SINGAPORE (Reuters) - VTTI, the storage arm of the world’s largest independent oil trader Vitol [VITOLV.UL], is scouting for investment opportunities in Southeast Asia to cater to the region’s rising demand for tank space, the head of its Asia business unit said.
The oil industry has absorbed at least 2 million cubic meters, about 12.6 million barrels, of storage in the past 18 months in Singapore, Malaysia and Indonesia following record fuel exports from China and a build-up in diesel supplies, according to Aernout Boot, general manager of VTTI Asia.
“There are more people looking for distillates tanks now than a year ago,” Boot, who is also general manager of ATT Tanjung Bin, VTTI’s Malaysia terminal, told Reuters.
The region is expected to see growing oil volumes, although selecting the right location to build a terminal is not straight forward, he said.
“People have the idea that Asian economies are all growing so it’s a slam dunk to invest in new projects, but that’s not really (the case),” Boot said.
While Southeast Asian countries are in general showing growth, they each have different regulations and their own state-run and domestic companies, Boot said.
“So in a lot of countries, it’s not easy to say we’re an outsider wanting to invest in terminal facilities. There are only a few places that tick the boxes.”
Rival storage operators Vopak and Germany’s Oiltanking have built terminals in Indonesia and Malaysia, while Trafigura’s [TRAFG.UL] joint venture Puma Energy is in Myanmar.
Oil volume through the Tanjung Bin terminal in Johor, Malaysia, which has a total storage capacity of 1.155 million cubic meters, has grown by 10 percent a year since 2014, according to Boot.
VTTI is now looking to add berths that will allow traders to increase the turnover of oil in storage tanks, Boot said.
Strong growth in India’s liquefied petroleum gas (LPG) import demand also points to a “huge opportunity”, although the company has no firm plans to enter the market, he said.
Boot also anticipates storage demand growing next year after China loosened restrictions on oil imports and exports for the independent refiners known as “teapots”.
“Teapots (are) setting up offices here, going to banks to get credit lines, so normally the next thing is that they’ll go to people like us for tanks,” Boot said.
“I haven’t spoken to them but it seems you could imagine that in 2017 we’ll have discussions with them because they’re short crude, long products.”
Reporting by Florence Tan and Jessica Jaganathan; Editing by Tom Hogue