13 June 12 The Business Times by ronnie lim
[SINGAPORE] Singapore may shut the door on new greenfield refineries, at least for a while.
Instead, in a strategic twist, the world's third biggest oil refining centre will get existing players like Shell, ExxonMobil, PetroChina and Chevron to upgrade or expand their facilities to produce higher-value petrochemicals, fuels and lubricants.
This comes as competition intensifies with new capacity emerging in Asia and the Middle East, and as concerns grow over greenhouse emission here. There is also the question of how much more Jurong Island can be expanded through reclamation.
"It's a survival issue for the Singapore industry," Fereidun Fesharaki, chairman of Facts Global Energy said recently. He was talking about emerging competition, including from the shale gas-fuelled US petrochemical crackers.
The Economic Development Board's deputy director of energy & chemicals, Eugene Leong, told BT this week: "EDB does not have a specific aim of attracting a greenfield refinery investment at the moment."
"With the strong refining base Singapore has built up - operated by world class companies, efficiently run and well integrated with the chemicals sector - the focus is on upgrading the complexity of these refineries to build on this strong foundation and remain globally competitive."
"Upgrading efforts include further downstream integration, not only with higher value petrochemicals, but also lubricants and fuels upgrading."
Mr Leong said this when asked for an update on a Hin Leong Trading-led consortium's plan - which includes one of China's "biggies" - to build a 300,000-500,000 barrels refinery costing US$6-8 billion here. Singapore's biggest local oil trader first mooted the plan in December 2010 and is understood to be still keen on building an integrated refining complex, including a petrochemicals element, and has gone back to the drawing board on this.
EDB's Mr Leong however, did not want to comment on this, stressing that "discussions with our clients is strictly confidential, and we cannot comment on specifics."
Singapore officials had previously stressed the need to draw more refineries here to anchor the thriving oil trading hub, and this is also cited in an industry background paper on EDB's website currently. This long-term strategy of growing refining capacity here remains, sources said.
In Singapore, ExxonMobil's 605,000 barrels per day Chawan refinery (ranked 5th) and Shell's 500,000 bpd Bukom facility (14th) are ranked among the top 20 biggest refineries worldwide by Oil & Gas Journal, with Reliance of India's new Jamnagar facility overtaking them at number four position.
BP's 2011 Statistical Review also showed that refining capacity here has stagnated at 1.38 million bpd, while other rival hubs are growing. In 2010, new refinery building boosted capacity in China to over 10 million bpd, while India's refining capacity has grown to 3.7 million bpd.
But the oil majors here have been expanding in other ways, with Shell's new petrochemicals complex and ExxonMobil's second such facility - currently being started up - helping attract a slew of new downstream investors, including synthetic rubber makers from Japan and Germany.
There is also upgrading, with ExxonMobil currently building a US$500 million "green" diesel project here, with PetroChina and Chevron also preparing to invest a similar sum on "green" petrol and lubricant feedstock plants at their Singapore Refining Company facility.
Competition is also knocking at Singapore's doorstep, with Malaysia's Petronas just announcing that it expects to make a final investment decision on its US$20 billion refinery in Pengerang, Johor by mid-2013.
Ngau Boon Keat, executive chairman of Dialog Group which is building a S$778 million oil storage terminal with Vopak next to the Petronas project, told StarBiz earlier this month that "Singapore is not building refineries because it has limited land. Singapore's Jurong (Island) is full. The only way it can grow is buying sand... It has gone downstream into producing petrochemical products."
But conceding that it will take Malaysia at least 10-15 years to catch up with Singapore petrochemicals-wise, he said that Johor, instead of being a competitor, can instead complement Singapore by "buying the raw materials they need from us, and vice versa."
Industry observers believe that Singapore is also becoming concerned about carbon emissions from having more refineries, and that is why it has taken a breather on this. The need for a large influx of foreign workers to build a refinery (ExxonMobil employed 22,000 workers at the construction peak of its petrochemical complex) is another.