All tanked up

01 February 1998 00:00  [Source: APC]

Despite the current problems, a long-term view is what is needed for storage and distribution in the Asia-Pacific, with infrastructure still needing to be developed. Bill Macdonald reports.

Whatever problems the Asia-Pacific may be experiencing in the short term, investment in infrastructure is a priority for the region. Another good year looks to be in prospect for terminal operators, hard pushed to keep up with demand in the area.

A good example of the importance attached to infrastructure is the recent decision by the Chinese government to build a Yuan16.6bn ($2bn) bridge to link the southern boomtown of Zhuhai with Hong Kong. Construction of the 27km Lingdingyang bridge, which will span the Pearl River, is scheduled to begin this year and take six years to build. The bridge will ease traffic to Hong Kong through Shenzhen.

Ambitious projects like these are being repeated throughout the region. Kuantan Port Consortium (KPC) of Malaysia is adding six liquid chemical berths (LCBs) to its facilities in Pahang, Malaysia, under a 30-year plan to develop Southeast Asia's premier chemical port. Altogether, more than Yuan823m will be invested over the next 30 years.

KPC, which will manage Kuantan port as a private enterprise, aims to build the facility into a premier chemical port for the region by 2000. The plan is in line with the government's aim of turning the neighbouring Gebeng Industrial Area into a petrochemical hub.

KPC is a consortium 40%-owned by road builder M Holdings, 20% by Pasdec Corp, 15% by road builder-linked Damanjaya, 10% by Mentiga Corp and 5% by Essmarine Terminal. The remaining 10% is held by staff.

Construction of the first 1m tonne/year berth is already under way, with completion expected by the middle of this year. Of the total investment, Yuan400m will be used for the liquid chemical berths, each estimated to cost Yuan25m, and to dredge a new harbour basin with the rest earmarked for equipment upgrading. Kuantan is the base for petrochemical investments by Petronas and foreign partners. Kuantan has also become the focus of big investment plans by chemical companies. When BASF outlined its long-term strategy for the region at the end of last year, Kuantan figured prominently.

Speaking in Kuala Lumpur late last year, Yee Boon Yeow, BASF's director of marketing, Malaysia, said the region is the most dynamic market in the world and thus has set a target of a fourfold increase in its sales in the region in its 'Vision 2010' programme.

'To support our long-term goals in the region, BASF will establish world-scale integrated production sites in three locations - Nanjing in China, Mangalore in India and Kuantan in Malaysia,' said Yee.

'BASF will also invest in stand-alone sites, where market proximity is more important than the synergies from integration.'He added that BASF will establish production facilities in Asia for key products. 'Those include C1-C4, styrenics, aromatics, pigments and dyestuffs. To sustain our regional progress, we will have to rely on our core competencies.'The leading terminal operators in the region also have ambitious plans for expansion. Recently, Van Ommeren said that it is planning more investments in the Asian petrochemical industries.

The Van Ommeren Group's chairman, Carel van den Driest, said that the Netherlands-based company plans to expand its existing business in countries like China, Singapore and India while at the same time 'develop new locations' for its terminal operations. 'We are doing a number of feasibility studies and we are looking seriously into these investments,' he said. Van den Driest said the turmoil in Southeast Asia is temporary and Van Ommeren's planned investments in the region will go ahead.

The company can afford to be bullish about its prospects, with preliminary profits for 1997 of Dfl40m ($70m) expected to be 48% up on the previous year. According to Van Ommeren, its chemical storage results improved mainly because of acquisitions, which helped it secure improved market share in the Far East. In Singapore, oil storage capacity was increased by 20% and chemical storage capacity by nearly 100% in mid-1997. Virtually all the group's new tankage in the area was immediately rented out.

In September last year, the company announced the formation of Van Ommeren Iver Ships (VOIS), an alliance with Iver Ships of Norway in which Van Ommeren has a 40% stake. The company said the name change was made in order to cement the recent alliance between Iver Ships and Van Ommeren. VOIS operates a fleet of 23 chemical tankers and product carriers which carry MTBE, methanol and 'clean petroleum products' (CPP) such as gasoline and naphtha.

'The strategic alliance with Van Ommeren enables the company to expand its service network to customers in Asia. A fleet of six new 45 000 deadweight tonne (dwt) chemical product carriers has already been assigned to provide transportation services to customers in the Asia-Pacific region,' VOIS said at the time.

The company will continue to operate out of its head office in Larvik, Norway. However, VOIS has opened a Singapore office to increase its service to Asian customers.

The company has invested heavily in China and India over the past few years. 'In the context of our strategy in Asia, we now have a position in the two big markets,' said Mohammed Merican, Van Ommeren Tank Terminals business development manager. 'Southeast Asia is now deregulating and opening its markets in line with WTO, and countries like Indonesia, Thailand, Philippines, and so on, will be the focus of our future investments. Naturally the current economic situation will require a more careful review of such prospects.'In June of last year Van Ommeren invested $8.5m in a 50% interest in United Storage & Tank Terminals, Madras, a subsidiary of IMC, Madras. United Storage & Tank Terminals has terminals in Kandla, Karwar and Goa; expansion plans for the next three years provide for an increase in facilities at Kandla and Karwar and the construction of a new terminal in Mangalore. On completion, capacity for chemical, oil product, vegetable oil andgas storage will total 245 000m3 and represent an investment of $33m. Indian import and export volumes are set to increase sharply as the economy grows in response to the recently initiated deregulation process and the removal of trade barriers. The existing port infrastructure, however, will not be able to keep pace with the increased consumption of energy and the greater demand for chemicals. The availability of sufficient tank storage capacity will be a critical factor in the industrialisation process. Against this background, United Van Ommeren Tank Terminals (UVOTT), the new name for United Storage & Tank Terminals, Madras, will be actively engaged in the development of new terminals in India. The company had a storage capacity of 31 000m3 which had been increased to 110 000m3 by the end of 1997.

In addition to the tank storage activities in UVOTT, IMC operates a further 12 terminals in India with a total storage capacity of 500 000m3. Van Ommeren has also announced plans to build a third storage terminal in Singapore. The third storage terminal, to be located on Singapore's Jurong Island petrochemical complex, is estimated to cost a minimum of $66m, and the company expects construction to start in two to three years. To date it has invested a total of $450m in Singapore.

Van Ommeren already has two storage terminals in Singapore, one on Pulau Serobok and the other on Jurong Island's Pulau Sakra.

The Pulau Sakra terminal caters to companies such as DuPont, Sumitomo and Hoechst; and Van Ommeren is currently expanding the facilities there to serve more new chemical tenants.

China is the focus of much of the new investment in the region, stimulated by the Chinese government's plans to develop the petrochemicals industry and the rapid growth in demand for chemicals. The Chinese government has announced plans to develop six new chemical centres, each focusing on a specific field, to boost the industry's base in Zhejiang province on the east coast.

The city of Hangzhou will be the centre for organic chemical materials and electronic chemicals, Jinhua and Quzhou for fluorine chemicals, Ningbo for petrochemicals, Taizhou for fine chemicals and Wenzhou for alum chemicals. China's official news agency, Xinhua, said the chemicals industry has been growing rapidly in recent years, with sales reaching Yuan80bn ($9.7bn) in 1997.

To keep pace with that rapid growth there has been a great deal of speculation recently that the government may allow foreigners to invest in and operate Chinese ports without a Chinese partner. Any such investments will still be closely vetted by the relevant port, navigational and transport authorities.

GATX Terminals is one of the companies which is already investing heavily in China. GATX is close to deciding if it will proceed with the $50m construction of chemical storage terminals in Ningbo. The proposed tanks will have a storage capacity of140 000m3. The feasibility of the Ningbo project was boosted by the port authority's completion of a 50 000dwt dedicated liquid jetty in April last year. GATX already operates a liquid bulk-storage facility in Lanshan, Shandong province, and has plans to develop facilities in Zhuhai.

The importance of infrastructure to the long term development of the region cannot be overlooked. Storage and distribution operators will play their part in this.

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