The new 1.3 million cubic metre storage terminal in Pengerang is on track to commence operations in early 2014 and represents the first phase of the project, Patrick van der Voort, president of Vopak Asia, told Reuters.
"There are many different types of crudes that are coming here (Southeast Asia) and in combination with the different level of requirements from various refineries, (we) see the opportunities for storage and blending," he told Reuters on the sidelines of a ground breaking ceremony.
Pengerang, which is famous for its lobsters and mangoes, also boasts a natural deep water draft of up to 24 metres, making it one of a few terminals in Asia capable of receiving a fully laden supertanker.
The project is being developed jointly with Malaysia's Dialog Group and the Johor state government.
Ngau Boon Keat, executive chairman of Dialog Group, said 80 percent of its capacity had been committed to customers, with part of the crude storage capacity already committed to an oil major that has concessions in the region.
"This is why we first considered crude storage, this is because of this particular request," he said.
About 420,000-430,000 cubic metres or around 33 percent of the capacity at the new terminal will be dedicated to crude storage. The remainder will be used for refined fuels such as gasoil, gasoline and aviation fuel.
The crude oil portion of the terminal will serve as hub for the consolidation and break-bulking of cargoes for re-export and for blending, Ngau said.
"You don't need to ship small cargoes of 70,000 to 80,0000 tonnes from FPSO units anymore, you can bring them here, consolidate and load it onto a VLCC for export into international markets," Ngau said.
"You know refinery specifications are also changing, traders can use this facility to blend to specifications and then they don't have to sell it for a discount to the market."
The joint-venture group has the option to expand the facility by an additional 1 million cubic metres, but this decision will likely come only after the completion of the first phase of the project.
Ngau said that if a refinery or a petrochemical plant was built in the area they would be looking to offer storage facilities through a joint-venture of up to 2.5 million cubic metres.
"If there is demand for it, from a refinery...petrochemical plant, we have more than enough land here to grow," Ngau said.
The Vopak project is being built in the same area where Malaysia's Petronas is eyeing construction of an integrated petroleum hub that includes a state-of-the-art oil refinery with a capacity of 300,000 barrels per day (bpd).