Editorial: Higher-tech is the way to go in energy

Business Times 29 Jan 10;

FEARS of a double-dip recession notwithstanding, so far, it has been more up than down as far as investments go for Singapore's energy and power sector. That is reassuring, if not promising, compared to the doom and gloom this time last year when projects were being dropped left and right. While it's still wait-and-see for some investors concerned about whether global economies would in fact continue strengthening, for others confident enough about the current economic rebound, it is time to revive projects they had earlier put on hold.

Just as China is leading the global recovery, new Chinese players here are also very much in the investment forefront. The country's biggest coal-fuelled power producer, China Huaneng Group, which bought Tuas Power, is investing a further S$2 billion to build a clean coal/biomass cogeneration facility on Jurong Island. It made the move last November just as the economy was stirring, clearly wanting to be first mover at the greenfield Tembusu sector to provide utilities such as power, steam and cooling water. By so doing, its project will also be a catalyst in helping draw new petrochemical investors there. And just this month, it has decided to proceed with another S$400 million 'repowering' of an older oil-fired plant into a more efficient, and environment-friendlier gas-firing unit.

Another is Singapore Refining Company (SRC) - owned by Chevron and its new partner, Chinese oil giant PetroChina - which has kick-started detailed engineering design, ahead of construction of its earlier-stalled US$300-400 million 'green' gasoline plant. This is not surprising given that oil prices are up again at US$70-80 a barrel - or double what they were this time last year. With a faster-than-anticipated market rebound, especially in China, Germany's Lanxess is also restarting its earlier-stalled US$575 million synthetic rubber investment here which will incorporate its latest second-generation (2-G) production process. It is a beneficiary of Jurong Island's 'plug-and-play' infrastructure, as Lanxess will be able to tap Shell's new US$3 billion petrochemical complex (starting up this quarter) for raw materials.

As for minuses, two earlier alternative energy investments here have unfortunately hit snags. Natural Fuel, a first-generation biodiesel plant here, was adversely affected by rising palm oil prices and has been wound up. And Rolls-Royce Fuel Cell Systems, a US$100-200 million project, ran into technical issues and has gone back to the drawing board.

More positively, a 2-G biodiesel plant - the S$2.4 billion Neste Oil facility, which will be the largest such facility in the world - will start up here later this year. The Finnish refiner claims the advantage of having advanced technology that no one else has so far, which means it has no competitor.

It will be this climb up the technological ladder - exemplified by the 2-G plants of Neste and Lanxess, as well as the advanced new Shell and ExxonMobil petrochemical crackers - which the energy/chemicals sector here will have to count on for future growth.