Thursday, September 26, 2013

Singapore ramps up LNG investment

SINGAPORE: Singapore is ramping up efforts to become Asia's hub for liquefied natural gas (LNG).

Temasek Holdings LNG unit, Pavilion Energy, says it wants to raise its investments in infrastructure and assets, with the aim of trading LNG in Asia within the next three months.

Already Asia's energy hub, Singapore has big ambitions to become the go-to market for LNG in the Asian region.

Pavilion Energy, set up by Temasek Holdings in April this year, wants to tap soaring Asian demand for energy.

The company is set to increase funding to its initial authorised capital of S$1 billion and invest in LNG infrastructure, terminal and assets in Asia.

Seah Moon Ming, CEO of Pavilion Energy, said: "I can say with confidence that Singapore will devote itself into a major LNG trading hub soon in the region. I believe we have what it takes to attract growing LNG volume into Asia, and will be in a position to set LNG prices in the region."

According to the International Energy Outlook 2013, natural gas is the world's fastest-growing fossil fuel.

Global demand is also keeping pace, and is expected to soar 64 per cent by 2040, compared to 2010 levels.

In line with economic growth and increasing wealth, developing Asia is expected to account for much of that demand, led by China, India and Southeast Asia.

Mr Seah highlighted the need for cross-border collaboration to tackle global energy issues.

"We value long-term international partnerships that will build new markets, enhance shipping logistics and regasification facilities. We shall support innovative processes and technology that enhance production, storage, delivery and trading."

Gaurav Tiwari, president of VGS Cavallo Energy Group, said: "I think that's the right way to deal (with LNG), to have not only the downstream or market focus, but to have the global LNG portfolios - companies like Pavilion. India being there comes under the Asian region too. We will look forward to work with companies like Pavilion where there is a global exposure on the projects we are developing."

In 2012, the Asia Pacific accounted for 70 per cent of total global energy trade.

Singapore commissioned its first LNG cargo in March this year.

Commercial operations at the three million metric-ton-a-year terminal on Jurong Island began in May while the completion of a third tank is expected in 2014. This will expand its capacity to six million tons.

- CNA/fa

 




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Tuesday, September 17, 2013

Oil refiners face profit squeeze

SINGAPORE: Oil refining companies are expected to see a profit squeeze.

Overcapacity in the sector and slower demand from developed economies are weighing down their margins.

Analysts said this means dimmer business prospects for refineries and other downstream oil and gas players.

OCBC Research, for instance, has an underweight call on the sector.

Global oil refining margins are under pressure, with more refining capacity being created.

This after oil refining majors expanded their capacity with new investments following the oil boom in recent years.

At the same time, oil demand growth, particularly in the developed economies, has slowed.

This is due to flagging economic growth rates, saturated car ownership rates, as well as the use of fuel-efficient technology like electric vehicles.

As a result, the world's net refining capacity is forecast to grow by 8.7 million barrels per day by 2016.

However, demand is expected to grow by seven million barrels per day, said the International Energy Agency. 

Ravi Krishnaswamy, vice-president of Energy & Power Systems Practice at Frost & Sullivan (Asia-Pacific), said: "We see a massive build-up in the Eastern hemisphere, so looking at China and India, they've been rapidly expanding. India was about 193 million tonnes per annum last year. They're expected to go up to about 300 million tonnes in the next six to seven years."

Almost all of the oil refining capacity growth is from developing Asia, and analysts said this trend is likely to continue.

"It is mainly funded by national oil companies as part of a greater government initiative. Although global refining margins are relatively low compared to the past, they are less sensitive to near term market price movements, so we expect the refining capacity to continue to increase in the near future," said Low Pei Han, an analyst at OCBC Investment Research.

This is expected to push refining margins on brent crude oil marginally down next year to around US$6 per barrel.

Singapore's Economic Development Board has recently said that it has no plans to attract any more green-field refinery investments, according to an analyst report by OCBC Research.

Analysts said this means Singapore-based downstream oil and gas players such as engineering, procurement and construction companies will be under greater pressure to look overseas for business opportunities.

They added that the SGX-listed companies that could be impacted include PEC, Rotary Engineering and Ezra.

 




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Petronas to Delay $19 Bln Petrochemicals Project to 2018

State oil firm Petronas will start up its $19 billion petrochemicals complex in Malaysia in 2018, the company told Reuters on Tuesday, signalling a further delay in the country's largest-ever infrastructure project.

A delay to the project in southern Johor state could deal a potential blow to the economy of the Southeast Asian nation as well as local oil and gas services firms hoping for work on the massive complex.

A source familiar with Petronas' business strategy told Reuters the project had been complicated by a need to secure water supplies as well as cater for proposed international partners.

Petronas had already put back the project from late 2016 to early 2017 in June and revised the final investment decision (FID) to the first quarter next year, citing state government problems in relocating villages and graves from the 2,000 hectare-site, five times the size of New York's Central Park.

"As a result of the revised FID date, the RAPID refinery is scheduled to be ready for start-up in Q4 2017 and the remaining plants within the complex is scheduled to be commissioned in 2018," Petronas said in a statement to Reuters on Tuesday.

This is at least six months later than market expectations after local media had cited Petronas CEO Shamsul Azhar Abbas in June as saying the start date for phase one of the RAPID project had been pushed back to early 2017.

BIGGEST INVESTMENT

Delays in the project - a cornerstone of Prime Minister Najib Razak's Economic Transformation Programme aimed at doubling Malaysians' incomes by 2020 - could slow an economy whose oil and gas sector makes up a fifth of GDP.

The complex is the largest single investment in Malaysia, and aims to grab a chunk of the $400 billion global market for speciality chemicals used in products from LCD televisions to diapers.

Its location at the southernmost tip of the peninsula, just 10 km (6 miles) from Singapore's east coast, is part of a vision for a "Greater Singapore" energy trading hub that would rival competitors such as China.

"This massive project is getting more complicated as we move forward," said the source, who declined to be named as he was not authorised to speak to the media.

"We will need to spend to secure the water supply and now parts of the project may need to be redesigned to cater for incoming project partners," he added.

Petronas, Malaysia's only Fortune 500 company, has signed heads of agreements with Italy's Versalis SpA, Japan's Itochu and Bangkok-listed PTT Global Chemical to build speciality chemical plants.

Germany's Evonik also stepped in to the project after rival BASF - the world's top chemicals group - pulled out after differences in business strategy.

NOT SO RAPID?

Petronas unveiled the Refinery and Petrochemicals Integrated Development (RAPID) project in May last year. The plan was to construct a 300,000 barrel per day refinery, which would supply naptha and liquid petroluem gas to the chemical plants and produce gasoline and diesel for European markets.

France's Technip was awarded the front end engineering and design (FEED) contract, which was slated for completion in the second quarter of 2013. The financial value of the job was never disclosed.

Petronas will use the design specifications to reach a final investment decision, after which the major construction works usually begin. BNP Paribas is the financial advisor for project financing

The June decision to postpone a final investment decision to Q1 2014 knocked the shares of local mid-sized oil and gas services companies, and analysts said the latest delay could weigh on firms like SapuraKencana and Wah Seong .

Petronas has yet to award the engineering, procurement and construction jobs, although preparation work for the site started on Oct. 18.

It is expected to award about 20 construction job packages valued at about 2-3 billion ringgit ($620 million-$930 million) each, two other sources familiar with the company's plans said.

The contracts for the refinery are expected to be awarded in November or December this year.

"Anyone with a licence from Petronas will benefit, if they can meet the specifications," said one of the sources.

"Delays just means the party starts a little late for some of these companies. These projects are generally complicated and can have a longer gestation period." ($1 = 3.2260 Malaysian ringgit) (Reporting by Niluksi Koswanage and Yantoultra Ngui; Editing by Stuart Grudgings and Richard Pullin)

 




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New Upgrades to Keep Jurong Island Fresh

Jurong Island continues to bask in sunshine. Despite the attraction of cheaper gas feedstock in the Middle East and also that from new shale gas projects in the US, oil giants like ExxonMobil and Shell are still growing their integrated refining and petrochemical complexes in Singapore to boost their sophistication and competitiveness.

ExxonMobil is ramping up its spanking-new second petrochemical complex here to full commercial operations, while Shell has just announced a raft of expansions, said to cost additional billions of dollars, to its facility.

Their expansion projects here - clearly focused more on high-value specialty chemicals rather than oil refining - are fuelled by Asian economic growth, especially in China and India. The latter has sparked industrial demand for a whole range of chemicals needed to make end-products from heat and oil-resistant plastic car parts and high-performance tyres to textile fibres, high-end foam bedding and surfactants or cleansing agents for the offshore oil industry, just to name a few. But it raises the question of why the investments are coming to Singapore, rather than going directly to the heart of the mega markets, like China. Apart from well-known pluses like Jurong Island's superb infrastructure and synergies for the chemical players on the island, industry players say that a big draw is also Singapore's iron-clad, intellectual property protection regime.

This has given the oil giants the confidence to incorporate state-of-the-art technologies in their mega-billion dollar plantings here. It also extends down the chemicals chain to specialty chemical makers which have brought their latest proprietary technologies here, fully assured that potential copycats are effectively fenced out.

The fact that the "big boys" are here to stay, in turn, provides assurance to the downstream players. New investor Solvay Novecare, for instance, said that the guarantee of long-term feedstock supplies from Shell clinched the deal for the surfactants maker to follow suit here. All this must be sweet music to the Economic Development Board, which, as it moves into the next phase of development on Jurong Island, aims to draw in more of such new investors producing higher value-add downstream derivatives and specialty chemicals. It was the increased availability of butadiene feedstocks from the petrochemical crackers here, including an expansion at Petrochemical Corporation of Singapore, which recently spawned a whole new chain of downstream synthetic rubber plants here.

These include projects by Germany's Lanxess, Japan's Zeon Chemicals, Sumitomo Chemicals and Asahi Kasei Chemicals, and Taiwan's Dairen Chemicals. And right now on EDB's to-do list is the establishment of a similar "high purity chemicals corridor" of downstream plants which will make use of feedstocks like high-purity ethylene oxide, polyols and ethoxylates from Shell's latest investments. These latest developments will ensure that Jurong Island continues to stay attractive.

 




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Thursday, September 5, 2013

SINGAPORE: Asia’s largest jet fuel trader lease storage tanks to build up fuel oil business

(EnergyAsia, September 6 2013, Friday) — Asia's largest physical jet fuel trader said it is venturing into fuel oil, the region's main oil product, with the signing of a three-year lease to store refined products on Singapore's Jurong Island.

China Aviation Oil (Singapore) Corporation Ltd (CAO) said it will lease five tanks with a combined capacity of 174,000 cubic metres from Horizon Singapore Terminals Private Limited (HSTPL) from September 1 to store fuel oil and blending components.

HSTPL is a subsidiary of Horizon Terminals Limited, a leading independent bulk liquid storage company owned by the UAE's state Emirates National Oil Company (ENOC).

Calling this a "milestone" deal, Meng Fanqiu, CAO's CEO, said it represents the company's first venture into the fuel oil trade, which far exceeds the volume and value of jet fuel.

He said: "Singapore is the largest fuel oil market in the world and strategically located between the growing fuel oil markets of Middle East and China. Having access to fuel oil storage facilities in Singapore is essential to the growth and expansion of CAO's fuel oil business, as it enhances our flexibility and trading capability in this market, as well as opens up new business opportunities in the Asia Pacific region.

"CAO will continue to execute the strategy of building up an integrated supply chain for its fuel oil business, so as to expand income streams and diversify into other oil products with jet fuel supply and trading as its core business."

Apart from trading oil products, CAO and wholly-owned subsidiaries, China Aviation Oil (Hong Kong) Company Limited and North American Fuel Corporation, supply jet fuel to airports outside China, including Asia Pacific, Europe, North America and the Middle East. The company owns investments in various strategic oil-related businesses including Shanghai Pudong International Airport Aviation Fuel Supply Company Ltd, China National Aviation Fuel TSN-PEK Pipeline Transportation Corp Ltd, Oilhub Korea Yeosu Co Ltd and Xinyuan Petrochemicals Co Ltd.

A subsidiary of China National Aviation Fuel Group Corporation, CAO is listed on the mainboard of the Singapore Exchange Securities Trading Limited.

 




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