Published June 9, 2009

2010 date for Johor oil terminal

Work to start next year if study proves project viable

By PAULINE NG
IN KUALA LUMPUR

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WORK on a US$1 billion independent deepwater petroleum terminal that can accommodate up to five million cubic metres of storage will start at Pengerang, in south-east Johor, by March next year should a feasibility study prove the project viable.

To be located on some 500 acres of reclaimed land between Tanjung Kapal and Tanjung Ayam about 16 nautical miles from Singapore, the Pengerang terminal - backed by the Johor state government and oil & gas company Dialog Group - is aimed at meeting increasing demand for storage facilities which has led players in Singapore to turn to underground and floating storage facilities owing to the lack of land.

Pengerang is expected to be very 'cost competitive' given Dialog's estimations of underground and floating facilities costing 30-50 per cent more.

Because of its water depths of up to 26 metres and port facilities that can cater to Very Large Crude Carriers, the proposed terminal and its tankage facility for handling, storing, blending, and distribution of crude oil and petroleum productions, would appeal to much larger vessels that might not be able to dock at other petroleum hubs in Johor where the waters are less than 20 metres deep, Dialog chairman and group managing director Ngau Boon Keat said at a media conference yesterday.

Earlier, he had inked a memorandum of understanding with the state government to establish the Pengerang petroleum terminal, which Johor chief minister Ghani Othman said the state was committed to developing with the aim of positioning itself as a future petroleum logistics and trading hub.

The state's long coastline, deep waters and proximity to Singapore gave it certain advantages in the area, he said, pointing to a recent shift in investments in the state which has resulted in oil & gas investments surpassing those from electrical and electronics.

Of the RM2.3 billion (S$954 million) secured in the first quarter of the year, RM1.49 billion were foreign direct investments; oil & gas accounted for RM1.14 billion.

'This project is of great significance because not only will it bring in direct capital investments from terminal construction and operations, but it will be a platform to generate growth in trading of petroleum products and other associated services,' Mr Ghani said.

Moreover, it would attract supporting industries and services, creating more jobs and business opportunities.

Although Pengerang is not within the proposed Iskandar Malaysia special economic zone, the Senai- Desaru highway when completed next year would make the area more accessible - as would a proposed third bridge linking Singapore and Malaysia on the eastern side.

Mr Ngau said some oil companies have already expressed an interest in taking up storage space, and depending on the demand, plans to build the facility in phases over 3-10 years.

He said Dialog and the state - which would be an equity partner in the project by way of its land contribution - would consider other partners including multinationals to jointly develop, build and own the terminal.

An integrated specialist technical services provider, Dialog had approached the state government with the proposal. Mr Ngau owns slightly over 26 per cent of the Malaysian stock exchange-listed company, with the state pension Employees Provident Fund the second largest shareholder holding about 15 per cent.

Given that Dialog has experience in such integrated terminals, having invested in the Kertih (Terengganu) and Langsat (Johor) facilities, it is expected to be able to convince oil and gas players to commit to the new plant.