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* Breaks ground on phase-3 oil storage project this week
* Build tanks for 430,000 cubic metres clean products bymid-2021
* Plans pipeline to link fuel storage across Pengerang fortrading
By Jessica Jaganathan and Florence Tan
SINGAPORE, Sept 23 (Reuters) - Malaysian energy storageservices provider Dialog Group is expanding itsPengerang oil storage facility in the southern peninsular stateof Johor, as it seeks to tap growth in oil, gas andpetrochemicals trade around the Malacca Straits.
Dialog will break ground on a project this week, which willbe the third phase of development at Pengerang, to build oilproducts storage tanks that will be ready by mid-2021, ExecutiveDeputy Chairman Chan Yew Kai told Reuters in an interview.
An oil company has already committed to leasing the tanksthat will store 430,000 cubic metres of clean products forseveral years, Chan said, but declined to name the company.
Oil major BP has leased the tanks, trade sourcessaid. BP could not immediately be reached for comment on thematter.
In the first two phases, Dialog built an oil productsstorage terminal, two liquefied natural gas (LNG) tanks and anindustrial terminal, solely for the use by adjacent PengerangRefining and Petrochemical (PrefChem).
PrefChem, equally owned by Petronas and Saudi Aramco, housesa 300,000-barrel-per-day refinery and 1.2-million-tonne-per-yearsteam cracker.
Dialog plans to connect facilities across all three phasesvia an oil products pipeline to facilitate trade among clientsstoring fuel in Pengerang, Chan said.
"They can buy products if they are short and do fuelblending to their own requirements," Chan said. "This is goingto facilitate a lot of trading activities."
Dialog seeks to attract more companies to build plants toproduce intermediate petrochemicals and specialty chemicalsusing raw materials from PrefChem, Chan said.
"We are inviting petrochemical companies to come inpartnership with us to build, own and operate (the tanks). So,facilities are there for petchem plants, we provide tankagefacilities and also the port," Chan said.
The company is using only a part of the 600-acre land forthe phase-3 development and there is still land in the first twophases for further expansion, he added.
For example, the company has received interest from tradersto build a third LNG tank, he added.
"With Henry Hub (gas) prices at around $2, it makes itconducive to traders to buy, sell and break bulk, so there is alot of interest by traders to talk to us to take up storagespace for long term," he added.
Separately, Dialog is conducting a feasibility study forbuilding storage facilities for liquefied petroleum gas (LPG).
"The LPG demand is for cooking gas and industrial use inMalaysia and I believe there's a shortage, so they are lookingat bringing LPG into Malaysia and if it's into Johor, it's anideal place for transhipment," he said.
Johor Petroleum Development Corp manages the PengerangIndustrial Development complex that spans over 20,000 acres andis earmarked by Malaysia to be developed into an energy hubaimed at rivalling neighbouring Singapore's Jurong Island,Asia's main oil centre.
PrefChem has taken up just under a third of the land, andfor the remaining, Dialog is working with the Johor state toinvite companies to build refineries or petrochemical plants,Chan said.
Companies from the Asia Pacific region, including fromChina, are in talks with Dialog to conduct feasibility studiesfor such projects, he said.(Reporting by Jessica Jaganathan and Florence Tan; Editing bySubhranshu Sahu)
