Malaysia orders 7 floating facilities to leave port of Pasir Gudang

(Reuters) – Malaysia’s government has ordered seven floating storage facilities with a capacity to hold about 1.9 million tonnes of crude or fuel oil anchored off the southeastern port of Pasir Gudang to leave by the end of this month, industry sources said on Monday.

When contacted, a senior Malaysian government source confirmed the directive, but declined to give details or the reasons for the move.

”Yes, I can confirm that the directive has been issued, and it was decided last month,” he said.

These players must find alternative homes for their vessels either at nearby Tanjong Pelepas — also a floating storage hub, Indonesia’s Karimun island, or in international waters.

Some could destock their inventories and exit the floating storage market, due to higher costs at the alternative locations, the industry sources said.

”There might be some short-term impact in the market if the destocking volumes are high, but it’s too early to tell now,” a fuel oil trader said.

The reasons for the move are unclear but industry sources said it could be because Malaysian authorities want to improve access to several existing and planned oil terminals around Pasir Gudang, including the new proposed Petronas refinery.

”They have been talking about wanting to do some dredging works at the water-channel for a while , as the draft is quite shallow, and it can’t even take a fully-laden aframax,” a Singapore-based storage operator said.

”Right now, there are two shore terminals in the area, but more are coming up, including the site of Petronas’ proposed refinery. But the new projects won’t be ready for at least four years, so I don’t understand why they are doing it now.”

Currently, there are two land terminals in the area — Cosco Feoto’s 200,000-cubic metre (cu m) facility in Pasir Gudang and the 500,000-cu m plant in Tanjong Langsat, occupied solely by Trafigura.

Another new terminal, with a capacity of 1.3 million cu m, is being built further east in Pengerang, where the proposed 300,000 barrels-per-day Petronas refinery is also to be located.

The Pasir Gudang area has been used by floating storages for the past 8-9 years at least, with the Malaysian government issuing licences to operators, such as Hong Kong-listed Titan Petrochemicals.

Demand for the floating facilities has grown tremendously, with the Malaysian government opening up the south-western port of Tanjong Pelepas for the same purpose later.