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* Vopak says 420,000 cubic metres crude storage ready inMarch
* BP leases more than half of the capacity; the remainder toTotal (Adds details)
By Florence Tan
SINGAPORE, Feb 3 (Reuters) - World's largest independentstorage company Vopak will start operations at thefirst commercial crude oil tank farm in southeast Asia in March,a top company official said on Tuesday.
The facility in Malaysia "caters to a new and growing demandfor this service, triggered by growing crude oil and petroleumproducts import flows into Asia and Australia," Vopak Asia'sDivision President Patrick van der Voort said in an e-mail.
Located in Pengerang, in the southern state of Johor, justacross the Johor Strait from the Singapore trading hub, the sitecan hold 420,000 cubic metres of crude (2.6 million barrels) andalso offers blending and distribution services, he said.
BP has leased more than half of the storage spacefrom Vopak, while Total will use the remainder,industry sources familiar with the matter said.
The leases are likely for more than a year, the sourcessaid, underscoring the strong interest from oil companies tocapitalise on the so-called contango trading strategy in whichtraders store crude for sale in future months at higher prices.
Vopak and BP declined to comment on commercial activities. Total did not reply to an e-mail seeking comment.
In a contango market, cheap prompt barrels can be bought andheld in tanks to sell at higher prices in the future. Butonshore crude storage space is hard to come by in southeast Asiaas most tanks are built for refineries, traders said.
In the absence of available storage, traders have alreadybooked tankers sufficient to store at least 50 million barrelsof oil at sea for the contango play.
"Land storage is cheaper than floating, but the problem isthere is very limited storage capacity left in the market," aSingapore-based trader said.
The storage cost at the Pengerang terminal was likely on parwith that for tankers as freight rates for Very Large CrudeCarriers (VLCCs) have increased, a second trader said.
The crude storage facilities are part of a joint ventureterminal project between Vopak, Malaysia's Dialog Group and the state government of Johor. When completed, itwill have a capacity of about 1.3 million cubic metres to storeoil products in addition to crude.
(Reporting by Florence Tan; Editing by Himani Sarkar and TomHogue)
