Friday, August 17, 2012

Singapore's Hin Leong Keen to Develop $8B Grassroots Complex

August 15, 2012

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Singapore's biggest local oil trader Hin Leong Trading is moving on the vertical integration track as the company awaits regulatory approval for the proposed construction of a mega 300,000 to 500,000 barrel-per-day (bpd) green field integrated manufacturing complex on Jurong Island, the company's Executive Director Evan Lim told DownstreamToday in an exclusive interview.

The planned integrated manufacturing complex -- meant to produce green fuels such as ultra-low sulfur gasoline, diesel and naphtha -- will cost around $6.5 to $8 billion (SGD8 to SGD10 billion), Lim said. "Hin Leong is also exploring the possibility of producing petrochemicals in the proposed integrated manufacturing complex," Lim added.

The proposed site for the refiner is on a plot of land sited next to Hin Leong's $602 million (SGD750 million) Universal Terminal (UT).

Making the Case for Hin Leong's Proposed Integrated Manufacturing Complex

Singapore-based Hin Leong, well-known in the oil products industry for its trading capabilities and mammoth tanker fleet, has recently expanded into the oil storage arena with the establishment of UT in January 2008.

"Moving up the value chain into manufacturing oil products and petrochemicals is a natural step for Hin Leong," Lim said.

There are three strong arguments for the Singapore government to consider approving Hin Leong's integrated manufacturing complex.

The first reason relates to cementing the country's position as a pricing center for oil products.

"Singapore is at present the Asian price discovery center for oil products. The country should seek to cement this leadership role by developing its manufacturing capabilities in the oil products sector," Lim said.

A published report by the National Climate Change Secretariat (NCCS) of the Prime Minister's Office of Singapore this year supports Lim's view. "Singapore is the third-largest export refining center worldwide," the NCCS said in the report. "Our significant oil storage and trading infrastructure has made Singapore the Asian price discovery center for oil products," the NCCS added in the report.

The second reason in support of the project pertains to Singapore's fuel security.

Lim expounded on the benefits that their push for vertical integration can bring to the island-city. In addition to supplying Singapore's buses, cabs and tug boats with diesel, Hin Leong is also able to supply heavy diesel oil to the nation's power stations. Heavy diesel oil serves as stand-by fuel for local power stations which generally burn natural gas. The proposed integrated manufacturing complex provides Hin Leong with a more secure source of diesel that is critical for the operations of Singapore's power plants in the event that natural gas sources are compromised.

"When there are interruptions in the feedstock supply of Singapore's power stations, the company can step in and supplies them with fuel," Lim said.

In view of Hin Leong's strategic position in Singapore's oil products market and the company's formidable assets both in storage and oil products transportation, it alludes that the company's proposed integrated manufacturing complex could deliver high operational efficiencies. This will result in greater stability of oil products for Singapore's transport and power industries, at possibly more competitive prices.

The third advantage that should be considered is the possible strengthening of bonds with China that this project could provide.

Hin Leong's proposed integrated manufacturing complex could be an avenue for Singapore to strengthen its ties with mainland China. UT is a high-profile project that Hin Leong has embarked on with PetroChina creating another inroad for Singapore and China to join hands in the oil products market. This relationship between the two countries -- in oil products and petrochemicals sectors -- could be further enhanced if Hin Leong manages to attract increased commitments from the Chinese national oil companies (NOC). Lim confirmed that Hin Leong remains keen on working with the Chinese NOCs on the integrated manufacturing complex project, pending governmental approval.

Hin Leong's interest in moving into manufacturing oil products was first revealed in 2010 by Singapore's Business Times. The daily reported that Hin Leong was at that time in discussions with Chinese NOCs for a possible partnership.

"There could be a business case [for Hin Leong] if the refinery (integrated manufacturing complex) is geared towards petrochemicals," Singapore's Energy Studies Institute Principal Economist Tilak Doshi told Reuters in December 2010.

The NCCS report supports Tilak Doshi's published opinion in 2010.

"Our refining and chemicals cluster is focused on moving up the value chain. This involves expanding the production of petrochemicals and specialty chemicals," the report stated. "Our strategy of moving up the value chain could also reduce the over-carbon intensity of the chemical cluster -- by up to 25 percent -- in the long term," the report added.

Other Developments in the Pipeline

Hin Leong is at present studying plans to replicate the success of UT beyond Singapore's shores. As the company already has a successful working relationship with a Chinese NOC, China is the "logical" choice for Hin Leong when considering its terminal expansion plans, Lim explained.

"But it is not appropriate to disclose details on the project as it is still in the planning stage," Lim added.

When asked about the company's plans to launch an initial public offering (IPO), Lim was noticeably coy, saying that the company is "always getting itself ready." He added that an IPO is all about timing.

"When we feel that the market is good enough, we will proceed," he said.

About Hin Leong

The Hin Leong Group -- established in 1963 -- is involved in trading, terminalling, shipping, bunkering and in-land tank trucking. The Group consists of Hin Leong Trading (HLT), Universal Group Holding, Ocean Tankers (OT), Ocean Bunkering Services (OBS) and Hin Leong Tank Trucks.

UT is the largest independent petroleum terminal in Singapore and one of the biggest commercial storage facilities worldwide. UT occupies 56 hectares of land (equivalent to 60 international-sized football fields) and it houses 15 jetties. The terminal inner basin has nine bunker barge berths.

OT, the company's petroleum and oil products transportation arm, has a fleet of over 100 tankers. The company's tanker fleet consists of 500-deadweight-tonne (dwt) coastal barges to 318,000-dwt VLCCs.

OBS was one of the first companies to achieve the "Accredited Bunker Supplier" status under the Maritime and Port Authority of Singapore's Accreditation. OBS offers offshore bunkering services to include oil rig operations in the South China Sea and drill ships and storage tankers in offshore oil fields.

HLT has 120 employees, while UT and OT have around 110 and 250 employees, respectively. OT's manpower count excludes the number of employees that are based offshore.

 

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