PM Lee opens S$950m Jurong Rock Caverns

[SINGAPORE] The Republic is determined to develop the petrochemical industry here despite its land constraints and the potential impact of a United Nations agreement on carbon emissions that is under negotiations.

The petrochemical industry provides good jobs for Singaporeans and contributes significantly to the economy, making up a third of manufacturing output, said Prime Minister Lee Hsien Loong on Tuesday at the official opening of the Jurong Rock Caverns (JRC).

"(JRC shows that) we are determined to find all ways to make a living for ourselves in the world," he said.

The S$950 million commercial underground storage facility for oil and petrochemicals, conceived in 2001, is a first in South-east Asia.

As the deepest public works structure in Singapore so far, located 150 metres below ground (or four times as deep as the deepest MRT station in Singapore, the Bras Basah Station), it is also an engineering feat.

The five caverns beneath the Banyan basin on Jurong Island will store 1.47 million cubic metres, or about 9.2 million barrels, of liquid hydrocarbons such as crude oil and condensate - the equivalent of 600 Olympic-sized swimming pools.

JRC's first customer, Jurong Aromatics Corporation, is already using the first two to store condensate, a feedstock for its aromatics plant which it is currently developing on Jurong Island. The remaining three caverns are expected to be completed by 2016.

Despite JRC costing 30 per cent more compared to reclaiming land for each tonne of crude oil, the government pursued the project as it freed up about 60 hectares of land, enough to house up to six petrochemical plants, said Mr Lee. Some 63 per cent of the land on Jurong Island has been allocated so far, according to JTC.

JRC also cuts down the need for in-house storage facilities; if companies leverage on the JRC for their storage needs, it could free up land currently being used by existing tanks for growth projects, said Economic Development Board (EDB)'s energy and chemicals director, Eugene Leong.

Singapore has been reluctant to grant more onshore space for oil storage, preferring to keep them for higher-value activities, even as increasing oil trade flows in the region lead to more demand for such facilities. This has pushed oil players to build storage facilities in Malaysia and Indonesia in recent years, spurring new dynamics in the oil market."With significant scale in capacity, close proximity between locations and to the international shipping routes, and gross trade for some oil products set to rise, the Singapore-Malaysia-Indonesia region has the potential to develop into a Straits hub similar to the Antwerp-Rotterdam-Amsterdam hub in Europe," said Patrick van der Voort, division president at Vopak Asia.

Vopak, which owns and operates four terminals on Jurong Island with a current capacity of nearly four million cubic metres, is the largest independent storage operator here. It also leads the consortium that has been appointed as JRC's operator.

JRC could be expanded in a second phase to add 1.73 million cubic metres if there is demand from industry players, said JTC Corporation.

Even so, there is a recognition that while physical oil storage infrastructure helped Singapore to grow into a leading energy hub, Singapore's success now is dependent on an "entire ecosystem of interconnecting activities".

"Today, price discovery of refined products are conducted in Singapore as a result of the large refining base and products being exported from our refineries," said EDB's Mr Leong. "The presence of oil majors with a large manufacturing presence, independent traders and new trading activities (such as gas trading) have led to a diverse marketplace where all the key market players can do business with each another."

Separately, Singapore investors could soon have a stake in the oil storage industry. Reuters reported in August that Universal Terminal, the largest independent oil storage terminal in Singapore, could be placed in a business trust initial public offering (IPO) on the Singapore Exchange to raise as much as S$1 billion.

Universal, which is co-owned by China's state oil giant, PetroChina and Singapore's privately held Hin Leong Group, has a capacity of 2.36 million cubic metres over 56 hectares of land, or 60 football fields.