KUALA LUMPUR: Once at the heart of the global spice trade, Malacca is pumping nearly $US3 billion into an ambitious plan to put itself in demand in a different hot commodity – oil.
The Malaysian state is reclaiming land along the Straits of Malacca to build a port that can handle the biggest tankers on the planet. The target is a slice of traffic sailing on to nearby Singapore, the top but congested trading hub in a region with $US600 billion in annual oil trade – a third of global oil demand.
Funded largely by Chinese investors, port operator TAG Marine and developer Linggi Base are building the 12.5 billion ringgit ($US2.82 billion) Kuala Linggi International Port (KLIP) to offer storage, repair and refuelling services.
At Singapore, 200 kilometres away, ships can spend costly time just waiting to deliver or take on goods, refuel or undergo maintenance work.
With Singapore’s port rules also banning floating storage and ship-to-ship (STS) transfers, the potential for savings and streamlined business is clear for KLIP users like trading company Agritrade Resources.
“Through our clients who are oil majors and oil traders, we see a competitive edge in locating our floaters (storage facilities) in KLIP resulting from lower costs and less congestion,” said Ng Xinwei, Chief Executive of Agritrade, which owns three supertankers.
Using 620-acres of reclaimed land, KLIP has launched construction of a port with 1.5 million cubic metres of oil storage capacity, and dry docks to handle the biggest of oil tankers, hoping for completion within a decade.
KLIP is aware business is now dwarfed by Singapore, which handles well over 100,000 vessel calls a year, compared to KLIP’s few thousand per year. KLIP did not provide targets, but analysts estimated it could handle three times current volumes within a decade.
“Many of the shipyards in Singapore have been fully booked for three years,” said Saifullah Noor, Chief Executive of TAG Marine. “Given the close proximity, we aren’t competing with Singapore, but are actually complementing them.”
Officials in Singapore did not comment on specific developments in Malaysia, but have previously said that growth in oil markets is strong enough to warrant further investment.
That’s a view shared among shipping industry executives, though some also see significance in Malacca’s project being backed by Chinese investors.
“I see this as a mainly China-led real estate investment project, under the ‘belt-and-road’ umbrella of Chinese economic expansion into south-east Asia,” said Ralph Leszczynski of shipping brokerage Banchero Costa.
The project is the latest in a string of developments trying to capture a piece of Asia’s rising oil demand. But while the waterways along the Straits of Malacca and Straits of Singapore – some of the busiest in the world – have created huge demand for port services, success is not guaranteed.
Malaysia’s Asia Petroleum Hub project, to the West of Singapore, launched in 2005 but was wound up in 2012 amid ballooning costs.
At KLIP, TAG Marine remains confident that the early stages of the port development project show a track record of success that can continue.
KLIP now has one of the region’s largest STS cargo transfer and floating oil storage zones, and has already handled some of the world’s largest oil supertankers, like the ultra large crude carrier “TI Europe” – half a kilometre long.
