Port Klang in Malaysia could see more business as the nation offers tax incentives to lure businesses from Singapore.
In an effort to compete with Singapore as the dominant commodity-trading site in Asia, Malaysia is offering incentives including a 3 percent tax rate for trading companies and a zero tax rate for companies building storage capacity in the country, the Financial Times reports.
"We've embarked on an aggressive plan to attract oil storage operators to Malaysia," Syahrilazli Mahammad, executive director at the Malaysia Petroleum Resources Corp., told the Times.
Singapore, the world's largest bunkering port and Asia's most significant petrochemical refining area, is said to be running out of land for oil storage and similar purposes.
Syahrilazli Mahammad said Malaysia wants to treble its storage capacity around the state of Johor to 10 million barrels and attract 20 new trading companies by 2017.
The demand for storage in Asia is growing due to increased trade, according to Sushant Gupta, an analyst with energy consultancy Wood Mackenzie.
Syahrilazli Mahammad, Executive Director, Malaysia Petroleum Resources Corp.
"We've embarked on an aggressive plan to attract oil storage operators to Malaysia,"
Singapore levies a 5 percent tax on its approximately 350 crude oil and coal trading companies, but the 3 percent rate in Malaysia has already drawn some companies to that country, including Vitol, the world's largest independent oil trader.
Malaysia is taking on Singapore by working to develop a $20 billion refinery and petrochemicals hub that executive chairman Ngau Boon Keat of Dialog Group Berhad (Dialog) said in June could be bigger than Rotterdam.
Pengerang Independent Deepwater Petroleum Terminal (PIDPT), a RM5 billion ($1.56 billion) deepwater oil terminal, is a joint venture between Dialog, Rotterdam headquartered Royal Vopak N.V. (Vopak), and Johor state.
Pengerang's second project is state owned Petroliam Nasional Berhad's (Petronas') RM60 billion ($18.73 billion) Refinery and Petrochemical Integrated Development (RAPID) which is expected to commence by mid 2013 and be operational some time in 2016.
Prime Minister Datuk Seri Najib Razak told the New Straits Times that the projects would result in the production of 450,000 barrels of oil and 3.8 million tonnes of naphtha cracker per year if completed successfully.
"This will strengthen Johor's role as a premier centre for oil, gas and petrochemical industries in Asia and the rest of the world," Najib said.
Singapore supplied more than 43 million tonnes of bunkers to 37,000 vessels in 2011, according to the Maritime and Port Authority of Singapore.