Hin Leong eyes Asia oil storage boost
SINGAPORE (Reuters) - Asia's leading oil trader Hin Leong aims to expand its Singapore storage capacity by a third, may invest in tanks in China, and could even consider going into refining, in a bid to become an integrated oil firm, a top executive said.
Privately held Hin Leong has grown from its local roots as a supplier of bunker fuel to Singapore boatmen to a multi billion-dollar energy empire that includes a fleet of tankers and Asia's largest commercial oil facility, Universal Terminal.
"We're looking to expand capacity at Universal, and pursuing this direction relentlessly. Our negotiations are going on," Executive Director Evan Lim told the Reuters Global Energy Summit in Singapore on Thursday.
When asked about the timeframe, Lim said in a rare interview: "Hopefully, it will be soon."
He added that for new investments, the group hopes to strike the right balance among factors like timing, cost, market conditions and regulatory requirements.
Total storage capacity in the Singapore oil products hub stands at close to 10 million cubic meters (cu m), after Singapore bunker fuel supplier Chemoil Energy Ltd (CHEL.SI) and Emirates National Oil Co (ENOC) boosted capacity of their terminals over the past year.
Chemoil Energy's $122 million Singapore Helios terminal, with a capacity of 450,000 cu m, began operations in February 2008. ENOC's 950,000 cu m Horizon Terminal entered into its third phase of expansion earlier this year, raising capacity to a total of 1.24 million cu m.
Despite the surge in capacity, Lim believes demand will hold firm.
"There are still people knocking on our doors for tanks -- that has not stopped. I do not think Universal will have a problem marketing the new tanks, should we find the right project, which is feasible, and where we're able to obtain all the regulatory approvals."
He added that liquid storage was always in demand by oil traders and refiners.
"If you want to be active in the Singapore market, which is a pricing center, owning tankage is a prerequisite."
Hin Leong is also looking at investing in tanks in the region, with a focus on China, if timing and market conditions are right.
"We're looking at Asia Pacific, and southern China would be one of the areas that we would consider," Lim said, adding that some terminals along China's long coastline were not equipped with blending capabilities.
"New terminals that come up with these different services -- that would set you apart." Universal's $455 million terminal, with 2.3 million cu m of capacity, started operations in January 2008. Hin Leong holds 65 percent, while Chinese major PetroChina (601857.SS) owns the remaining 35 percent.
Asked about Universal Terminal's performance last year, Lim said: "Net profit is in eight digits, and at the higher end of that range."
FROM BARGES TO SUPERTANKERS
The daily flow of millions of dollars is a far cry from the days when Lim's father -- founder Oon Kuin Lim -- came to Singapore from his ancestral home in China's southern Fujian province, where at the age of 12, he began delivering small quantities of diesel to boatmen, small-scale power generators and logging factories, sometimes by bicycle.
"Once the company started, we've been trying to grow vertically -- from inland diesel distribution to bunkering, shipping, trading, terminalling and lubricant blending," said Lim.
"There's always a desire to further integrate -- whether or not it goes into manufacturing, we do not know. But the desire is there," he said, referring to oil refining.
The group also owns shipping firm Ocean Tankers, which manages a fleet size of more than 80, offering what Lim calls a "supermarket" of vessels ranging from small coastal barges to supertankers.
The company has spent $2-$3 billion to complete the renewal of its fleet by next year.
It has taken delivery of two new very large crude carriers (VLCCs) and expects to take delivery of another four in 2010. This will bring its total fleet size to more than 5 million dwt.
"Most of our vessels have been chartered out. As the market is structurally in a contango, traders and national oil companies are very keen to put the vessels on time-charter," he said, adding the new-generation ships were proving to be very popular with oil traders and majors.
With estimated 2008 oil trading turnover of about $8 billion, all concentrated in Asia, Hin Leong rivals the top players such as BP (BP.L), Vitol and Glencore in its home market.
In comparison, European oil trader Trafigura chalked up $73 billion in consolidated group revenue for fiscal 2008, Swiss rival Glencore GLEN.UL had a turnover of $152.2 billion, and Geneva-based Vitol VITOLV.UL posted $191.2 billion of revenue, latest figures obtained from company websites showed.
Asked if Hin Leong was considering a listing, Lim said there were no firm plans at this time. Although the company had explored the possibility of an initial public offer in the late 1980s and 1990s, poor market conditions had scuttled plans.
(For summit blog: blogs.reuters.com/summits/)
(Editing by Ramthan Hussain)
