Energy Resource Guide - Singapore - Oil and Gas

Singapore - Oil & Gas

Take advantage of our market research to plan your expansion into the Singapore oil & gas market. This guide includes information on:

Current market needs
The competitive landscape,
Best prospects for U.S. exporters,
Market entry strategies,
The regulatory environment,
Technical barriers to trade, and more.

Oil and Gas - Singapore

Explore oil and gas export opportunities and the regulatory environment in Singapore.

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Executive Summary:

Singapore has become one of the most important shipping centers in Asia and is often listed as one of the world’s top three oil trading and refining hubs with a total crude oil refining capacity of 1.5 million barrels per day (bbl/d). In addition, Singapore is the market leader for high-end floating production, storage and offloading (FPSOs) conversions and jack-up rigs, as well as the regional HQ for most of the key players in the industry.

Output from the oil and gas and petrochemical industries here in recent years was valued at US$60 billion but it is expected to decrease due to fluctuating oil prices, unexpected diseases and global geopolitical issues. However, American companies can continue to find export opportunities in Singapore and the region if they are patient.

The changing landscape of the industry will require companies to invest heavily in new technologies including digitization that will enable them to better define and develop promising reservoirs while sustaining production for mature fields. Despite the ongoing uncertainty in the global economy, Asia is expected to lead instead of follow in terms of energy consumption in the years ahead.

Due to long term demands for petroleum and petrochemical products, many refining, hydrocarbon and gas processing and petrochemical projects are underway and planned around Asia. Technologies that cater to industries that deal in chemical engineering systems, LNG equipment, oil and gas processing equipment and pipeline engineering are expected to be best prospects in the years ahead.

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Government Policy:

In recent years, Singapore has embarked on a diversification strategy to avoid becoming dependent on a single source for gas imports. The nation is expanding a liquefied natural gas (LNG) import terminal, freeing itself from dependence solely on Indonesia and Malaysia for its gas supply. Importing LNG is also desirable because there are more countries such as Australia and Qatar producing it making Singapore less vulnerable to disruptions. Moreover, LNG has a better price stability than piped gas because LNG contracts are locked in for longer periods, unlike piped gas prices that are primarily linked to fuel oil prices. The terminal was completed in 2013 with the arrival of the first shipment of LNG from Qatar and work to expand the overall capacity is in progress slowly as it depends on demand.

Singapore has the potential to be an important regional natural gas hub for Southeast Asia due to its ideal location. International links already exist or are under construction between Myanmar and Thailand, Malaysia and Thailand, and Indonesia and Singapore. Countries are looking to reduce dependence on crude oil as Asia is now consuming about 50% of the global LNG supplies and is expected to consume two-thirds by 2025. Therefore, it is anticipated that global production of LNG may increase by more than 80% to approximately 280 million (metric) tons a year over the next five years.

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Current Market Size & Trends:

Singapore has established itself as one of the top three global oil trading and global refining hubs. The country has a strategic location at the crossroads of the Indian and Pacific Oceans, sound financial system, excellent infrastructure, transparent legal system and a skilled workforce. Singapore has a total crude oil refining capacity of 1.5 million barrels per day (bbl/d). Its three main refineries are ExxonMobil’s 605,000-bbl/d refinery at Pulau Ayer Chawan, Royal Dutch/Shell’s 500,000-bbl/d refinery on Pulau Bukom and the Singapore Refining Company’s 290,000-bbl/d refinery on Pulau Merlimau.

With mega refineries currently being built in China, India and South Korea, Singapore faces stronger competition in the future but has easily 50 years of refinery experience especially with a refining capacity of nearly double its rate of petroleum products consumption. Since Singapore is a major refining center, the country’s goal is to expand annual petrochemical output to more than US$75 billion over the next few years. All of Singapore’s three major refineries are enhancing their petrochemical facilities to gain a competitive edge in the face of growing competition. Singapore is also one of the premier marine bunkering centers in the world with an average of 45 million metric tons being sold annually for the past few years which is about 15% of global sales. Due to increasing competition from other Asian countries and new emission standards, Singapore has introduced stringent requirements on bunker delivery and sampling to ensure quality.

LNG is becoming very important for Singapore and expansion work on the existing LNG Terminal costing more than US$500 million is in progress as Singapore aims to be a future hub for natural gas trading and trans-shipment in Asia. Once all phases are completed, the terminal will be able to handle nine million metric tons per year which may result in Singapore being a LNG bunkering center in future. Currently, 90% of Singapore’s electricity is powered by natural gas and the rest by oil. LNG from Australia and Qatar currently accounts for a third of natural gas imports while piped natural gas from Malaysia and Indonesia make up the rest. This also helps Singapore to be more environmentally friendly.

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Market Entry & Opportunities:

According to industry estimates, over US$5.5 trillion of upstream investment will be required to meet world demand for oil and gas in the next 10 years. Worldwide spending in offshore oil and gas field development needs to increase by 20% to meet future demand growth and ensure companies sustain production over the next decade. Deepwater exploration will be crucial in replenishing depleted conventional inventories. With the industry downturn over the past 3-5 years, exploration budgets however, were reduced by 60% and have yet to recover significantly despite increased oil prices. Singapore’s strategic location at the entrance to the Strait of Malacca has positioned itself to become one of the most important shipping centers in Asia. Despite its relatively small size (5.7 million people), Singapore was the United States’ 11th largest export market and 13th largest trading partner in 2018. Many foreign firms find that Singapore is a great place to do business and they utilize the island city-state as their gateway to the region. There are around 4,300 U.S. firms in Singapore, many of which have located their Asia Pacific headquarters here. Various technologies have been identified as growth areas for U.S. companies with the increased emphasis on gas within Southeast Asia region such as those relating to enhanced oil recovery and drilling fluids. U.S. companies with expertise in enhanced oil recovery and drilling fluids for the offshore oil and gas industry, particularly regarding underwater projects would find the region attractive. There are also needs for companies with expertise in conducting geographical surveys, navigation and positioning, hydrographic surveys and underwater inspection services, information systems and marine forecasting.

Other best prospects include:

Supply of equipment and spares for upstream and downstream oil and gas, shipbuilding, marine, mechanical and electrical construction, oxidation additives and various control systems.
Oilfield equipment that include instrumentation such as drilling information systems, drilling monitors, mud logging units, mud monitoring systems, torque gauges, pressure gauges, weight indicators, deadline anchors, valves / actuators, performance testing and design control system.
Supply of tubular products such as casings, tubing, carbon steel line pipes, drill pipes, heavy wall pipes, drill collars, drill stem tubular accessories and mechanical alloy steel tubes.

Demand for drilling and well services worldwide is growing with a total of more than 72,000 wells set to be drilled and completed in 2020 which is a 3% increase over the previous year according to industry sources but this is expected to stagnate due to the ongoing flu virus epidemic which is dampening energy demands. Offshore represents a small portion of overall activity, partly because the complexity of developing fields at sea requires fewer and more efficient wells compared to conventional onshore fields. The offshore market has been slower in reacting to improved oil prices, and only next year will offshore investments and associated drilling activity expected to see an increase.

As for jackups, the main markets will continue to be in the Middle East and Asia. With offshore drilling reverting to growth, purchases of services look set to grow on average by 9% over the next 3-5 years. Currently, more than 100 rigs are on order or under construction. Some shipyards have ended up owning rigs after construction contracts were cancelled and they are finally starting to sell some of the units – for example, Borr Drilling spent US$2 billion to acquire 14 jackups from Singapore’s PPL Shipyard and KeppelFELS, five of which have been delivered to the contractor. [Native Advertisement] Demand over the next 1-2 years should slowly pick up for both jackups and floating rigs.

There are more than 250 rig requirements worldwide where an expression of interest or market survey has been issued to pre-tender or an outstanding rig tender pending award. This would be good news for both two Singapore companies - Keppel and SembCorp who used to be the market leader for floating production, storage and offloading (FPSOs) conversions and jack-up rigs, as well the construction of exploration and production platforms. Singapore is also the leading engineering, manufacturing and services center for specialized oil and gas equipment in Asia, including wellheads, down hole and production equipment. Estimated average price of oil for 2020-22 is expected to be US$55 per barrel but there is presently too much price fluctuation, economic uncertainty due to ongoing disease epidemic and geopolitical issues globally.

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Barriers:

Singapore is an ideal location for U.S. companies to expand operations and enter the Asian market. However, the biggest obstacle facing U.S. companies in Singapore is the intense global competition that exists on the island which is a result of the very free and liberal nature of the Singaporean economy. U.S. companies should look to capitalize on this situation by increasing their competitiveness. Quality products and superior after sale service are essential to competing effectively in Singapore.

Few barriers or tariffs exist in Singapore, making the country virtually a free port. Moreover, Singapore has adopted a single-tier income tax system which means no double taxation on stakeholders and has further reduced its headline corporate tax rate to a flat 17%. As one U.S. company senior executive commented, “Singapore has the best infrastructure, talent pool, incentive schemes, transparency and Intellectual Property protection in the region.” Even though competition from many foreign suppliers is strong, Singapore has proven to be a great place to do business with its strong transportation and logistics network, extensive supplier base and talented workforce.

The U.S.-Singapore Free Trade Agreement came into effect on January 1, 2004 which made it easier for U.S. companies to do business in Singapore. The FTA provides increased protection and enforcement of Intellectual Property making Singapore one of the strongest regimes outside of the United States. It is the first bilateral trade agreement between the United States and a country in Asia. During the first 10 years of the U.S.-Singapore Free Trade Agreement, two-way trade increased by 60% to more than US$50 billion and U.S. exports by almost 85%.

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Regional Perspective:

Most of the developing economies in Asia are highly dependent on oil imports, more energy-intensive and less energy-efficient than most industrialized countries. Regional analysts and industry players believe that the petrochemical, gas and oil business remain bright, especially in Asia. As such, fundamentals for sustained exploration and downstream production activities are expected to improve based on future demand in the ASEAN region especially with rising populations, growth in middle-income demography and continued rate of urbanization. Despite substantial oil & gas deposits in the region, ASEAN is generally a net importer of oil due to increasing demand but is a net exporter of natural gas.

The ease of doing business in Singapore is something the government has positioned itself as a hub for Southeast Asia. With its excellent business and physical infrastructure, skilled workforce and strong IP protection regime, Singapore offers U.S. companies a base to export their products and conduct R&D. Foreign MNCs located in Singapore have also taken the opportunity to reap the benefits of the comprehensive infrastructure and production synergies from the country’s unique cluster development of oil, petrochemical and specialty chemicals.

Industry sources have indicated that Asia’s share of chemicals increased from 32% to 52% over the past 10 years where the value has increased from US$1.8 trillion to US$3.7 trillion over the same period. As such, Singapore is an ideal location for U.S. companies to establish a regional headquarters for Southeast Asia.
Price, quality and service are the three main selling factors of Singapore, but it is equally important for U.S. companies to build a long-term relationship first with potential partners. These partners could be in the form of agent or distributors who can serve Singapore and the Southeast Asia region such as Malaysia, Indonesia and Thailand. Singapore companies are known to be aggressive when it comes to representing new products and are also open to joint ventures or manufacturing under license. In addition, Singapore companies have for many years, been well placed to serve as agents and distributors of U.S. technology, products and services but prospective exporters should be aware that competition is strong and of a global nature. As a result, buyers expect superior after-sale service. Selling techniques vary according to the industry and products but are comparable to the techniques used in most other developed markets.

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Trade Events:

Singapore is rated as Asia’s top convention city and among the top five in the world. U.S companies interested in the Southeast Asia market should consider participating at Singapore trade shows which are particularly important as they are more regional in nature. These trade shows provide a very good perspective as to who the major players in the industry are and serve as a venue to meet many trade visitors (both local and foreign) including government officials. CS Singapore regularly coordinates with other Posts across Asia to arrange buyer delegations to attend Singapore events.

Gastech 2020
September 8-10, 2020
www.gastechevent.com

Offshore South East Asia 2020 (OSEA 2020)
November 24-26, 2020
www.osea-asia.com

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Useful Web Links:

Government & Statutory Agencies

Centre for Offshore Research and Engineering (CORE)
www.eng.nus.edu.sg/core

Singapore Economic Development Board
www.sedb.com

Shell Eastern Petroleum Pte Ltd
www.shell.com.sg

Singapore Petroleum Company Ltd
www.spc.com.sg

Singapore Refining Company Pte Ltd
www.src.com.sg

OilTanking Singapore Ltd
www.oiltanking.com

Vopak Terminals Singapore Pte Ltd
www.vopakasia.com

Petrochemical

Celanese Singapore Pte Ltd
www.celanese.com

DuPont Company (Singapore) Pte Ltd
www.dupont.com.sg

Petrochemical Corporation of Singapore (Pte) Ltd
www.pcs.com.sg

Petrol & Oil Marketers & Distributors

Chevron Oronite
www.caltex.com.sg

ExxonMobil Asia Pacific Pte Ltd
www.exxonmobil.com.sg

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U.S. Commercial Service Contact:

Name:    CHAN Y K
Position:    Commercial Specialist
Email:    yiukei.chan@trade.gov
Phone:     (65) 6476-9037
Location:    Singapore

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