Jurong Island's chemical romance

Jacqueline Woo THE STRAITS TIMES AsiaOne 19 Jul 15;


The reclaimed 3,000ha Jurong Island – an amalgamation of seven offshore isles – was formed in 2009. It is home to more than 100 companies – including leading industry players BASF, ExxonMobil, Mitsui Chemicals, Shell and Sumitomo Chemicals – with investments amounting to over $47 billion. Photo: EDB

Jurong Island - the cornerstone of Singapore's petrochemicals industry - is looking to the speciality chemicals field to keep it ahead of its global competitors.

The Government is behind the push, with the Economic Development Board (EDB) setting its sights on significantly growing the sector, said Mr Eugene Leong, its director of energy and chemicals.

Speciality chemicals refer to niche chemicals and polymers which are usually higher up in the value chain as they have unique functions that enhance a product's performance. They include automotive-related chemicals, which can be used to produce fuel-efficient cars, and agro- chemicals to raise farm efficiency.

"If you're just a factory making things, you're not going to go very far," Mr Leong told The Straits Times in a recent interview. "We need to go beyond just manufacturing... and become relevant for the future."

He noted that the speciality chemicals sector, which thrives on intellectual property and intensive know-how, will come with higher margins. It is also "much more resilient to commoditisation".

"With a growing middle class in Asia and consumerism on the rise, we need to make sure we are plugged into the future of the economy," said Mr Leong.

The number of speciality chemicals investments on the island has grown rapidly in recent years.

German firm Evonik Industries announced in May its plan to expand its oil additives plant there as part of its €5.5 billion (S$8 billion) investment programme.

Earlier this month, Belgium- based Solvay opened a $50 million speciality surfactants plant on Jurong Island- its largest in Asia.

The EDB said one-third of the $6 billion fixed asset investments secured for the industry over the past two years came from the speciality chemicals sector.

As the sector moves deeper into creating knowledge, Mr Leong noted that investments in Jurong Island are likely to become smaller compared with the large-scale projects previously. But they will "create a lot of value".

"It's operationally very challenging because these speciality chemicals are not easy to make," he said.

"But we have the expertise after being in the industry for more than a decade. This is what will make us relevant and robust as a sector."

Indeed, Singapore's position as a global chemicals hub has grown significantly alongside the extensive development of Jurong Island over the past decade.

The reclaimed 3,000ha island - an amalgamation of seven offshore isles - was formed in 2009.

"We started with essentially just an idea," said Mr Leong.

"Then we had to move into really delivering the goods, convincing investors to make investments here even though we don't have any feedstock or a clear idea of where the market was."

Jurong Island today is home to more than 100 companies - including leading industry players BASF, ExxonMobil, Mitsui Chemicals, Shell and Sumitomo Chemicals - with investments amounting to more than $47 billion.

The energy and chemicals sector, which employs 26,000 people, is the largest contributor to Singapore's manufacturing output.

Output from the chemicals cluster has nearly doubled, rising from $53 billion to $103 billion over the past 10 years.

The evolution of Jurong Island helped open up opportunities for small and medium-sized enterprises as well.

Local firm Rotary Engineering, for instance, was contracted by several companies in the 1990s to carry out maintenance work for facilities on the island.

Turnover for its maintenance division, which was only around $2 million then, has since grown more than 20 times, said founder, chairman and managing director Chia Kim Piow, who added: "As Jurong Island continues to grow, Rotary will grow with it."

Keeping its place among the top global petrochemical locations, however, is easier said than done.

Mr Leong acknowledged that the industry today faces headwinds from various directions, especially as current market conditions are "not so rosy".

The shale revolution in the United States, for one thing, has led to cheaper feedstock, giving American producers an edge over local players in terms of cost, he noted.

This was little helped by the plunge in global oil prices since June last year, which has squeezed margins for companies in the refining and petrochemicals industries.

Also, just last month, Tokyo-listed chemical and pharmaceutical company Teijin said it will shutter its polycarbonate resin plant on the island by the end of this year, owing to high costs.

Singapore's key markets in Asia are also growing at a slower rate amid an increase in global chemicals production over the past few years, said Mr Leong.

Still, he remains hopeful about the future.

This is because South-east Asia's demand for chemical products is among the highest-growing globally and Singapore is "smack in the middle of it".

"If you look at the longer-term prospects, we're still in a region where they will need products," said Mr Leong.

"We still have a good future. Over time - and it's just a matter of when - we will have to think about adding capacity when demand returns."

He added that the EDB will continue to develop infrastructure and logistics on the island - such as the new barging terminal and Jurong Rock Caverns underground storage facility - while driving integration among companies there.

"Every time a company decides to pull out, we can find ways to make them stay, or we can keep transforming to keep getting new, good investments.

"Our strategy is to look for additional opportunities to make such investments so that companies which are here will say that Jurong Island continues to provide something special."

For oil giant Shell, Singapore's vision to be a leading petrochemicals hub has helped it maintain its competitive edge.

"It's a winning model of how co-location of related chemical industries and services in a single site can bring synergies for companies," said a Shell spokesman.

The group's largest petrochemical production and export centre in the Asia-Pacific region is on Jurong Island, where it is also building new petrochemicals production units.

The projects, added the spokesman, are "progressing well".

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