SINGAPORE: BP is doubling its fuel oil storage capacity in Singapore to about 600,000 cu m, to help keep its trading edge over rivals who are snapping at its heels, industry sources said yesterday.

The oil major has reached initial agreement with Universal Terminal to take up 250,000-300,000 cu m to store the utility and marine fuel in Asia's trading centre by first-quarter of next year, sources said.

The deal has yet to be officially signed, but BP has agreed to take up the tanks, the sources said.

Traders said BP is taking up extra storage to maintain its competitive advantage in the market, as other major players will also beef up capacities amid a boom that will see an additional four million cu m by the end of the first quarter.

"Put it this way, BP used to have the biggest guns in town before the current wave of expansion. By the first quarter, when the expansion is completed, their guns will no longer be the biggest," a Singapore-based Asian fuel oil trader said.

"If they want to mount a bull play next year, it would be harder to achieve their goals if more than one of the other larger players are on the other side. So they have to get bigger guns."

The oil major can trade up to 1m tonnes in a single month in the Singapore physical market when it mounts a bull play, which can happen two to three times a year.

Traders expect the storage deal to go ahead despite comments by BP chief executive Tony Hayward who told staff recently that the company's third-quarter results were "dreadful" and that he planned a shake-up to improve operations.

BP currently has about 300,000 cu m, or half the total fuel oil capacity at the Tankstore terminal in Singapore, which it shares with Singapore blending firm Kuo Oil. Other big players such as Vitol already has 700,000-800,000 cu m of capacity in both onshore and offshore storages. By the end of the first quarter, total capacity in Singapore will be about 10 million cu m.