Integral roles: Energy developments in Singapore

Singapore

S. Iswaran is currently a minister in the Prime Minister’s Office and the second minister for both home affairs and trade and Industry. Responsible for energy developments in Singapore, the Ministry of Trade and Industry (MTI) oversees the Energy Market Authority and the Jurong Town Corporation, both of which play integral roles in the development of Jurong Island.

Singapore lacks hydrocarbons resources and has relied on the Association of Southeast Asian Nations for energy supply. How does the country plan to diversify its energy sources?

Singapore is a small city-state with no natural resources and currently has to rely on imported fuels to meet its energy needs. The MTI’s key objective is to ensure a continued and reliable supply of competitively priced energy in Singapore. Diversification is one key prong of our strategy to ensure those energy supplies.

Besides piped natural gas imports from Malaysia and Indonesia, Singapore has embarked on several initiatives to further diversify its energy sources. The LNG terminal on Jurong Island, which is scheduled to commence operations in the second quarter of 2013, will allow Singapore to procure competitively priced LNG from geographically diverse supply sources. We are also studying other energy options, such as electricity import, which could potentially allow the country to tap new energy sources.

It is important for the country’s relations with top trading partners Malaysia and Indonesia to be strong. Singapore continues to have a good working relationship on energy issues on the bilateral front, as well as through the regional level with our ASEAN neighbours.

Besides conventional energy sources, what alternative energy sources can Singapore explore?

Singapore has limited access to alternative or renewable energy options. We have limited land to accommodate large-scale solar or wind farms. We have high cloud cover and low average wind speeds, which result in intermittency problems with these energy sources. Wave, tidal and ocean thermal energy sources have limited application due to the low tidal variations in our sheltered coasts and the high maritime traffic in our waters. Singapore also does not have the available land area and geographical conditions to harness renewable energy from hydro or geothermal technologies. In short, Singapore is alternative energy-disadvantaged. Given today’s technologies, renewables are not able to generate base load electricity for Singapore reliably and at competitive prices.

Nevertheless, we are investing in research and development to build our capabilities, grow the clean energy sector and develop innovative solutions for domestic deployment. Test-beds, such as the floating solar photovoltaics pilot project at the Tengeh Reservoir, and the Pulau Ubin Micro-Grid test-bed, help to facilitate the adoption of alternative and clean energy sources. In the area of research and development, we have set up the Energy Innovation Programme Office, which provides funding for solar photovoltaics, smart grids and energy-efficient green buildings. We also recognise that innovation is key to solving Singapore’s energy challenge over the long term. To facilitate this, we have established the Energy National Innovation Challenge, a competitive research programme to seed effective solutions for domestic deployment in 20 years that will increase our energy options, reduce carbon emissions and improve energy efficiency.

A planned LNG terminal at Jurong Island will give Singapore flexibility in terms of energy consumption. How important will imported LNG be to the Singapore economy?

Approximately 80 percent of Singapore’s electricity is generated using imported piped natural gas from Indonesia and Malaysia. To diversify Singapore’s energy sources and to meet rising future energy demand, the government announced in 2006 that Singapore would build an LNG terminal. As this will allow the country to import LNG from across the globe, the LNG terminal will play an important role in enhancing Singapore’s energy security. It will also enable the country to respond to developments in LNG markets, such as the emergence of non-conventional gas supplies.

By augmenting our gas supplies, imported LNG will facilitate new investments in the power generation and petrochemicals sectors, as well. The terminal will also support the growth of LNG-related businesses, such as trading, bunkering, storing and bulk-breaking of LNG for re-export.

While the main objective of the LNG terminal is to meet our domestic gas demand, we see potential opportunities for LNG spot-market trading activities, especially given the demand and supply profile in Asia. Our experience in developing Singapore as Asia’s oil trading hub, and position as a financial centre and bunkering port, could also be relevant. Already, we have seen a steady growth of traders establishing LNG desks in Singapore. Shell was among the first of the energy majors to establish LNG marketing and trading activities in Singapore. We have since welcomed other key players, including BP, BG Group and Gazprom.

Singapore saw a 32.7-percent growth in refined petroleum exports in 2011 – the second largest growth among Singapore’s exports. What are the current objectives of the petrochemicals industry in Singapore?

Today, Jurong Island is home to about 100 oil, petrochemicals and specialty chemical companies, undertaking a range of activities across the entire value chain of the petrochemicals industry. The key advantage of Jurong Island is the high level of integration – companies located on Jurong Island are able to both obtain critical feedstock as well as supply finished products to companies also on the island.

In the future, the focus for Jurong Island is to ensure that it continues to be an attractive investment location for companies. To achieve this aim, Singapore has developed a strategic blueprint, Jurong Island version 2.0 (JI v2.0), in close collaboration with industry players. JI v2.0 focuses on new infrastructure developments and system-level optimisation of valuable resources, including energy, carbon, water and land, and will encourage companies to adopt resource optimisation initiatives. In conjunction with this effort, the government is implementing projects to enhance the sustainability of the industry and the supporting infrastructure, such as an LPG terminal and a multi-user product grid.

How is Singapore preparing itself for the increasingly competitive nature of the region’s petrochemicals industry?

Despite the challenges facing the petrochemicals industry, we see opportunities for trade, as there is a geographical shift in petrochemicals production capacity and consumption patterns from the West to the emerging markets in the East. We understand that in terms of production capacity, more than 80 percent of the new ethylene production capacity over the next five years will be in the Middle East and other parts of Asia. The demand for petrochemicals in Asia Pacific is also expected to grow from 38 percent of worldwide demand in 2008 to 46 percent in 2020. As such, one of our approaches is to engage companies that are involved in the trade flows of petrochemicals from the Middle East to China and India.

In addition to serving as a trading centre for such activities, Singapore is an ideal place for such players to base their regional distribution activities. For example, Borouge, a plastics manufacturer that has its international marketing and sales head office in Singapore, also uses the country to repackage plastic resins for its regional customers in Southeast Asia.

Despite non-existent upstream assets in the country, many upstream companies have set up regional headquarters in Singapore. Why is Singapore a desirable location for these companies?

Singapore’s position as a neutral vantage point in Asia is attractive to energy companies. With their regional headquarters based in Singapore, companies can tap on Singapore’s connectivity and location to manage their regional growth and respond to both customers and suppliers. The conducive business environment, diverse talent pool and established services sector also allow energy companies to conduct commercial activities for their regional upstream assets from Singapore, including functions such as market analysis, business development, legal, accounting and strategic planning. A vibrant supporting sector has also helped in attracting upstream energy companies to Singapore. Companies such as Keppel and Sembcorp currently build a majority of the world’s subsea rigs and oilfield services companies such as Schlumberger, Halliburton, and Baker Hughes have set up both headquarters and technology centres in Singapore.

How is Singapore responding to rising global energy costs, especially its impact on businesses?

Energy efficiency is a key initiative that companies can adopt in order to prepare for rising global energy prices. Investments in energy efficiency pay back over the long-term through energy savings. We have introduced fresh funding and new initiatives to help businesses in this area. This year, we have increased funding for grants that can co-fund companies’ investments in energy efficiency. We are also working with private players to pilot repayable financing schemes.

We are also taking a targeted approach for companies whose operations are more energy-intensive. A good example is JI v2.0, which focuses on resource optimisation and promoting energy efficiency. Through this initiative, we help companies adopt energy efficiency and explore co-operation, such as exchanging excess steam and heat among plants. One of the projects includes working with a cracker cluster on Jurong Island to identify energy and water efficiency projects. Some sectors have also embarked on their own initiatives. One example is the biomedical manufacturing energy workgroup, where energy managers of companies in the pharmaceutical sector share proven energy-saving projects and practices. The group set a collective target of improving its energy intensity by an annual average of 6 percent among the companies. On average, they achieved an improvement of 7.4 percent in 2011 over the previous year.

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