Published May 15, 2009

Customer squeeze hits Jurong cavern

Appointment of operator for storage facility put on hold

By RONNIE LIM

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(SINGAPORE) Ripples from the financial crunch have reached all the way underground. JTC Corporation has called off its tender for an operator to run the $890 million Jurong Rock Cavern (JRC) meant to store oil and petrochemicals underground.

The move comes as petrochemical investments on Jurong Island face delays. At the earliest, a re-tender is expected only in the next couple of years.

Industry watchers have been taken by surprise. Just last month JTC awarded the main construction contract for the first phase 1.47 million cubic metre storage facility to South Korea's Hyundai Engineering & Construction. It was expected to finalise the cavern's operator by June.

The timetable has suddenly been revised. 'We are lapsing the earlier tender for the operator and will recall it again nearer the completion of the first two caverns which will be ready in the first half of 2013,' a JTC spokeswoman told BT yesterday.

'This is due to the shift in the timeline for various downstream projects there, which are potential JRC customers.' In other words, there is no point in deciding on an operator if the plans of potential customers have been pushed back.

It is understood that the bidders for the JRC's operatorship - in a tender first called in late-2007 - were informed of the decision this week.

The known bidders are Royal Vopak of Holland and Emirates National Oil Company (ENOC), both of which already operate above-ground oil terminals on the petrochemical island.

'I guess it's not the best of times to market the project, given that construction proper of JRC has been delayed by a year and potential customers are not coming in yet - with Jurong Aromatics Corporation (JAC) still plodding along,' a source from ENOC's Horizon Terminals said.

He was referring to JAC's ongoing bid to tie up project financing for its stalled US$2 billion petrochemical complex there. JAC is so far the only known committed customer for the underground oil storage. The source felt that it's probably better to start marketing JRC once the first caverns are nearer completion.

After a one-and-a-half year delay and cost overruns, actual building of the JRC will now start at year-end, with the first two caverns providing 480,000 cu m of storage when ready.

The entire phase one, comprising five caverns, will offer a total of 1.47 million cu m when completed by 2014.