Singapore’s oil refining/petro-chemicals industry will have to fight for survival in the coming two to five years, warned the chairman of Facts Global Energy.
The start-up of new refineries in Asia and the Middle East, as well as new US petrochemical plants using cheap gas from shale gas projects there, will impact Singapore, said Fereidun Fesharaki.
“It’s a survival issue for the Singapore industry. If the refineries and petrochemical plants here can hold up (against the competition), they’ve done well already. That’s my view,” he told BT in an interview on Wednesday.
Dr Fesharaki said this in regard to concerns here over the big new US petrochemical crackers planned by oil majors which will tap ethane from shale gas projects.
Shell for instance is developing a multibillion-dollar cracker facility in Pennsylvania, while Aither Chemicals is looking at a US$330 million cracker in Kanawha Valley, West Virginia.
Chevron Phillips is similarly building a cracker in Baytown, Texas. The Marcellus Shale Play, which underlies part of the Appalachians, will supply gas to the plants.
“All the products from the upcoming US petrochemical plants will be for export,” Dr Fesharaki said. “We see the US becoming the next most important petrochemicals exporter after Saudi Arabia, with at least 10 US plants brought out of mothball.”
Because of the cheap gas available there, the oil majors are investing in the United States, and not Asian economies such as Taiwan any more, he added.
This clearly spells yet more competition for Singapore which currently has three petrochemical complexes operated by Petrochemical Corporation of Singapore, Shell and ExxonMobil, with a fourth new complex being started up by ExxonMobil.
The Singapore crackers use naphtha feedstock, although Shell and ExxonMobil’s crackers are integrated with their refineries, which means they have some flexibility to use other feedstocks such as hydrowax. They are also looking at a liquefied petroleum gas terminal to help them further diversify feedstock.
Dr Fesharaki said that while “biggies” such as Shell and ExxonMobil - which have established their largest global manufacturing sites in Singapore - are likely to maintain the status quo here, their attention will now turn towards US petrochemical projects.
This suggests that “there is likely to be a holding pattern on their petrochemical investments here”, he said.
“It is going to be worst for refining, with huge, new capacity emerging in Asia and the Middle East between 2014 and 2017… People will struggle. Essentially, Asia will be in surplus, so products will have to be transported to Europe and the US,” he added.
On the impact on Singapore refiners, Dr Fesharaki said: “Don’t look for growth.”
“If they manage to keep running and don’t close, that’s success already,” he added, saying that Japan for instance is closing 1.4 million barrels per day capacity.
“Singapore’s advantage is its location. Besides, for the biggies here, Singapore is part of their global (supply) system.”
Meanwhile, in its bid to increase competitiveness and add value to its refineries, ExxonMobil is building a US$500 million ultra-low sulphur diesel plant here, while Singapore Refining Company is mulling over a US$300 million-US$400 million “green” petrol expansion plus a base oil plant investment.
