DEVELOPMENT OF INTEGRATED OIL & GAS HUB AT PULAU DAAT OFF WP LABUAN

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2 DEVELOPMENT OF INTEGRATED OIL & GAS HUB AT PULAU DAAT OFF WP LABUAN

3 EXECUTIVE SUMMARY As a consequence of demographic growth, but also the constant rise in the overall standard of living of world,s population, demand for energy, and most particularly transportation fuels, is expected to increase steadily as well as the natural gas represents a tremendous worldwide resource for energy and a primary feedstock for the production of numerous chemicals. With the majority of the oil & gas discoveries made last year happening in the Asia Pacific (35%), the bulk of the exploration and production investment in the coming years is likely to be spent in this region. Presently, Singapore is the largest oil & gas supply base and technology hub in the region, accounting for 70% of the global market share for floaters/rigs for instance. With the recent official visits to WP.Labuan by our Deputy Prime Minister, YAB.Tan Sri Muhyiddin Yassin emphasized that Malaysia needs to be nimble in responding to the factor's new requirements. If done right ; Malaysia can become a key deepwater oil & gas hub globally after Houston, Rio De Janerion and Aberdeen. The impetus of this developments will be the catalyst to boost up the oil & gas industries for the state of Sabah & Sarawak. With the support by the Economic Transformation Program launched by the Federal Government and we are confident that WP Labuan will definitely become one of the leading oil & gas hubs for the country / regionally and internationally.

4 BACKGROUND TO THE PROPOSED STUDY Sabah is poised to become the second largest Oil & Gas producing state in Malaysia. It has several new offshore fields such as Kikeh, Kakap, Gumusut, Kebabangan, Malikai, Jangas, Pisangan, Ubah, Kamunsu and Senangin that have been or will be put into production in the period 2007 to It is well documented in many parts of the world and closer home, In Trenganu and Bintulu / Miri that Petrochemical Industries bring large scale and long term economic benefits to wide range of beneficiaries. It is not only highly skilled technicians and specialists and the companies that they work for the benefit. Industry expenditures create employment & income for people working in construction, retailing, hospitaility, education, tourism and indirect benefits to the state and local government through taxes and revenues. It is envisaged that Pulau Daat, which is part of the Federal Territory of Labuan, is strategically and geographically well placed to be an internationally-recognized Integrated Oil & Gas Hub as it is in close proximity to oil exploration sites along the North and West Coasts of Sabah and International shipping routes. The Integrated Oil & Gas Hub will cater for both upstream & downstream activities of the Oil & Gas industry. It is envisaged to act as the locomotive and spearhead the economic growth of Labuan and neighboring states through enhancement of socio-enviro-economic benefits, which include creation of employment, upgraded transportation and provision of utilities. With the discovery of new Oil fields and increasing Oil production volume, large quantities of gas will be available for large scale utilization in downstream and upstream Oil & Gas related and Petrochemical industries.

5 SPECIAL FEATURES OF PULAU DAAT Strength Located Near Main Shipping Routes Pulau Daat is located near the main shipping routes of Asia that connect the East and West globally. This geographical advantage allows the project to ride on increased vessel traffic in Asia. This geographical advantage would be critical in attracting vessels to call at Pulau Daat for storage and bunkering logistics. Located Near East Import Asian Markets The Pulau Daat Oil Terminal would be located close to the key import markets of East Asia and due to Pulau Daat's geographical strength would allow it be positioned as a prime supply terminal for the growing East Asian import market. Located in Prime Fishing Grounds of Southeast Asia It should also be noted that the island is located in the main fishing grounds of Southeast Asia. This strength is important to opening new opportunities such as providing bunkering and logistics to the fishing fleet in Southeast Asia. Special Investment Piolicies In addition to the previously mentioned geographical advantages, Pulau Daat ia also a beneficiary of the following investment policies that gives it advantage over other locations : - Duty Free Port : All construction imports would be exempted from custom tariff tax. - Economic transforamtion Program (ETP): Pulau Daat development has identified and attained Under ETP status by Pemandu of Prime Minister Department of Malaysia. This would also allow the Project to receive a favorable tax incentives and assistance from government to ensure the succeed Of the development. (A)

6 INTRODUCTION PULAU DAAT:PLANNING BRIEF Pulau Daat is approx 650 acres in area. The local and international investors are desirous on developing the island into a major international Oil & Gas Petroleum Hub, Integrated Fabrication Hub, Port & Jetty and Supply Base. A formal approval has been obtained from Labuan Corporation and all the relevant authorities in Labuan for the rezoning of the present land use of Agriculture on Pulau Daat to Industry use. Specially for Integrated Oil & Gas Hub. This planning brief explores into all the reasons why the Industrial Development on the subject site is justifiable. A survey on the study area has also been conducted in order to understand the local characteristic, its social economic standing and the surrounding population.

7 PULAU DAAT Location: Pulau Daat is an island situated approx 3km south-east of Labuan and 4km south-west of Menumbok on the Sabah Mainland, where to the nearest tip of Sabah mainland it is only approx 3km. Ownership: The island 650 acres in area is presently owned by a private company exclusivity to develop an international Integrated Oil & Gas Hub, Integrated Fabrication Hub, Port & Jetty and Supply Base. Site Access Pulau Daat is accessible by way of a 20-minutes boat journey from Labuan and 15-minutes from Menumbok Ferry Terminal on the mainland of Sabah.

8 PULAU DAAT Topography The island is generally undulating with heights ranging from 15 metres to 60 metres above sea level. The two highest points are at the north-west part (45 metres high) and the south-east part (60 metres high) of the island as shown on the Site Plan attached herewith in this report. Existing Land Use Zoning The island is presently zoned for Industrial status by WP.Labuan Corporation and proposed for the development of Integrated Oil & Gas Hub.

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11 LABUAN FEDERAL TERRITORY

12 PULAU DAAT Potential of Pulau Daat as Integrated Oil & Gas Hub and Integrated Fabrication Hub, Port & Jetty & Supply Base Each year, thousands of cargo ships and oil tankers move in both directions of the main shipping routes as shown on the map presented herewith on the next page. As can be seen on the map, many of these main shipping routes just pass west and north outside of Labuan and Pulau Daat. This create a huge potential for Pulau Daat to become an International Hub for Oil and Gas and base for Fabrication, Cargo Port, Logistic Centre

13 PULAU DAAT

14 PROPOSED DEVELOPMENT PLAN

15 PROPOSED DEVELOPMENT Type of development Area 1. Engineering Fabrication Yard Crude Oil Storage Terminal Rentis Yard Logistic Supply Base Public Facilities, Commercial, Staff Housing development Common roads & drains & infrastructures 40

16 PROPOSED MASTER PLAN Project Fabrication Yard Project Tank Farm Terminal Project Logistic Base Project Rentis Yard Project Commercial Lots for Petroleum Industries 200 acres 250 acres 50 acres 50 acres 50 acres

17 FABRICATION HUB (150 ACRES) The Proposed Fabrication hub will consist of the following development Fabrication yard for offshore Floating Oil Rig and Platform * Jacket and Structure fabrication pipeline. There is no private company to specially fabricate the offshore platform, jacket in Sabah. It will be the urgent needs to have the set up to cater for the upcoming rigs in Sabah water.

18 PROPOSED DEVELOPMENT Fabrication Yard For Offshore Floating Oil Rig & Platform There are some 24 oil rigs and platforms required to be fabricated for Petronas oil fields at the South China just outside Labuan thus making Pulau Daat a very strategic location for the fabrication of the oil rigs and platforms.at the present moment, all the fabricators are located in West Malaysia and 1 small size in Sarawak. The next alternative yard which has the technology and the facilities to fabricate such floating rig is in Penang. However, due to the distance, the Penang fabrication yard would not be competitive to Pulau Daat in costs. Due to the high demands on the platform in the recent years, this business will not be confined to the supply at Malaysia water but other countires as well. Ie; Southern Philippine (Palawan) is coming up for the new exploration near to northern Sabah, Vietnam & etc.

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20 CRUDE OIL STORAGE TERMINAL (250 ACRES) This island is located at a very strategic point in between Singapore and China. This tank farm terminal can be used as the bunker trading centre to cater for East Asia region. Ie; China, Korea and Japan With the natural depth of the sea water and it can berth for all kind of vessels from small to VLCCs. There is no sizable storage facility within this area despite with most exploration rigs within the vicinity. It will be the most idle area to use as the strategic reserve and transhipment centre to cater for world s biggest and key consumer markets - China, Japan

21 CRUDE OIL STORAGE TERMINAL (250 ACRES)

22 LOGISTIC SUPPLY BASE (50 ACRES) Due to the lack of suitable land and anticipation of high increase in Petronas offshore drilling and production activities, more lands will be required by the existing Supply Base Company to cater for the great demands. To provide with an additional logistic & Supply base at Pulau Daat will be necessary as this set up will compliment with the existing Asian Supply Base to cope with the increase demanding by the tenants.

23 WAREHOUSES & TRANSHIPMENT CONTAINER PORT (50 ACRES) The present Labuan Liberty Wharf has very limited warehouse space and there is practically no room on Labuan island for the Port to expand and to increase its warehouse and container space even if they wish to. Liberty Wharf would probably need major expansion and upgrading in the near future. The jetty for instance was not design and built for handling containers and there is no space reserved for a container yard.

24 ENVIRONMENTAL ISSUE Air and Water Pollution As the proposed development and facilities are basically fabrication of steel structures and tank storage, it is anticipated that insignificant pollution would be created to the surrounding air and water. Noise Pollution Due to Pulau Daat being some distance away from Labuan and mainland Sabah, it is very unlikely that any noise pollution could be hazardous to neighboring areas. Earthworks All earthworks shall be carried out strictly in accordance with the regulations imposed by the relevant authorities to avoid polluting the clean surrounding sea water.

25 JUSTIFICATION FOR REZONING FOR INDUSTRIAL DEVELOPMENT The mixed development when fully completed may create approx 1000 to 2000 short and long term direct and indirect job opportunities to Labuan, Sabah and even West Malaysia. Creates hundreds of business and training opportunities directly and indirectly to Labuan, Sabah and West Malaysia. Long term revenue to Labuan Corporation and Federal Government on taxes & charges. Long term revenue to the country as a whole. Help boost up the overall economics of Labuan. Promote the image of Labuan internationally as an Oil & Gas Hub. To move away some of the present and future crowded facilities from Labuan Island to Pulau Daat.

26 Analyzing the overall development of Oil & Gas Industries and facilities. Sabah State that including WP.Labuan was very much lag behind compare to West Malaysia & Singapore region. The exploration history in Sabah State started much earlier to compare with Peninsula West Malaysia and yet there are destitute of auxiliary developments / downstream industries to support the Oil & Gas activities. Such as; Tank Farm Terminal, Fabrication Engineering Yard & etc. The development at Pulau Daat shall comprise for the following shortcoming facxilities to fill the gap to make Sabah will become one of the Integrated Oil & Gas Centre for this region. : (1) Sizable Tank Farm Terminal For export, blending process, import & export purposes & transhipment (2) Fabrication Engineering Yard To fabricate and construct oil rig platform, jacket,pipeline and other related engineering works. (3) Other like fuel bunkering would be an great business opportunity Comparables for similar industry hub e.g. Singapore PROJECT VIABILITY Likewise, similar facilities have been developed sucessfully in Singapore and Tanjung Langsat in Johor and the demand for such services is increasing from time to time. With the massive on-going development of Oil & Gas downstream industries brought in Sabah by Petronas in recent years has attracted the attention for a lot of foreign investors to focus on East Malaysia/ Borneo for their s business venture Labuan Federal Territory will be the first choice for those investors as it had been actively involved in Oil & Gas business activities. With the development of Pulau Daat Integrated Oil & Gas Hub (PDIOGH) will be one of the most idle area to cater for such an business activity as it sits as an independent island apart from Labuan main island to cater for the hazardous industry.

27 BUSINESS OPPORTUNITY > Tank Farm Terminal > Bunker Oil Trading Center > Engineering Fabrication Yard Labuan Federal Territory had been actively involved in Oil & Gas Industry activities and also recognized as one of the main regional Oil & Gas Centre in Sabah of East Malaysia since then. Having the biggest Methenol plants in the world, Shipbuilding Industry, Supply base. Apart from this, it was one of the world famous International Offshore Financial Centre (IOFC). Despite as one of the major Oil & Gas Centre in this region but there are still some short coming in term of facilities to fully support the requirements to become the International standard of Oil & Gas Centre. Ie ; There is still lacked of proper and sizable storage tank terminal available ; No Fabrication Yard for fabricating of offshore platform for drilling purpose to suuport the upcoming new wells exploration within the peripheral of Sabah water. It is the utmost urgency to have the Tank Farm Terminal set up in Labuan Federal Territory for storage, blending and even refinery process to support the great demands in this industry. It can be served as the strategic reserved purpose, create as one of the bunker oil trading centre in this region apart from Singapore. Its possessed with a lot of advantages compare with Singapore for it nearer distances to Eastern Asia countries; China, Korea, Japan and neighbors with Phillipine & Kalimantan of Indonesia. Engineering Fabrication Yard will be another priority choice to support the demands of the offshore platform. Once the fabrication yard is provided and there will be the first priority choice for Petronas to award with the supply as all the fabrication yards in West Malaysia could not cope with great demands

28 INCREASING STORAGE RENTS Singapore Scenerio Rents in Singapore (used as the reference for the region) have been rising and are forscasted to continue growing. The annual rental growth rates for 2009 and 2010 were 10% and 24% respectively. Similarly, based on recently concluded contracts and enquiries for 2013 storage, rents are set to continue to grow in double digits. Global Scenerio Global oil trade increases demand for oil storage and port facilities because storage and ports are needed for bulk breaking and stock building at import and export locations. Increasing trade volumes globally and in Asia has led to increase demand for bulk breaking infrastructure in the form of storage capacity and port facilities. The IEA expects to total trade in oil globally to grow 19& from 1980 to The development of the oil terminal in Pulau Daat would be a perfect method to leverage on this global oil trade growth trend.

29 Increase in Refining Capacity DRIVERS OF OIL STORAGE DEMAND Refining capacity drives demand for storage capacity because tank space is needed to store feed stocks required by refineries and, similarly, tanks are needed to store the various grades from the output prior to export. As such, as regional refining capacity increase, so does the need for oil storage capacity. Refining capacity is set to expand by 16% from 2009 to This in turn would drive the demand for storage capacity in the region. Refining Capacity In Asia (Million BPD) Growth Rate Japan 4,895 4,295-12% Singapore ,415 8% China 9,669 12,922 34% South Korea 2,679 2,729 2% Taiwan 1, % India 3,574 4,814 35% Total 23,368 27,467 18% Total for Asia 28,042 32,466 16%

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31 BUNKERING BUSINESS Singapore is the world's largest bunkering port by volume and bunker sales there have been growing rapidly (see graph below). Monthly sales hit an all time record high in Jan, 2011 and vloumes could rise to a new record for full year 2011 as Singapore benefits from rising container traffic at Chinese ports. There is a huge opportunity for the Pulau Daat Oil Terminal to position itself as an alternative bunkering port given its proximity to Singapore & North Asia. On top of it. Its the wish of the Malaysia government under the New Economic Transformation Program shall fully support for the proposal. 15 C olumn B C olumn C C olumn D 10 Millio n b a rre ls p e r d a y 5 0 Central And West Asia East Asia Pacific South Asia Southeast Asia Developed -5

32 FABRICATION YARD A 150 Acres of land area had been allotted for the Fabrication Yard and this fabrication yard will be major for fabricating of deep sea platform, Jacket, Topside to focus on the great demands in the recent years. Since there are few new wells will be explored soon within the Sabah water as mentioned earlier and there will be a great opportunity and priority to be awarded for the supplying. This will be the first fabrication yard set up in Sabah area as well. With the natural deep draft of the Pulau Daat frontiage, it will be the most ideal area to set up the fabrication yard and specifically to focus on deep sea (subsea) supply.