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With construction work imminent, Tanjung Piai™s strategic location and naturally deep draft are attractive features for storage operators looking to grow in the region

As Asia cements its position as one of the key players in the global tank storage market, Tanjung Piai in Johor, Malaysia is capitalising on the surge in demand for storage.

Connected to the Strait of Melaka, one of the busiest shipping routes in the world, the petroleum and petrochemical hub also has VTTI™s ATB terminal in the Port of Tanjong Pelepas, and the Pengerang Deepwater Terminal in eastern Johor as its neighbours.

Coupled with its close proximity to Jurong Island in Singapore the island is poised to be an attractive asset for interested storage operators.

Following approval to proceed with reclamation and construction works from the Department of Environment in January 2015, work will start in August to reclaim 1,000 acres of a total 3,485 acres of land.

It is envisaged that the total reclamation of the island will take up to 15 years to complete. In an interview with Tank Storage Magazine Brian Mak, business development and investor relations manager for Benalec SDN BHD, a subsidiary of Belnalec Holdings, says that the reclaimed island will have a considerable focus on storage for the oil and gas industry.

He adds that the company is willing to partner with existing storage operators to build and operate facilities within the area and that an oil terminal could be operational as early as 2018.

˜Tanjung Piai is of significant interest to the main players in this region because we are the closest in southern Johor to the price centre “ Mean of Platt™s Singapore,™ he explains.

˜We are the closest loading or unloading point that an oil trader can specify outside of Jurong in the FOB Straits framework.

˜Southern Johor is already recognised by the industry for being a good base to locate storage facilities. ˜We are willing to take equity or partner and form a joint venture with existing storage operators who want to expand built capacity on Tanjung Piai. We are also open to leasing land out to storage operators who do not necessarily want to form a joint venture.™

Attractive investment
In addition to its strategic location, Tanjung Piai also boasts a jetty draft of more than 24 meters, an anchorage area for more than 1,000 vessels as well strong interconnecting road infrastructure.
Crucially, Tanjung Piai is also well-positioned to absorb storage interest from Singapore, which is rapidly running out of land for development and has no more seafront opportunities to offer prospective operators.

Mak believes that the entire Johor region together with Singapore has the potential to become Asia™s equivalent of the ARA region. ˜It is useful to look at industry benchmarks. In Rotterdam, there was competition between the three regions when they first start but now the whole area has morphed into a single port region.

˜Similar dynamics are being played out in this region and there are a lot of incentives to investing in storage here.™

Various tax incentives have been developed by the government to entice more business and commerce to Johor. In addition to the pioneer status and investment tax allowance, which effectively offers a 10 year tax break, oil traders, LNG traders and traders of other commodities can take advantage of the Global Incentives for Trading (GIFT) “ which offers a 3% corporate tax rate.

Strategic storage hub
Looking beyond Tanjung Piai, the Johor region is a promising area for storage. The Pengerang Deepwater Terminal in eastern Johor, which will have a total storage capacity of five million m3, is slated for full completion in 2017. The first three phases are fully operational. Additionally Petronas is also due to start operations of its refinery and petrochemical integrated development located within the Pengerang Integrated Complex by mid-2019.

The Langsat Terminal, a joint venture between MISC, Dialog and PUMA, is also located in eastern Johor while VTTI™s ATB Malaysia terminal is close by in south west Johor.

˜This is proof that southern Johor is a viable location for this industry,™ says Mak. ˜While terminals in the Greater Singapore region serve a regional market, those based in Johor and especially Tanjung Piai benefit from both a bigger hinterland market as well as easy access to regional markets. Most players in this industry also want the flexibility to own and operate their own jetty as they cannot afford any bottlenecks in traffic.™

Despite the fact that the contango structure is starting to flatten out and oil prices are starting to recover, the market volatility will always be the driving force behind the industry, according to Mak.
˜Storage seems to have an inverse relationship to the absolute price of oil,™ he says. ˜When oil is expensive no one wants to have a large inventory and there are limited opportunities for storage but the opposite happens when oil is cheaper.

˜What drives the industry and the global trade is this volatility. Asia is still a long-term growth story for storage.™

Source: http://www.tankstoragemag.com/feature/jewel-of-the-asian-maritime-highway/