Japan's Itochu takes fuel oil storage in Singapore

SINGAPORE, May 6 - Itochu Petroleum has expanded its presence in Asia's fuel oil market, by taking 100,000-120,000 cubic metres (cu m) of storage space at joint-venture partner Chemoil's Helios terminal, industry sources said on Wednesday.

The Japanese trading house, a stakeholder in Singapore-listed Chemoil Energy Ltd <CHEL.SI>, started trading mainly straight-run feedstocks after the storage deal at the 450,000 cu m facility was sealed several days ago.

"This is Itochu's first foray into fuel oil in Singapore ever since they started the JV with Chemoil. They have been buying up quite a bit of cargoes in the past one to two months," a Singapore-based Asian trader said.

"It's yet another competitor in a crowded market place."

There is no fixed timeframe for the lease period as Itochu is taking the storage tanks as part of its joint-venture agreement with Chemoil and its status as a stakeholder. The terms of the storage agreement were not disclosed.

Under terms of the larger joint-venture agreement, Itochu is not allowed to trade in the Singapore bunkers market, the world's largest and the biggest demand outlet for fuel oil in Asia.

Prior to the current deal, it has limited its participation in the residual fuel market by being an allocation holder for Indonesian low-sulphur waxy residue (LSWR) and selling the cargoes into Japan as power-generation fuel.

It had also sold marine fuel in the Japanese bunkers market from its refineries there.

Traders said the Japanese firm will trade mainly straight-run fuel oil, used as refinery feedstocks, buying from traditional sources such as Russia and the Middle East and selling mainly to Singapore and China's independent "teapot" refiners.

Itochu has been awarded Rosneft's latest six-month term tender for eastern M100 cargoes, of which it will take delivery of two 40,000-tonne parcels each month between this month and October.

It has also won at least five spot tenders from Saudi Aramco since March, taking three cargoes of high-quality straight-run A960 lots from Ras Tanura and another two bunker grade A962 380-cst parcels from Rabigh.

It had to take a short-term lease on board part of a floating storage facility in March before the Helios deal was completed.

Prior to that, the Japanese firm, which has a Singapore trading office that trades across the product barrel and crude, had not taken storage for fuel oil.

Chemoil's Helios terminal in Singapore became operational less than two years ago and it had leased about 200,000 cu m to Brazil's Petrobras <PETR4.SA> soon after.

With Itochu's lease, Chemoil is left with about 150,000 cu m, which it uses for its cargo-trading and bunker-supply business, mainly in Singapore.