A new ship-to-ship (STS) marine gas oil (MGO) and marine fuel oil (MFO) storage and supply hub will be built off the Port of Tanjung Pelepas in southern Johor, say sources familiar with the matter. It is touted to be the largest in the world.

The construction cost of the hub — to be developed by little-known KA Petra Sdn Bhd, partnering Hong Kong tycoon Li Ka-shing’s Hutchison Port Holdings Ltd — is estimated at RM500 million, a Hutchison Port official tells The Edge.

“KA Petra has been in the STS business since 2005, providing offshore storage and MGO and MFO supply services between vessels in the waters off Port Klang, Selangor, Tanjung Beruas, Melaka, and Tanjung Pelepas, Johor.

“In Johor, it is one of four operators licensed by the Ministry of Transport to provide STS services to vessels coming to the Port of Tanjung Pelepas (PTP) and Port of Singapore,” says the official.

Hutchison Port will have an up to 30% stake in the completed STS hub, the official adds. The project will have a gross development value of RM8 billion to RM12 billion.

A check with the Registrar of Companies shows that KA Petra is a distributor of marine lubricants and provider of shipping and oil and gas-related services. It is almost wholly owned by Datin Lelawati Raffik.

According to RoC, for the financial year ended Dec 31, 2017 (FY2017), KA Petra recorded a 170% year-on-year increase in profit after tax (PAT) to RM2.05 million on revenue of RM336.88 million.

The STS hub will be developed by KA Petra’s wholly-owned subsidiary, KA Petra STS Hub Sdn Bhd, the company in which Hutchison Port will be investing.

The company official says the STS hub will be able to handle up to 30 very large crude carriers (VLCCs) at any given time, compared with the existing STS operation there, which can only handle nine.

The new STS hub will have mooring buoys and “dolphins” to berth the tankers. The usage of dolphins — isolated marine structures for berthing and mooring vessels — enables mother ships to be berthed without the need for large piers or docks.

The current STS operation, where the mother ships — large tankers and crude carriers — are anchored in an offshore area to transfer fuel and other liquid hydrocarbon products onto other vessels without being tied to any permanent structure, is taking up too much space.

This is because VLCCs and their daughter ships — the vessels used to transport liquid hydrocarbon from the mother ships to their destinations — tend to swing due to the ocean currents, explains a source from the maritime industry. The area can only cater for only nine VLCCs at any given time due to the vessel swing factor, the source adds.

The area where the STS hub will be built stretches 2,800 acres between PTP and the Johor Baru port limit.

“With the STS hub being developed, the number of VLCCs that can be moored off PTP will treble to up to 30 at any given time, which will make the waters off PTP the largest STS hub in the world,” the source says.

But is there a need to develop the STS hub? It will raise the volume of oil products traded in Malaysia, which would increase the country’s weightage in the Platts’ Free-on-Board (FOB) Straits pricing of oil products.

In 2014, Platts, the leading global energy, petrochemicals and metals information provider, introduced the FOB Straits benchmark to replace the FOB Singapore and FOB Malaysia oil products reference rate.

These oil products are traded through Singaporean terminals, as well as four Johor ports, namely Tanjung Bin in the southwest, and Pasir Gudang, Tanjung Langsat and Pengerang Independent Terminal in the southeast.

If the STS hub materialises by 2021, Johor’s petroleum product storage capacity will increase further, in line with the federal and state governments’ aspiration to turn the state into one of the largest petroleum products trading hubs in the world.

ATT Tanjung Bin Sdn Bhd (ATB), which operates a petroleum product storage terminal in Tanjung Bin, has a storage capacity of almost one million cu m. ATB is a joint venture between MISC Bhd and Vitol, a leading global petroleum product trading company.

Pengerang, on the southeast coast of Johor, has the largest petroleum product storage capacity in the state. Phase 1 of the Pengerang Deepwater Terminal (PDWT) has a storage capacity of 1.3 million cu m of petroleum products, while Phase 2 has a capacity of 2.1 million cu m.

The PDWT is a joint venture between Dialog Group Bhd, Royal Vopak NV and Johor’s State Secretary Inc for Phase 1, and the three parties plus Petroliam Nasional Bhd for Phase 2.

KA Petra’s STS hub will not have an installed storage capacity, as its capacity depends on the size of the tankers moored at its piers. However, as an illustration, a VLCC can typically carry 300,000 cu m of petroleum products.