Malaysian Oil Storage Expanding Singapore Hub

Malaysia is willing to work with Singapore to become part of a regional oil pricing area, including offering land for storage the island state lacks, the head of a Malaysian state body coordinating a major new oil hub said.

Despite being an oil and gas exporter, Malaysia lacks sufficient storage and refineries to allow it to act as a pricing hub like Singapore, Europe's ARA hub (Amsterdam, Rotterdam and Antwerp) or Houston in the United States.

In a bid to remedy this, Malaysia is building the Pengerang Integrated Petroleum Complex (PIPC) at its southern most point in Johor state, about 10 km east of Singapore.

The first phase of the project, led by state-owned firm Petronas as well as private firms Dialog Group and Vopak, is expected to be completed by 2019.

Singapore is Asia's leading oil and petrochemical trading hub, but a lack of land is capping further expansion.

"We should work with Singapore. We can offer new land, which Singapore doesn't have," said Mohd Yazid Ja'afar, chief executive of the state run Johor Petroleum Development Corporation (JPDC), which is in charge of coordinating the oil hub developments.

Commodity price reporting agency Platts has said it is "actively studying the evolution of the geographical coverage of its 'Free On Board (FOB) Singapore' refined oil products benchmarks" due to "the limited possibility of further expansion of Singapore's on-land oil storage."

Platts already includes some Malaysian assets located nearby in its FOB Singapore price, but Singapore's sites on Jurong Island still far outweigh them.

"There's an idea by Platts for a FOB Straits (price). That would involve Johor," said J'afar, who was speaking during an interview with Reuters this week. He added that any cooperation had to be on terms in which all sides got a fair share of profits.

Inclusion of a large integrated hub in Malaysia would shift the balance towards a more regional hub.

Singapore's agency for International Enterprise (IE), which is in charge of attracting commodities companies to the island-state, was not immediately available for comment. IE has previously said that "Singapore recognizes the growing energy requirements of Asia and the continued importance of oil storage terminals to support the trading needs of the region."