Singapore's Universal Terminal operations normal and independent of Hin Leong: spokeswoman

Singapore — Singapore-based petroleum storage company Universal Terminal, one of the assets owned by the Lim family, is continuing its business as usual and operates independently of embattled oil trader Hin Leong Trading, a company spokeswoman said this week.

Universal Terminal, which has one of the world's largest tank farms for refined oil products, has been the subject of market speculation after financial troubles were disclosed at Hin Leong, also owned by the Lim family, and amid concerns that terminal operations might be impacted.

"Universal Terminal operates independently of Hin Leong, and is continuing with its business as usual, providing essential service to our clients and partners during this period," the spokeswoman said in an email in response to queries about its operational status.

"The terminal operations team and staff of each department of Universal Terminal remain intact and engaged in the business," she said.

"All the shareholders, including PetroChina International (Singapore) Pte. Ltd. and MAIF Investments Singapore Pte. Ltd. (the latter two together own 59% of Universal Terminal), are also working closely with us, in the best interests of Universal Terminal and all of its stakeholders," she added.

The Lim family has a 41% share in Universal Terminal, PetroChina has a 25% share and Macquarie has 34%.

COMPETING CLAIMS

Since Hin Leong's financial distress became public in the first two weeks of April, the market has reacted by cutting exposure to cargoes and assets related to the Lim family, including vessels and barges operated by Ocean Tankers, to avoid counterclaims and lawsuits.

While Universal Terminal is not under any form of debt restructuring like Hin Leong or Ocean Tankers, market caution has extended to fuel stocks stored in the terminal for Hin Leong's customers.

On April 22, Sembcorp Industries terminated the gasoil supply and storage agreement between its subsidiary Sembcorp Cogen and Hin Leong, under which gasoil reserves purchased from Hin Leong were stored and managed on behalf of Sembcorp Cogen at Universal Terminal.

This week, Sembcorp said it had commenced legal proceedings to assert its ownership of the gasoil reserves stored in designated tanks at Universal Terminal, saying: "There is a possibility that the gasoil reserves designated for Sembcorp Cogen may be subject to competing claims by one or more third parties."

Hin Leong had an inventory of 608,745 mt of high sulfur fuel oil, low sulfur fuel oil, marine gasoil and jet fuel as of April 10, 2020, down 77% from October 31, 2019, according to a court affidavit dated April 17. This was spread across Universal Terminal, its floating storage units E Mei San, Wu Yi San and Sea Coral and the trading vessels Ocean Queen and Ocean Gar.

The competing claims emerged as Hin Leong said the value of cargo held by it was less than the total amount of secured claims of bank lenders who had provided financing based on the stored inventory.

MARKET CAUTION

Meanwhile, Singapore-based oil traders said Universal Terminal was congested after initial reports of Hin Leong's financial crisis, because traders rushed to load their fuel oil volumes, but this has eased.

"Universal Terminal is now operating normally. Before it was congested as traders moved their cargoes from the terminal, but this is fixed now," a fuel oil trader said.

Other commodity traders and oil majors contacted by S&P Global Platts also confirmed that their third-party leased volumes at Universal Terminal, which were independent of any trades with Hin Leong, have not been impacted.

"Not that I know of. My [operations team] hasn't informed me. Singapore is not a cowboy town," a trader who has tankage in Universal Terminal said.

"On our end, so far there is no issue, because we have part ownership, so for my own cargo, yes, there is no problem," another trader with leased space added.

Separately, Universal Terminal has also come under scrutiny for deal talks if the Lim family were to opt for asset sales for liquidity injection.

Founder Lim Oon Kuin said in his affidavit that a proposed debt restructuring of Hin Leong and Ocean Tankers are likely to include, among other things, "the injection of assets by the Lim Family, such as the Lim Family's shares in the Xihe Group and UGH" and "the disposal of non-core assets and investments."

The Universal terminal spokeswoman said: "We are unable to reveal details of customer transactions -- but again, we would like to reassure that business and operations are very much as usual."