KEYNOTE ADDRESS

 

OVERVIEW OF SINGAPORE & ASIAN MARKET – A LOOK TO FUTURE DEVELOPMENTS

 

BY

MR PHILIP SU,

ASSISTANT CHIEF EXECUTIVE OFFICER,

 JTC CORPORATION,

 

AT THE STOCEXPO ASIA,

TUESDAY, 2 OCTOBER 2007, AT 9.10 AM

 

Friends and Colleagues, 

Good Morning. 

            While it gives me great pleasure to deliver the Keynote Address, I am equally delighted that Singapore is chosen as the venue to host StocExpo’s first Asian Conference. 

2          For this morning’s keynote, I will start with an overview of Asia’s rapid economic growth and Singapore’s position in the oil trading and bunkering industry.  I will then give a quick introduction on JTC - the role that we play in Singapore’s economic advancement and move on to give you some details of Jurong Island.  Then, we will review the market demand for storage and logistics and take a look at what we have to offer to meet this strong demand – the storage solutions for oil products and petrochemicals.  I will give a progress update on the Jurong Rock Cavern, before moving on to our next project – the Very Large Floating Structure, or VLFS in short. 

3          We are all aware that the global energy scene is transforming rapidly.  The complexity of today’s energy landscape is compounded by the high and volatile energy prices of the past few years.  The concern over climate change is also driving the trend towards improving energy efficiency and the use of low carbon energy sources.  But, even as countries actively seek alternative energy sources to meet their energy demand, oil will continue to play a critical and dominant role in the energy arena.

Asia’s Rapid Economic Growth

4          According to the latest International Energy Agency Report, global energy demand is expected to grow by about 50 per cent over the next two decades.  The global oil market is becoming even more interconnected and interdependent.

5          For Asia, our rapid economic growth is fuelling the energy demand with great potential.  This is an encouraging phenomenon as it will also foster an increase in inter-regional energy trade.  We can expect logistic hubs that are along the main supply routes to play a more significant role in regional trading. 

Singapore’s Position in the Oil Trading & Bunkering Industry

6          Singapore’s strategic location and continued investment in state-of-the-art infrastructure and technology are critical factors to your advantage as our partners. Here - we provide you with a total solution in a cost-competitive and synergistic environment - by integrating manufacturing, regional distribution, marketing and financial services.

7          The history of Singapore's oil industry dates back to the 1890s when companies like Shell and Standard Oil (the predecessor of ExxonMobil) located their kerosene trading operations here.  In 1961, the first oil refinery in Singapore commenced operations, marking the start of over four decades of growth and development for the Singapore's oil industry. 

8          Today, Singapore is Asia’s price discovery and trading centre for oil products, and we remain an important refining and distribution hub.  Singapore is established as one of the world's largest oil trading hubs and refining centres.  In 2006 alone, the total physical trade amount is US$300 billion and the refinery output is US$31 billion.  Singapore is also the world largest oil bunkering port with more than 28 million tonnes of bunkers delivered in 2006 as compared to the 16.9 million tonnes 10 years ago.  Looking at these encouraging numbers, the oil trading and bunkering industry is definitely one that will continue to grow in Singapore.

Strategic Role of JTC & Jurong Island

9          JTC, being a statutory board under Singapore’s Ministry of Trade and Industry, is the lead agency to develop key industrial facilities and space, in support of Singapore’s economic advancement. At JTC, our mission is to plan, promote and develop a dynamic industrial landscape.  While we play the role of a strategic developer of industrial infrastructure, we are committed to support your business in Singapore – simply said, …  your success is our vision.

10        To support the Chemicals Industry, JTC reclaimed and built Jurong Island - the centrepiece of Singapore’s Chemicals Cluster.  By developing a common pipeline service corridor that integrates the tenant companies on Jurong Island, we help our partners reap the benefits of the comprehensive infrastructure and production synergies from this unique cluster development. 

11        Today, Jurong Island houses more than 90 leading petroleum, petrochemicals, specialty chemicals and supporting companies with total gross investments exceeding S$27 billion.  Some of our partners include: Akzo Nobel, BASF, Chevron Phillips, Degussa-Rohmax, Dupont, ExxonMobil, Mitsui Chemicals, Shell and Sumitomo Chemical. 

12        As oil trading, storage and logistic terminals are key components of Singapore’s energy and chemicals industry cluster, JTC will continue to develop the industrial infrastructure for these markets.  To this end, JTC is working on how we can upgrade or expand the existing infrastructure on Jurong Island.  I will elaborate on some of these plans later. 

Strong Market Demand for Storage and Logistics Terminals

13        We are also aware of the strong demand in the oil storage industry.  Several companies have indicated their interests to JTC to set up storage and logistic terminals in Singapore.  Oil traders have provided feedback that they would like Singapore to have additional storage capacity for refined oil products.  Oil majors have expressed interests in additional storage capacity for storing their products and during plant shutdown and maintenance periods.

14        Singapore currently has 4.6 million cubic metres of independent petroleum storage, with an additional 3.5 million cubic metres currently under construction by companies in the private sector.  Even with this additional capacity, feedback from the industry suggests there is a shortage of at least 3 million cubic metres of oil storage in Singapore, which would translate to more than 100 hectares of land.  In addition, demand for storage is expected to increase as some oil-rich countries like Brazil and UAE are looking for overseas storage facilities to house their reserves.  This augurs well for Singapore and countries in Asia if we are able to meet their demand.

15        We will continue to build on our capabilities and expand our storage capacity in recognition of the potential economic benefits to all our partners. 

A Look to Future Developments – Innovative Storage Solutions for Oil Products and Petrochemicals

16        Innovation is the key driver of change and growth in JTC.  We have to continually challenge the status quo and implement innovative real estate solutions for land-scarce Singapore. 

17        Earlier this year, JTC launched another pioneering project on Jurong Island - the Jurong Rock Cavern (JRC).  It is our first underground storage for hydrocarbon.  By constructing it more than 100m below ground, Phase 1 of JRC will have a storage capacity of some 1.47 million cubic metres. 

18        As an update on the JRC project, progress is well underway.  The access shafts are currently under construction; we are finalising the engineering design of the JRC.  Upon completion, JTC will be calling the Stage 2 tender for the construction of the tunnels, caverns and the associated facilities for oil storage.  We hope to be able to do this within the next two months. For the selection of a JRC operator, we are currently studying all the submissions to determine the shortlist.  We will fine-tune the RFP details before launching it sometime by first half next year.

19        Looking ahead, we foresee a strong demand for the JRC Phase 2 - which can offer another 1.32 million cubic metres of storage capacity. 

20        In addition to the JRC for hydrocarbon storage, JTC is also exploring the possible use of Very Large Floating Structure (VLFS) for oil products and petrochemicals storage.  The VLFS will be a strong boost to the industry, especially in terms of providing additional logistic infrastructure for the refining and petrochemicals, and oil trading sectors here. 

21        The VLFS is to complement the JRC and will play a unique role of providing storage for high turnover, small volumes and high quality oil products and petrochemicals.  

Embarking on the VLFS

22        JTC embarked on the VLFS by conducting several feasibility studies on the development of a technically-viable and cost-effective conceptual design of VLFS for oil products and petrochemical storage.  Co-funded by National University of Singapore (NUS), Maritime and Port Authority of Singapore (MPA) and JTC, the 12-month Phase 1 feasibility studies was completed in June 2007. 

23        We are happy to announce that the Phase 1 Feasibility Study concluded that the VLFS for oil products and petrochemical storage is technically feasible.  A conceptual design of such a VLFS has been developed and the cost is found to be comparable to land-based oil storage facilities. 

24        The conceptual design proposed by NUS comprises two rectangular modules, each measuring 180m x 80m x 15m, and has a capacity of approximately 150,000 cubic metres. 

25        From the economic and functional viewpoints, the VLFS should have an initial minimum storage capacity of 300,000 cubic metres, which is equivalent to the size of a Very Large Crude Carrier (VLCC) - a size typically used to transport crude oil in this part of the world. 

26        For 300,000 cubic metres, the VLFS only need 5 hectares of foreshore area as compared to a land storage facility which would require at least 20 hectares of land area for the same storage capacity.  This would translate to a significant saving in land use.  More importantly, it is also a marine eco-friendly system as the VLFS, being afloat in the sea, will allow sea water to flow underneath the floating modules and will not cause any irreversible damage to the marine ecosystem. 

27        The VLFS can be designed to be able to store any kind of oil products or petrochemical products.  It will be made of concrete, and is durable, fire resistant and relatively easier to maintain. Another special feature of the VLFS is its versatility.  The floating modules can be either attached to land or be a stand-alone unit. 

28        The VLFS will be ideal for oil traders and oil bunkers since it is able to cater for high turnover and high grade oil products.  JTC is already in talks with several oil trading companies who have expressed strong interest in the VLFS.

29        Here are some artist’s perspectives of the VLFS.  [First artist’s perspective] This is an example of a VLFS that is attached to land.  For this, the existing facilities on land will support the VLFS operations.  [Second artist’s perspective] Here is another possibility of a stand-alone VLFS.  This will be something like a floating petrol kiosk that is self-sufficient, and the facilities to support its operations are built on the VLFS.  [Last artist’s impression]  As mentioned earlier, the proposed VLFS is a modular system.  This spells versatility for the VLFS as the modules, and hence storage capacity, can be increased by modules easily.

30        Moving forward, JTC will be embarking on the Phase 2 of the feasibility studies which will include in-situ marine data collection, engineering design, scaled modelling and specialised tests, business operating model, security and marine environmental impact assessments.   We hope to be able to share our findings when we complete the Phase 2 studies in end-2008.

Expansion Plans in the Pipeline

31        Finally, in addition to the development of storage solutions on Jurong Island, the Singapore Government also has expansion plans to accommodate about 150 companies on Jurong Island by 2015.  We plan to invest more than S$1 billion over the next five years.  The investment includes the construction of the Jurong Rock Cavern, the Jurong Island Checkpoint expansion, allocation of sites to private companies for construction of dormitories for workers on the Island and introduction of new third-party service providers of utilities and other services.  Amidst the thriving expansion plans, I would like to stress here that the safety and security of our partners on the Island remains of paramount importance.

Conclusion

32        In summary, we are optimistic about the growing energy sector and encouraged by the strong demand for storage from oil traders and the bunkering industry.  For JTC, several innovative storage and real-estate solutions are in the pipeline. We are committed to provide the infrastructure needs to support the storage and logistic terminals industry.

33        Let me take this opportunity to wish you a beneficial Conference and great success in your business.  Thank you.