Singapore's new chemical strategy

Jurong Version 2.0

06 August 2010 00:00  [Source: ICB]

The island state tries to build on past successes with Jurong Island Version 2.0 - a new approach all the way down the value chain from energy to specialty chemicals

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At first glance it's baffling - how a small island state with a domestic market hardly worth talking about and no indigenous oil or natural gas has become a major petrochemicals producer.

But then you dig deeper into the history of Singapore and the reasons for its success become clear: long-established and fully depreciated refineries enabling highly feedstock-efficient integration with crackers and cracker derivatives, excellent logistics and a stable political and therefore investment environment.

Now, though, as Singapore draws up plans for Jurong Island Version 2.0 - the next investment blueprint for the industry - there are plenty of challenges, not least of which is maintaining the feedstock efficiency essential to further boost basic petrochemicals capacity.

Once the second ExxonMobil cracker complex has been brought on stream in Singapore, the official schedule for which is 2011, the country will have a C2 capacity of around 4m tonnes/year. The eventual aim is to raise this to 6-8m tonnes/year, says the Singapore government's Economic Development (EDB). The EDB is driving the Jurong Island Version 2.0 initiative.

Both ExxonMobil and Shell Chemicals - which commissioned an 800,000 tonne/year cracker in March this year - have employed mixed-feed cracker technologies to take advantage of low-value refinery products as feedstock. The focus might now switch to any further spare refinery capacity on Jurong Island as one of the objectives of Jurong Island Version 2.0 is to make better use of "refinery bottoms".

The blueprint also calls for diversification of bio-based and liquefied petroleum gas (LPG) raw materials.

Last November, Ben van Beurden, executive vice president of Shell, said: "One of the critical success factors of any petrochemical facility, whether it is in the Middle East or here in Singapore, is access to competitive feedstock."

He was speaking after the announcement that Qatar Petroleum International had taken equity stakes in two Shell/Sumitomo Chemical joint ventures in Singapore - cracker operator Petrochemical Corp. of Singapore and the downstream company The Polyolefins Co.

Van Beurden added that he was hopeful that the investment would result in condensates and LPG flowing from Qatar to Singapore - hence plans reported last December by ICIS for an LPG terminal on Jurong Island.

Stronger links with Qatar seem logical as the country is extracting ever-greater quantities of propane and butane from methane as part of a huge increase in its liquefied natural gas (LNG) capacity.

Why all this focus on feedstocks? Building more basic petrochemicals capacity is going to be hard to justify in an era of highly cost-­competitive Middle East crackers, unless Singapore can maintain a raw materials advantage.

BEYOND "PLUG-AND-PLAY"
Jurong Island Version 2.0 is being formulated through discussions with the industry and the government via a series of steering committees covering energy, logistics and transport, feedstock options, environment and water.

The plan is to add to the plug-and-play concept that has contributed to Singapore's success in petrochemicals, which involves shared pipelines, utilities and logistics.

A consultancy study is under way into how to boost energy efficiency as investments take place to increase Singapore's energy options. These include not only the LPG terminal, but also an LNG receiving terminal, due to be completed by early 2013.

Logistics and transport options being studied include minimizing tanker turnaround time and multi-user jetties.

A second link from Jurong Island to the mainland is being planned, according to a source with the JTC Corporation - an industrial development branch of the government.

Nearly 40,000 workers travel daily to Jurong Island, and the number is set to grow as more petrochemical companies set up base at the hub, the source told ICIS news in May.

The growing number of commuters had made it necessary to improve the transportation link to, and within, the island, he added.

"We are also building a barging terminal to transport hazardous products in and out of the island," he said.

As for the environment and water, "Singapore is an ideal place to test out new technologies and could also become an important carbon credits trading hub," says a producer based in Singapore with a global polyolefins producer.

In a speech in March, marking the start-up of the Shell cracker, Singapore's Prime Minister, Lee Hsien Loong, said: "We have schemes to tap in to waste heat to power production processes and schemes to convert 'waste' CO2 into useful products, thus creating more value and reducing the carbon footprint."

The Jurong Island Version 2.0 process includes a separate water working group that is examining the use of innovative water technologies in order to create what the government calls a "self-sustainable Jurong Island."

ADDING VALUE DOWNSTREAM
The new strategy also involves attempting to attract further value-added chemical investments. In March, Shell's van Beurden said: "We have surplus propylene and ethylene from our new cracker and we are in advanced discussions on an array of options to make use of these feedstocks. Announcements will be made in the coming months."

Shell already has a contract in place to supply raffinate 1 and 2, after butadiene has been extracted, to LANXESS's 100,000 tonne/year butyl rubber project, which is due to come on stream in the first quarter of 2013.

The new Shell cracker has around 150,000 tonne/year of ethylene for export, say market sources; its 155,000 tonne/year butadiene capacity is being sold to customers in Jurong ­Island and overseas, van Beurden added.

Another objective is to go way downstream to take advantage of a very good intellectual property rights environment. Bayer MaterialScience (BMS), for example, opened a Functional Films Research Centre in Singapore last month, representing a modest investment of S$12m ($8.8m) - but with the potential for big returns.

"The global polymeric films markets could grow from $650m in 2005, increasing to $100bn by 2020, with BMS hopefully gaining about $1bn of that hugely increased market," says the company's CEO, Patrick Thomas.

Realisation of this astronomical growth hinges on the success of research in Singapore and elsewhere into improving barrier and other properties. This would enable these materials to gain a major foothold in the consumer electronics industry.

Since Singapore's first cracker came on stream in the mid-1980s, the competitive environment has undergone major changes. And change continues, presenting big challenges for the architects of Jurong Island Version 2.0.

 

EDB ON THE NEW STRATEGY
Liang Ting Wee, director of energy and chemicals at the Economic Development Board (EDB), further outlines the strategy for growing petrochemicals in Singapore.

He says that further use of refinery feedstock is one option for raising ethylene capacity. "There is a global trend towards cleaner and low-sulfur transportation fuels. The implication of these stricter fuel standards and policies is that there will be more refinery bottoms (available), which can either be upgraded to cleaner fuels, or used as a feedstock for chemicals.

"We are studying this closely with the refineries in Singapore to understand the economics of the various options." He added that Singapore was also keen to diversify the petrochemical raw materials: "In partnership with the industry, we are studying the feasibility of an LPG [liquefied petroleum gas] terminal to enable companies on the ­island to import LPG in more significant volumes.

"In the area of biomass, we are keen to position Singapore as a leading location for biomass-to-chemicals conversion technologies," says Liang.

"Our geographical position in the middle of a region rich in biomass and strong logistics connectivity, coupled with integration opportunities to our chemical industry, will present interesting new opportunities for companies."

As for energy efficiency and the environment, Liang adds: "We are also looking to enhance the sustainability of the chemical industry through R&D in emerging areas such as carbon capture and utilization. The availability of concentrated streams of CO₂ on Jurong Island can present exciting opportunities for companies."

Additional reporting by Nurluqman Suratman and Pearl Bantillo

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