Malaysia’s biggest commercial oil storage facility will start operations tomorrow when it receives its first fuel shipment, expanding South-East Asia’s share in the oil storage business and also raising competition with neighbouring Singapore.

The US$600 million oil storage terminal with a capacity of 1.28 million cubic metres at Pengerang in Johor will receive a clean oil product shipment tomorrow morning, Dialog Group Bhd, one of the owners of the terminal, confirmed to Reuters in an email.

Singapore is the 800-pound gorilla in the regional oil storage business, boasting a capacity of around 20 million cubic metres of storage space that is essential for oil trading activities. A scarcity of land, however, has stymied the city-state’s growth of the business.

So Malaysia is cashing in on the opportunities provided by the rising quantities of crude oil and products passing through the region to meet the appetite of Asia’s growing economies.

The Pengerang terminal, majority owned by a 51:49 joint venture of Dialog and Dutch oil and chemicals storage company Vopak, will boost southern Malaysia’s oil storage capacity by nearly 70 percent to more than 3 million cubic metres when its first phase is completed by year-end.

It will also become then the first commercial oil terminal in the region to offer crude oil storage.

It was not immediately clear what fuel the shipment will bring tomorrow or what the quantities are and who’s leasing the storage space.

Malaysia also has oil storage terminals at Tanjung Bin, Tanjung Langsat and Pasir Gudang.

Twenty-five storage tanks at Pengerang with a combined capacity of 432,000 cubic metres that can store clean oil products such as naphtha and diesel will be brought online at tomorrow’s commencement. Another 432,000 cubic metres is set to be commissioned by June and a further 420,000 cubic metres by December, an industry source familiar with the matter said.

When the first stage is completed, the project will offer 57 tanks and six berths. It will have capabilities to dock a very large crude carrier.

Two-thirds of the terminal’s capacity will be designated to store clean products and the remaining for crude oil.

Subject to demand for more storage, there are also plans to expand Pengerang’s storage capacity to up to 5 million cubic metres.

The storage terminal is one of several upcoming energy projects in Pengerang.

Malaysia’s state oil firm Petronas will build a 300,000 barrels-per-day refinery and petrochemical integrated development which costs about US$16 billion at Pengerang. The refinery is expected to start operations by early 2019.

And in November, Singapore-based oil trader Concord Energy said it had signed a pact with Dialog for a feasibility study to build another terminal there with a capacity of up to 2 million cubic metres.

- Reuters