Strong oil demand from Asia has prompted Middle Eastern oil majors as well as traders to expand operations in a market that is rapidly growing in contrast to the economic gloom in Europe and the US.
“We will start fuel oil and distillates trading as well as bunkering out of Singapore,” Sanjeev Sisaudia said on the sidelines of Asia Pacific Petroleum Conference (APPEC) in Singapore.
“At the moment we have six people in Singapore mainly dealing with base oil. We’re looking to hire 3-4 people until the end of the year,” Sisaudia said, adding that the company will further expand its team in 2012.
As sign of its ambitions in Asia, Gulf Petrochem, which is not a regular participant in Asian fuel oil spot tenders, won a semi-term fuel oil tender from India in early August.
“That was a strategic move,” said Gulf Petrochem trader Kalrav Dixit, who was instrumental in securing the deal.
“The idea was to position ourselves in the market.”
An expansion of the draft at headquarters, the Hamriyah Free Zone on the west coast of the UAE, will allow the company to handle much larger vessels and bigger flows, Sisaudia said.
“Until now, the bottleneck for us was the 4.5 meter-long draft. This will now go up to 12 meters,” he said.
As the company bets on handling larger volumes, it is also expanding its oil storage facilities at the free-zone, where it currently has 60,000 cubic meters of oil storage for clean and dirty products.
“To meet the increasing demand, we are adding 15,000 cubic meters,” Sisaudia said.
Capturing more oil storage space in the Middle East is a priority for oil traders, who are pouring millions of dollars to build new tanks that will give them more flexibility in supplying their biggest customers in Asia.
Leasing out these tanks to oil companies or other traders is also a major source of revenue.
All of Gulf Petrochem’s tanks at Hamriyah are currently full, Sisaudia said, with some of them allocated to the company’s usage and the rest leased out to other traders.
With oil traders rushing to grab storage space, ports in the Middle East Gulf also are set to expand.
The UAE’s Fujairah port, the world’s top bunkering hub after Singapore and Rotterdam, is planning to more than double its oil storage capacity to 7 million cubic meters in the next two to three years.
Gulf Petrochem is among the investors in Fujairah.
The company will spend $134 million to build 412,000 cubic meters of oil storage, or 17 tanks, due to become operational by April-May 2012, Sisaudia said.
Nine tanks have already been built and the company will allocate 25 to 30 percent of the storage capacity for its own use and will lease out the rest.
“We’re already in discussion with potential parties to lease,” Sisaudia said, declining to name any possible tenants. All the major trading houses and oil companies have rented tanks in Fujairah.
“Many players are trying to come to the Middle East market but the storage tanks are just not there,” he said.
Some traders in the Gulf Mideast say the oil storage flurry could lead to an oversupply in the future, but Gulf Petrochem plans to increase its Fujairah capacity to 1.2 million cubic meters in the next five years.
It is also planning to build 120,000 cubic meters of oil storage in Malaysia’s Port Klang and 300,000 cubic meters of space in India’s Pipavav port, located on the west coast, for a total cost of around $130 million.
These capacities will be up and running by April 2013 at the latest, Sisaudia said.
In India, the company is looking to increase its space to 1 million cubic meters in the next five years. Both clean and dirty products will be stored in all the new storage facilities.
“Wherever we go from here (in terms of trading and storage), it will be just about grabbing more and more. We’re in a fast developing phase,” Sisaudia said.
