* Sinopec eyes storage for upto 16 million barrels of crude
* About 360 ha land set aside; refinery, petrochemical
project seen in 2nd phase
* Groundbreaking ceremony said set for Wednesday
By Luke Pachymuthu and Chen Aizhu
SINGAPORE/BEIJING, Oct 10 Asia's top refiner,
China's Sinopec, has started work to build Southeast Asia's
largest oil storage terminal at the Batam free trade zone in
Indonesia, the company and industry sources said, in an
$850-million investment aimed to boost petroleum trading.
Sinopec Kantons Holdings, a unit of the Sinopec
Group, will hold a stake of 95 percent in the PT West Point
Terminal project covering the construction of storage for up to
16 million barrels of crude and refined fuels, the company told
the Hong Kong Exchange in a filing on Tuesday.
This would be Sinopec's first facility of such a size near
Singapore, Asia's oil trading hub, where the Chinese refiner has
established its presence over the past 15 years, trading refined
products with a team of 50.
"It should boost Sinopec's trading opportunities...and
Singapore has run out of space to build such facilities," said a
crude oil trader based in Beijing who deals with Sinopec.
Sinopec's Asia crude teams are based in Beijing and Hong
"Sinopec has a trading presence in Singapore and I imagine
having a storage terminal in Batam, bordering Singapore, would
be used to support their trading activity in the region," said
Victor Shum, managing director at IHS Purvin and Gertz in
"I think the terminal has very little to do with energy
security for China. It is a commercial decision."
About 360 hectares of land in Batam's Free Trade Zone has
been set aside, with a refinery and petrochemical project being
considered in the second phase of development, a source familiar
with project details said.
Indonesian officials were not immediately available for
"For the moment, the immediate priority is to get the
storage facility built, the refining and petrochemical projects
are not at the execution phase yet," said a second industry
"This has been a project which they (Sinopec) had been
thinking about for a while now ... OK, at least two years in the
making, this project is on a cluster of islands where some
reclamation has taken place."
The project edges the Chinese oil major closer to domestic
rival PetroChina, Asia's largest producer of oil and
gas, which has a stake of 35 percent in the 14-million-barrel
Universal Oil Terminal on Singapore's Jurong Island.
Industry sources said the project was originally planned as
a joint venture between the Chinese refiner and OilTanking, a
unit of privately held Marquard & Bahls, but did not work out.
"The deal fell through after Oiltanking decided to go ahead
to build a storage facility in Karimun (Indonesia)," an industry
source said. "To be honest this came as a surprise. It's
happened all very quickly."
An invitation sent to select industry executives said
Indonesian president Susilo Bambang Yudhoyono would preside at a
ground-breaking ceremony set for Wednesday.
The new storage facility is likely to take anything between
18 and 24 months to build, industry sources said. It will
complement Singapore's role as the region's top trading hub.
Singapore, which is about three and half times the size of
the U.S. capital, Washington D.C., has been struggling in recent
years to meet the region's expanding demand for oil storage.
The reluctance of the Economic Development Board, its main
agency for economic strategy, to free up more land to build oil
storage facilities has triggered a series of oil infrastructure
projects in southern Malaysia over the past 24 months.
In late 2011, Vopak, the world's largest
independent oil storage operator, began construction of a
terminal project at Pengerang, a seaside town at the southern
tip of Malaysia's Johor state.
The 1.3 million cubic metre (cu m) facility, being developed
with Malaysia's Dialog Group, is estimated to cost up to $700
million and be fully operational in 2014.
Earlier this year, Vitol, the world's largest independent
oil trader, kicked off operations at its $290 million storage
facility at Tanjong Bin in southwest Malaysia.
(Editing by Clarence Fernandez)