Asia's top refiner, China's Sinopec, has started work to build South-East Asia's largest oil storage terminal at the Batam free trade zone in Indonesia, the company and industry sources said, in an US$850mil investment aimed to boost petroleum trading.

Sinopec Kantons Holdings, a unit of the Sinopec Group, would hold a stake of 95% in the PT West Point Terminal project covering the construction of storage for up to 16 million barrels of crude and refined fuels, the company told the Hong Kong Exchange in a filing on Tuesday.

This would be Sinopec's first facility of such a size near Singapore, Asia's oil trading hub, where the Chinese refiner has established its presence over the past 15 years, trading refined products with a team of 50.

“It should boost Sinopec's trading opportunities and Singapore has run out of space to build such facilities,” said a crude oil trader based in Beijing who deals with Sinopec.

Sinopec's Asia crude teams are based in Beijing and Hong Kong.

“Sinopec has a trading presence in Singapore and I imagine having a storage terminal in Batam, bordering Singapore, would be used to support their trading activity in the region,” said Victor Shum, managing director at IHS Purvin and Gertz in Singapore. “I think the terminal has very little to do with energy security for China. It is a commercial decision.”

About 360ha in Batam's free trade zone had been set aside, with a refinery and petrochemical project being considered in the second phase of development, a source familiar with project details said.

Indonesian officials were not immediately available for comment.

“For the moment, the immediate priority is to get the storage facility built, the refining and petrochemical projects are not at the execution phase yet,” said a second industry official.

“This has been a project which they (Sinopec) had been thinking about for a while now Okay, at least two years in the making, this project is on a cluster of islands where some reclamation has taken place.” - Reuters

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