) jetty facilties and a strategic location that is next to international sea lanes.
The Johor state government also has a 10% stake, via its investment arm the State Secretary Johor Inc, in the terminal project.
Ngau reiterated that Pengerang has natural resources and advantages that Singapore and Rotterdam lack.
“Rotterdam, as the world’s biggest oil refining and petrochemical hub, is the pride of the Dutch. They are still reclaiming land from the North Sea. They are very efficient. Jurong has limited land and is finding it hard to grow further.”
However, Ngau stressed that the country needed to create a cost-efficient environment for oil and gas investors to operate in.
“Whoever comes to Pengerang is looking at cost efficiency. It is not so much about the cheap land or incentives. Rather, it is because Pengerang is the most efficient location for doing business. These are huge investments. For example, on an investment of RM120bil, if you are 5% more effficient, then you generate a RM6bil advantage against others,” he said.
Ngau said when Rapid was commissioned at end-2016, it would be the first oil refinery of significant size in almost two decades in SouthEast Asia, since a Petronas-Conoco phillips joint venture refinery
in Malacca was added in 1998 and excluding a refinery in Dung Quat, Vietnam that was opened in early 2009. Rapid, which is known as the Refinery and Petrochemicals Integrated Development project, will comprise a crude oil refinery with 300,000 barrels per day capacity, a naphtha cracker that will produce about 3 million tonnes of ethylene, propylene, C4 and C5 olefins per year, and a petrochemicals and polymer complex.
“Singapore is not building refineries because it has limited land. Singapore’s Jurong is full. The only way it can grow is by buying sand. It is buying sand from as far as Cambodia and Vietnam. It has gone downstream, into producing petrochemical products,” he said.
According to Ngau, Pengerang will not be competing against Singapore.
“We will complement Singapore. We can go into primary and secondary petrochemical products. But, for us to go into tertiary products, it would take us at least 10 to 15 years to catch up with Singapore.”
Ngau said Rapid would be using using the latest technologies and designs for modern products.
“So, Singapore will buy the raw materials they need from us and vice versa. That is why I say we will complement each other.”
According to Pemandu’s (Performance Management and Delivery Unit) handbook on the Economic Transformation Programme (ETP), the Pengerang terminal is expected to generate RM1.6bil in gross national income (GNI) by 2020 through three streams.
“First, independent logistic players will charge storage fees, generating RM500mil in additional GNI. Second, the availability of storage will drive additional shipping volumes, generating an expected RM300mil in GNI. Lastly, trading of crude oil and petroleum products is expected to generate an additional RM800million in GNI.”
It was estimated that 800 new jobs will be created from the Pengerang terminal venture, excluding any spinoff from other sectors.
The ETP report said that with port locations on major shipping routes for crude oil and refined products, its close proximity to Singapore, land availability and deepwater marine accessibility, Malaysia is well placed to complement Singapore in the oil storage industry.
“Together, Malaysia and Singapore could operate to form a hub like Amsterdam-Rotterdam-Antwerp (ARA), which complement each other in areas of refining capacity, independent storage and blending capacity as well as access to markets.”
The report also noted that in SouthEast Asia, Singapore has traditionally had a significant presence in the oil storage industry, with a total of 10 million barrels of independent storage capacity (capacity which is owned by third party operators and contracted out to oil companies, refiners and traders).
“In addition, by 2007, Singapore had built a significant trading business worth more than RM1 trillion in physical oil trade and RM2 trillion in derivative trade. In the last three years, Singapore has more than doubled its independent storage capacity with the commissioning of the Universal and Helios terminals, which are already operating at capacity.”