Energy firms expanding, but cautious over risks

By Chua Baizhen

SINGAPORE (Reuters) - Energy companies are planning expansions to capture a bigger slice of future growth, looking past gloomy months on hopes the worst of the economic crisis is past, industry executives said this week.

But the optimism is tempered by the view the industry still holds many risks -- Japan's Idemitsu (5019.T) sees lower export margins this year and leading Asian trader Hin Leong says end user demand for distillates in Asia and Europe remains bad.

Those who survived the economic shake-up and demand slump, which brought oil prices hurtling down from the peak above $147 a barrel last July, are hankering after the part of the pie left behind by those who faltered.

Companies including European trader Trafigura and Singapore-listed Noble Group (NOBG.SI) told the Reuters Energy Summit they aim to boost their trading presence with investments in two main areas -- expertise and storage infrastructure.

"Some of our competitors have scaled down, but we see this as a major opportunity to grow our energy business into a global one," said Noble's Chief Operating Officer Ricardo Leiman.

Noble recently sub-leased storage in Singapore formerly used by Cargill, which suspended its Asian gasoline trade operations, and the Hong Kong-based commodity and oil firm hired five former Trafigura traders to start physical fuel oil trade.

Citigroup (C.N) is looking to hire at least two to three more traders to join its Singapore team of 20 trading and marketing staff, and brokerage MF Global (MF.N) hired last year a team of middle distillates and fuel oil brokers in Singapore at a time rivals were folding teams.

"Coming in and making the investment (in people) when the market was at the lowest point was a good strategy," said Mikal Boe, MF's managing director for commodities.

MORE TANKS

Trafigura, the world's third-largest independent oil trading firm, will invest up to $400 million over the next two years to double storage capacity at a unit to 25 million barrels in East and West Africa, Malaysia, the Caribbean and Middle East.

"These investments allow us to open up new markets and expand our trading operations by improving logistics in regions where adequate infrastructure is lacking," Trafigura's Chief Financial Officer Pierre Lorinet said.

Access to storage is crucial to traders, allowing them to time their purchase and sale to make the most profit. Storage demand is particularly high in a contango market structure, where future prices are expected to be higher than prompt rates.

Hin Leong -- which owns Asia's largest commercial oil facility in Singapore, the Universal Terminal -- aims to expand its Singapore storage by a third, may invest in tanks in China, and said it could even consider going into refining in a bid to become an integrated oil firm.

CAUTIOUS OPTIMISM

Oil prices climbed to seven-month highs above $69 a barrel this week, after rising 30 percent in May alone.