Singapore's petrochem hub moving to higher gear next year

Measures are being taken to further improve sector's competitiveness
Ronnie Lim Business Times 20 Dec 10;

(SINGAPORE) Singapore's oil and petrochemicals hub will shift to higher gear in 2011, especially with the roll-out of the Jurong Island 'version 2.0' initiative by mid-year.

The joint government/ industry push to further improve the sector's competitiveness comprises strategies such as importing LPG as an alternative feedstock for the petrochemical crackers here, and harnessing cryogenic energy from the LNG terminal for various purposes including power generation.

Increasingly, Singapore is also moving into production of specialty chemicals with the establishment of an emerging new high-purity ethylene oxide (HPEO) 'chemicals corridor'.

Feedstocks from newly-started petrochemicals complexes have also drawn in more players including a slew of synthetic rubber producers. This will help Jurong Island maintain an edge over rival hubs in China and the Middle East which are focused on commoditised petrochemicals, industry observers say.

An upcoming cornerstone investment will be ExxonMobil's US$5 billion second petrochemical complex starting up mid-2011. It will boost Singapore's production of ethylene, an essential building block for downstream chemicals, to a critical 4.1 million tonnes per annum (tpa) from altogether four crackers here.

The world's largest biodiesel plant, Neste Oil's just-started S$1.2 billion Tuas facility, is also expected to ramp up to full production of 800,000 tpa by around the same time.

They will add more muscle to a sector, which earlier this year saw the start-up of Shell's US$3 billion petrochemical complex, which includes a monoethylene glycol unit which is helping Shell launch a new 'chemicals corridor' for HPEO feedstocks needed by downstream soap and detergent makers there.

Just as the new Shell complex (which will supply Raffinate-1 feedstock) also helped draw in Germany's Lanxess to set up a 400 million euros (S$712 million) butyl rubber plant here, butadiene from another new Shell unit could similarly induce Lanxess to site a planned second plant here for Nd-PBR (another hard- wearing synthetic rubber used for tyres).

Two other Japanese synthetic rubber makers, Sumitomo Chemical and Asahi Kasei Chemical, have also just announced that they will be investing in S-SBR synthetic rubber plants on Jurong Island to tap butadiene and styrene feedstocks available there.

This is exactly what Singapore is banking on: that the new petrochemical crackers will provide the 'critical mass' to supply the harder-to-get feedstocks needed by new downstream players producing more specialised petrochemicals.

Not only will the latest Shell and ExxonMobil crackers take Singapore nearer to its long-term target of a capacity of 6 million tpa of ethylene, the Republic must also ensure that it 'fully extracts value from these crackers by also securing specialised, downstream players', one investment official earlier stressed.

There was also recent good news that Jurong Aromatics Corporation's long-delayed US$2.4 billion aromatics complex is firmly back on track, having just sewn up debt financing for the project. Construction of the world-scale project - which will produce 1.5 million tpa of aromatics and 2.5 million tpa of transport fuels - is expected to start shortly, with the facility slated to come on-stream by 2014.

Like the other investments, JAC's project will have spill-over effects. It is the first customer to commit to the Jurong Rock Cavern oil storage which is currently under construction. JAC's 20-year utilities deal with Sembcorp has also spurred the genco to plan a 800-megawatt utilities expansion on Jurong Island.

The JAC facility will also comprise Singapore's first new 'niche' refinery investment in a long while, in the form of a US$400 million condensate splitter which will supply the raw materials needed by the aromatics complex.

Refining in Singapore - comprising ExxonMobil (605,000 barrels per day), Shell (500,000 bpd) and Singapore Refining Company (290,000 bpd) - has stayed stagnant at 1.4 million bpd for quite a while, amid significant new plants in rival centres in China, India and Thailand.

BP's latest 2010 Statistical Review of World Energy showed refining capacity increases of 10.5 per cent in China and 19.5 per cent in India, with Reliance Industries' 1.2 billion bpd Jamnaga complex now the world's biggest. Thailand also added 5.5 per cent of capacity to 1.24 million bpd, bringing it close to Singapore's.

While Singapore would like to see at least another new refinery investment here - to help provide naphtha feedstock for a targetted 6 million tpa of ethylene (petrochemicals) production here - this has so far not been forthcoming. Jurong Island version 2.0 may short-cut this process, if Singapore decides to proceed to build an LPG terminal to import alternative liquefied petroleum gas feedstocks for the petrochemical crackers.

Despite no new refinery building here so far - not surprising, given the current global overcapacity - what is heartening however, is that the refiners here are continuing to invest in upgrading projects.

ExxonMobil - whose US$11 billion refinery and petrochemical facility here is already its largest manufacturing site worldwide - has just committed to build another diesel hydrotreater investment. The project, said to cost another US$500 million, will enable it to produce 'green' diesel for increasingly environment-conscious regional markets.

An industry source says it is anyone's guess what the petrochemicals market will be like when ExxonMobil's new cracker starts up in the middle of next year. He is nevertheless hopeful that continued economic growth in South-east Asia and China will be able to absorb the upcoming new capacity. 'While the market is quite volatile, I'm guardedly optimistic about 2011,' he adds.

Singapore refining margins up to healthy levels
Demand growth for diesel and jet fuel from China, India set to continue: analysts
Ronnie Lim Business Times 20 Dec 10;

SINGAPORE's oil refiners seem to have turned a corner in the last few months, thanks to a demand pick-up for oil products like diesel and jet fuel. And this momentum could continue into early next year, industry sources reckon.

After enduring negative refining margins in the fourth quarter of 2009, and sub-US$1 a barrel margins in the first half of this year, Singapore refining margins have been climbing again to US$2.30-2.40 levels since Q3, BP's latest Refining Global Indicator Margin measure shows.

This is also reflected by a recent Moody's Investors Services report which indicated that Asian oil refining margins have 'bottomed out' because of growth in demand from emerging economies, including China and India.

'Q4 margins are quite good and are in fact higher than that shown by the generic BP measure,' one refinery official here told BT, adding that this 'strong refining performance may carry on for the next couple of months'.

'Throughput is currently quite high, with Singapore refineries running at 85 per cent to 90 per cent levels,' he said. The three facilities here are run by ExxonMobil (605,000 barrels per day), Shell (500,000 bpd) and Singapore Refining Company (290,000 bpd), the last equally owned by PetroChina and Chevron.

There have been several factors cited for the recent refining turnaround.

One is seasonal. 'Q4, being winter in the northern hemisphere, usually sees strong oil prices as people store heating oils like kerosene and diesel,' the refinery official said, and this has been borne out especially by the current cold snap in Europe.

Another has been the spike in Chinese diesel demand. 'As the Chinese authorities clamp down on power from coal-firing stations under a national move to reduce environmental pollution, factories there have resorted to using diesel-powered portable generators for power,' he said.

These two factors were also cited by oil traders here for the uptick in oil trading activity here since November. Diesel shipments from Singapore to China for instance tripled last month, one trader earlier told BT.

On the refining front, the refinery official added that 'recent demand for jet fuel has also been strong, given the growing trend towards air travel thanks to budget airlines. Mogas (motor gasoline) demand has also been good, due to low inventories in the region. Naphtha cracks are also improving, as the petrochemical industry is also running at high levels.'

Furthermore, despite new refining capacity coming up, such as in China and Thailand, 'there has also been consolidation of capacity elsewhere, like in Japan, the US and Europe, where less efficient refineries are shut down'.

The Moody's report showed that Asia added about 1.6 million bpd of capacity last year, including 800,000 bpd in China and 600,000 bpd in India. Capacity additions in Asia could total 800,000 bpd each year in 2010 and 2011.

'The large portion of global oil demand growth should stem from emerging countries such as China and India,' the report added, especially with China's oil demand forecast to grow by an average 6.35 per cent in 2010-2011.

'It's looking good,' the refinery official here said, adding that this happy situation could continue in the short term, especially as the global economy, especially in Asia, continues to grow.