Group to help reduce nation’s dependency on foreign firms by becoming niche provider of petroleum products

KUALA LUMPUR: The KIC Group, which owns and operates petroleum terminals at the Port of Tanjung Pelepas (PTP) in Johor and the Westport in Port Klang, plans to make Malaysia more self-reliant in storage capacity for petroleum products, executive chairman Abdul Rashid Mohamad Isa Al-Qadiry said yesterday.

KIC is currently Malaysia’s largest independent oil terminal operator, with over 500,000 cubic metres in storage capacity.

It owns and manages two internationally-recognised terminals — Kadriah I at PTP and a land terminal at Westport.

Since its inception in 2003, Abdul Rashid told Bernama that KIC had handled over RM47 billion worth of petroleum products, of which RM9 billion had been exported to Singapore.

In an interview, he said the group started operations six years ago when it recognised a ‘missing link’ in the domestic petroleum supply chain then.

He said that although Malaysia was an oil-producing nation, it was still importing a lot of petroleum products.

Thus KIC was formed to “complete the supply chain and complement both retailers and Petronas in their downstream activities and reduce Malaysia’s dependency on foreign oil companies by becoming a niche provider of petroleum products,” he said.

“We felt that we could help eliminate the need for double handling costs and allowing consumers to benefit from savings in the supply chain efficiency,” said Abdul Rashid.

In September 2005, KIC salvaged a land-based terminal at Westport that used to be operated by a subsidiary of a US oil major.

From a single product domestic import depot, KIC then developed it into a full-fledged international export terminal that caters for both the domestic and regional markets.

Two years later, Abdul Rashid said KIC’s operating methods, equipment and safety standards also brought the Kadriah I terminal at PTP to be officially included in PLATTS Singapore, a benchmark for price assessment. This also marked KIC’s establishment as a global player in the petroleum industry.

As part of its global business plan, he said KIC had also formed a strategic partnership with Petroleum Authority of Thailand (PTT), Thailand’s national oil company.

But over the middle and longer term, KIC wants to expand its role in the petroleum products supply chain.

It intends to explore areas in financing through the creation of a shipping trust that will purchase various classes of coastal vessels for use by local players in the domestic and regional routes.

Over the longer term, KIC wants to establish a receiving and break-bulking liquefied petroleum gas terminal in Johor.

It also wants to complete and operate the Asia Petroleum Hub (APH) project, of which KIC is the majority shareholder.

The concept behind the hub is to reduce the cost of landed petroleum products in Malaysia by cutting out the double handling charges that are usually levied on deliveries.

The hub is being constructed on a fast-track mode on a 40ha man-made island in the Pontian district, near PTP.

The project has been scheduled to be completed by the end of this year.

“The APH terminal will be the largest fully integrated terminal in Malaysia and one of the largest worldwide. It will increase the group’s total storage capacity to over 1.5 million cubic metres.

“The viability of the APH terminal has been secured by long term leases of up to 15 years from KIC’s customers,” said Abdul Rashid.

Other than storing, blending, bulking and break bulking petroleum products for export, APH will provide Malaysia with alternative supplies of refined products from not only the Middle East but also Russia, Venezuela and Singapore.

The petroleum hub has been designed with facilities to receive, store, blend and distribute petroleum products.

The facility will also include break-bulk facilities for fully laden vessels of up to 350,000dwt (deadweight tonne).

The hub will also have loading facilities for tanker trucks for road deliveries inland, bunker barges for offshore bunkering of ships and oil product carriers for trading in the gasoline and petroleum product markets.

There will also be facilities at the hub for the blending of fuel oil and gasoline so that the hub can produce different grades of these products for sale.

“The concept behind the hub is first to reduce the cost of landed petroleum products in Malaysia.

“Products will include industrial and marine fuel oils, gasoline (unleaded), diesel (low sulphur), jet fuel and biodiesel products,” said Abdul Rashid.

He said the hub would reduce Malaysia’s reliance on foreign oil companies that imported petroleum products via Singapore instead of directly into Malaysia.

Shipments through Singapore thus increased handling costs, which were ultimately paid by both consumers and the government in the form of fuel subsidies, he explained.

Abdul Rashid said the spill-over effects of the APH project would be substantial as new branches of financial services such as banking and insurance would naturally develop and evolve to support the petroleum trading activities at the hub.

The influx of vessels would also foster a maritime-based supporting industry that will focus on activities such as ship repair, engineering and fabrication for the maritime and oil and gas industries, he said.

“APH shall be the paradigm shift for development within the Western Gate Development Zone of Iskandar Malaysia.

“The rapid growth of the petroleum upstream and downstream sectors will augur well, not only for Johor but Malaysia as a whole, as they will bring about job creation and specialist training for home-grown talents in the financial services; oil and gas and engineering sectors,” he added.

— Bernama