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In just over two decades of building up the industry, the Republic is recognised as a trusted and connected petrochemicals hub.
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Singapore's chemicals industry had an outstanding year in 2007. Output from the cluster now stands at S$82 billion (US$59.4 billion), and it is the largest contributor to Singapore's manufacturing output at close to 34 per cent. The outlook for the industry continues to be promising, with even stronger growth predicted over the next decade. The country is particularly excited about its petrochemicals sector, which is becoming increasingly attractive to major international players.
One might question Singapore's focus on petrochemicals at this time, in light of rising oil prices. Yet according to Merrill Lynch (Singapore), the petrochemicals industry has not been hard hit; on the contrary, sector margins and company earnings are breaking records. Speaking with Asiamoney, Sonia Song, Head of Asia-Pacific Chemical Research, Merrill Lynch (Singapore), says this is "a direct example that what is important in this sector is the fundamentals of demand."
And all the action is headed for Asia, according to Saudi Basic Industries Corp (SABIC), which recently predicted that Asian demand for petrochemicals would outstrip the combined demand of the US and Europe within two years. To understand the significance of the petrochemicals industry, one simply has to consider the end products - from plastic bags and packaging to textiles, car parts, and electronics - and their relevance to Asia's increasingly wealthy population.
It is proof that Singapore's foresight is paying off; the country has been actively building its petrochemicals capabilities since it opened Southeast Asia's first petrochemicals complex in 1984. Today, it is recognised as a trusted and well-connected petrochemicals hub from which investors can run their Asian ventures. There is even a dedicated island for the activities of the chemicals industry - Jurong Island - which hosts over 95 companies including heavyweights ExxonMobil Chemical and Shell. Accordingly, one of the country's greatest strengths is offering companies the benefit of industry integration, so they can source for raw materials and sell products literally over the fence, as well as share common pipeline services and other utilities.
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Lanxess AG to invest in a butyl rubber facility in Singapore.
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Vote Of Confidence
The latest boost for the industry has been synthetic rubber supplier Lanxess AG's decision to invest in a proposed S$823 million (€400 million) butyl rubber facility in Singapore to meet growing demand from auto tyre makers. Dr Axel C. Heitmann, Chairman of the Board of Management, Lanxess AG, cites Singapore's stability as one of its winning factors.
"[Singapore] enjoys a remarkably open and corruption-free environment. It has stable prices, a business-friendly government, and a per capita GDP equal to that of the four largest West European countries," says Dr Heitmann. "Believe me, these are qualities that any CEO looks for when contemplating a major investment in any part of the world today."
Dr Heitmann was also impressed with the country's port, which offers the fastest turnover time in the world for loading and unloading ships. In addition, its terminals link shippers to a network of 200 shipping lines with connections to 600 ports in 123 countries. "Good shipping, good logistics, and good transport services are very important to us," says Dr Heitmann. He also added that Singapore's high level of IT connectivity means Lanxess could conduct its business "at very high efficiency levels here in Singapore."
Other significant developments include ExxonMobil Chemical's announcement last September that it would be building its second world-scale petrochemicals complex on Jurong Island. To be called the Singapore Parallel Train complex, its primary function will be to turn crude oil components into innovative petrochemicals products such as Vistamaxx™, a specialty rubber that reportedly trumps the competition when it comes to elasticity, softness and strength, with uses ranging from medical equipment to space-age fabrics. The project is one of the largest petrochemicals investments the company is making, in terms of size and scale, says Kwa Chong Seng, Chairman and Managing Director, ExxonMobil Asia Pacific. "It is our commitment to and confidence in Singapore's long-term growth which underlies our decision," he adds.
Earlier last year, Mitsui Chemicals too announced a new S$230 million (US$166.5 million) plant to boost production of a substance called TAFMER™, which, when blended with other resins, is said to dramatically improve impact resistance for automobile bumpers and sealability for packaging materials. The new plant will feature a "simplified and final version of Mitsui's state-of-the-art catalyst and process technologies," says Yasushi Nakashima, Managing Director, Mitsui Elastomers Singapore. "In addition, this new technology enables us to provide new TAFMER™ products with higher and differentiated performances for various applications."
Buoyed by its success thus far, Singapore is already contemplating the future. "We need to tackle infrastructure, human resources, raw material and technology issues to remain competitive over the long run," says Julian Ho, Executive Director, Energy, Chemicals and Engineering Services, Singapore Economic Development Board (EDB).
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Shell - a key petrochemicals investor in Singapore.
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The Next Level
Remarkably, despite its reliance on imported raw materials, Singapore is on its way to producing almost four million tonnes of ethylene a year. Responsible for this boost in production will be ExxonMobil's latest development, as well as Shell's upcoming world-scale ethylene cracker and monoethylene glycol plant, which is targeted to begin operations in 2009.
Looking ahead, the country intends to move closer to the output rates of major international players, but it will take time, says Aw Kah Peng, Assistant Managing Director, Industry Development, EDB. This critical mass of ethylene output will allow the industry to capture value from new chemical chains and produce specialty and higher value chemicals and polymers. It is in line with the country's plans to move up the value chain, from commodities to specialties, thus strengthening its competitiveness, and providing a differentiation factor from other chemicals-producing regions such as China and the Middle East.
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Technology is also a critical enabler in the growth and development of the petrochemicals industry, and Singapore is investing heavily in R&D with the aim of being a "first implementer" of technologies, as well as a technology creator.
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Technology is also a critical enabler in the growth and development of the petrochemicals industry, and Singapore is investing heavily in R&D with the aim of being a "first implementer" of technologies, as well as a technology creator. In particular, the country has its sights set on corporate upstream R&D; areas of interest include new process routes and novel applications.
Singapore's Agency for Science, Technology and Research (A*STAR) fosters world-class scientific research and nurtures world-class research talent by setting up and sponsoring public research institutes in specific niche areas like chemicals. The Institute of Chemical and Engineering Sciences (ICES) is one of the research institutes under A*STAR - it has done research work in biocatalysis and is gaining traction in the area of catalyst screening and optimisation, bioprocess engineering, and protein engineering. To facilitate R&D interactions with the industry, the ICES is sited onJurong Island, and Singapore aims to have companies work hand-in-hand with the ICES to translate their laboratory research into commercial applications.
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"We want to reach the point where we can compete with the US, Europe and Japan as an investment location focused on technology-intensive processes and high-value specialty products."
- Julian Ho, Executive Director, Energy, Chemicals and Engineering Services, EDB
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"We want to reach the point where we can compete with the US, Europe and Japan as an investment location focused on technology-intensive processes and high-value specialty products," says Ho. "Companies are increasingly choosing Singapore as a location for differentiated technologies that are close to their hearts."
For one, British firm Lucite - the world's leading producer of methyl methacrylate (MMA), the basic ingredient of the acrylic industry - chose Singapore to launch its new Alpha technology, which it predicts "will change the face of the methacrylates industry." According to the company, the technology can cut costs by up to 40 per cent by using ethylene, carbon monoxide and methanol as feedstock, as opposed to traditional methods based on acetone cyanohydrin.
Likewise, Shell plans to implement its proprietary OMEGA technology in its new plant; the technology is touted as the most efficient technology in the world to convert ethylene to monoethylene glycol, an important raw material for industrial applications.
With other companies following suit, Singapore can expect to remain one step ahead of the competition in terms of technology - and in time to come, launch revolutionary technologies of its own.
From Creation To Protection
It must be said that cutting-edge technologies and research are futile if the resultant expertise and products cannot be protected. As such, the country takes its IP protection seriously with a regime that is ranked highly in Asia. Companies can file for IP protection globally from Singapore, as it is a signatory to major IP conventions and treaties, such as the Patent Cooperation Treaty.
Within the country, institutions such as the Intellectual Property Office of Singapore and the Singapore International Arbitration Centre ensure investors have all the services they need for new patents, copyrights and trademarks, IP litigation, technology intelligence and IP valuation. This is a strong incentive for companies not only to develop unique proprietary technology, but also to locate their Asian developmental centres and build their brands from Singapore's shores.
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BASF has chosen Singapore for its R&D activities.
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Consequently, chemical companies have been eager to locate their IP base in Singapore. Leading chemicals company BASF is investing about S$4 million (US$2.9 million) in a Singapore-based organic electronics R&D centre that will focus on two important growth clusters: nanotechnology and energy management. "Our investment underlines our firm commitment to Singapore and will generate innovation for our customers in Asia-Pacific and other regions," says Dr Martin Brudermüeller, Member of the Executive Board, BASF, who is responsible for its Asia-Pacific operations.
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Mitsui Chemicals sets up plant to boost production of TAFMER™.
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Mitsui Chemicals is another industry leader with R&D interests in the country. Its Singapore research centre - the first such establishment outside Japan and housed at ICES - focuses on catalysis and asymmetric synthesis, which will provide the means to create environmentally friendly and efficient processes, as well as new materials and chemicals. With fewer steps needed in the entire chemical process, this translates into tremendous time, energy and cost savings for chemicals companies in future. Dr Akihiro Yamaguchi, Senior Managing Director and Group Executive (R&D Centre), Mitsui Chemicals, sums it up well: "In order to conduct R&D efficiently and consistently, we need a number of things including human resources, excellent facilities, up-to-date information on science and technologies, and researchers should feel secure. And Singapore satisfies these requirements."
The Wacker Group also opened a technical centre in Singapore last year, which serves as a regional Centre of Excellence for construction polymers, silicone emulsions, silicone resins and antifoam agents. Its other functions include the development of applications in the construction, textiles, pulp- and paper-processing sectors, and in the process industry. Calling the centre an "important milestone" in Wacker's Asian growth strategy, Dr Rudolf Staudigl, Executive Board Member for Asia, Wacker Chemie AG, said Singapore was chosen because of its "valuable assets for developing business and R&D."
Top-Notch Infrastructure
To cater for the needs of the industry and optimise efficiency, Singapore has invested in infrastructure, worked with private companies to provide services, and developed a comprehensive slate of logistics services.
The construction of substantial new storage facilities in the country in 2005, with projects by Horizon, Vopak, Oiltanking and Hin Leong, will collectively add an additional 26 per cent to Singapore's total storage capacity of 88 million barrels. This will give Singapore the largest oil storage capacity in Asia once work is complete.
The country's jetty has also been reinforced, enabling heavy equipment to be moved by barge as well as by road. This has helped prevent traffic congestion. Also helping to keep these projects on track is the expansion of the Jurong Island checkpoint. Processing of each person entering the island during peak-construction period will now take no more than 10 minutes.
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Singapore's strength in infrastructure goes beyond the ports. Its Banyan LogisPark (an 80-hectare area on Jurong Island) is dedicated to transshipment and break-bulk operations for bulk liquid petroleum and petrochemicals products, supporting manufacturers in Singapore and within the Asian chemicals industry.
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However, Singapore's strength in infrastructure goes beyond the ports. Its Banyan LogisPark (an 80-hectare area on Jurong Island) is dedicated to transshipment and break-bulk operations for bulk liquid petroleum and petrochemicals products, supporting manufacturers in Singapore and within the Asian chemicals industry.
Furthermore, integrated into the complex infrastructure of Jurong Island are underground rock caverns; the first phase of underground storage construction is underway with the creation of 1.47 million cubic metres of storage space below ground. A second phase of 1.73 million cubic metres of storage space has been catered for additional demand. Known as the Jurong Rock Cavern project, the multimillion-dollar facility not only enhances safety on Jurong Island, but also frees up about 60 hectares of surface land for higher value manufacturing operations, a critical advantage for land-scarce Singapore.
A Skilled Workforce
One of the biggest problems confronted by the chemicals industry is manpower shortage, from unskilled construction workers to senior chemical engineers capable of managing complex projects. Singapore has gone to great lengths to develop indigenous talent; it set up its Chemical Process Technology Centre in 2004 to build a pool of highly skilled workers for the industry. The Centre was conceptualised, designed and created largely by industry players, with support from government and educational institutions. Students at the centre can undergo comprehensive training in "live" plant operations, as well as enjoy access to state-of-the-art technologies.
Also instrumental in grooming talent is the local ICES, which is dedicated to training R&D manpower and developing a world-class research programme in chemistry and chemical engineering sciences.
The country's massive efforts in training and education have paid off, even resulting in expertise being exported. For example, Singapore executives worked on Shell's Nanhai project in China.
But with new projects being announced locally on a regular basis, labour shortage can still occur, especially in construction. In an effort to tackle this problem, the ratio of foreign unskilled workers who can be employed for every one Singaporean has been gradually raised from 3:1 in 2006 to 7:1 in 2007. The capacity of the country's testing and certification centre, which assesses the suitability of overseas workers, is also being expanded to prevent bottlenecks.
With respect to global talent, BASF's Singapore R&D centre is one that features a melting pot of nationalities - over 30 researchers who hail from at least 10 different countries, including China, India, Vietnam, Japan, Korea and Taiwan. This is just one example of how Singapore provides investors with access to world-class regional talent.
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While pushing ahead with its plans to develop the industry, Singapore has remained mindful that sustainable growth is only possible through ensuring high standards of environmental protection, workplace safety and socially responsible practices.
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Moving Forward With Sustainability
While pushing ahead with its plans to develop the industry, Singapore has remained mindful that sustainable growth is only possible through ensuring high standards of environmental protection, workplace safety and socially responsible practices.
"If Singapore's energy and chemicals cluster as a whole is to be truly world-class, it needs to show leadership on sustainability," says Ho. "This involves ensuring the safety and the security of our assets. We also need to improve on energy and waste-water efficiency as well as environmental sustainability-driven technologies and socially responsible practices."
One of the organisations working to this end is the Singapore Chemical Industry Council (SCIC). In addition to representing Singapore's chemicals industry in the private sector, SCIC represents the industry regionally and internationally in the areas of workplace safety and environmental standards. It also helps to drive initiatives in Responsible Care within Singapore through outreach and awareness programmes such as roadshows, induction programmes and conferences.
To propel the industry forward, SCIC launched the Responsible Care Awards in 2001, which recognises companies that have effectively implemented health, safety and environmental programmes and initiatives. This year's event saw Shell Seraya win accolades in three categories - community awareness and emergency response code, employee health and safety code, and process safety code. An increasing number of local companies were also recognised.
"By their safe and responsible management of chemicals throughout their lifecycles, the winning companies continuously raise the bar on acceptable standards in health, safety and environmental performance of the chemicals industry," says Lee Tzu Yang, Chairman, Shell Singapore. "Their successes inspire others to follow, but more importantly, their adherence to Responsible Care principles help to ensure that the industry remains sustainable."
EDB is also working closely with JTC Corporation to further enhance Jurong Island's infrastructure for sustainable development. For instance, Singapore is working to achieve water self-sufficiency on the Island through de-salination and waste-water collection programmes. Efforts are also underway to reduce emissions and improve already high standards of processing.
As climate change becomes a global concern, the need to reduce reliance on fossil fuels to generate energy is growing stronger. With a good track record in safeguarding the environment, Singapore is stepping up efforts to reduce global warming. To improve energy efficiency, the National Environment Agency (NEA) set up the Energy Efficiency Programme Office (E2PO) to coordinate the drive towards more sustainable use of energy in Singapore. According to the International Energy Agency's World Energy Outlook Report for 2006, energy efficiency can reduce projected CO2 emissions
by more than 60 per cent by 2030. It will also increase overall costsavings for businesses and consumers by cushioning the impact of rising energy costs.
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ExxonMobil's second steam cracker complex, one of the company's largest investments.
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Companies are increasingly investing in technologies, measures and facilities to increase their energy efficiency and enhance their business competitiveness. PowerSeraya, for instance, is commissioning an 800MW natural gas-fired co-generation combined cycle plant by 2010 to replace its three oil-fired steam units to reduce its overall carbon footprint by an additional 10 per cent. ExxonMobil's Singapore Olefins Plant is uniquely designed to improve furnace energy efficiency and lower carbon dioxide emissions.
Exciting Times Ahead
As a sign that Singapore has become a respected player on the global front, the country will host the upcoming Asia Petrochemical Industry Conference for the first time.
It must be said that the country's good run is a result of intensive preparation - it successfully wooed ExxonMobil by ensuring there was sufficient space to integrate its new project with its existing facilities in Singapore, and secured the Shell project by readying the industrial land well in advance so that Shell could break ground and start work within a month of their final decision. The Shell investment in turn led to Lanxess's decision to set up in Singapore, for its plant would be relying on feedstock from the Shell cracker.
Once the Shell and ExxonMobil crackers are ready, a whole new world of investment possibilities will open up for Singapore in the areas of downstream petrochemicals and specialty chemicals. At the same time, the country is urging its investors to translate their laboratory research into commercial applications; this will ensure its petrochemicals industry continually evolves to meet ever-changing market requirements, and move up the value chain. All things considered, the industry looks set to remain at the forefront by being not only competitive but also sustainable.
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