Singapore's Marina Bay Sands complex
Source of picture: Washington Pos
By John Richardson
"SUCCESS in this business, whether you are tracking price direction or planning new investments, is 95% about feedstock," says a senior European-based sales manager with a global polyolefin producer.
So perhaps it shouldn't be a great surprise that a considerable amount of the planning and thinking going into Singapore's next wave of petrochemicals capacity relates to raw materials.
To say that this business is 95% about raw-material advantage, however, may, in some instances at least, be an overstatement.
Energy efficiency, the environment and logistics matter a great deal, too, which is also reflected in the discussions taking place in Singapore as the Jurong Island Version 2.0 strategy is compiled.
Working committees have been established involving the government and the private sector to help formulate the new direction in these areas.
Singapore is already a major regional supply source with sufficient competitive advantages and so where it goes from here will be the focus of keen interest from Houston to Beijing.
Despite having no oil or gas reserves to draw on, the country has still managed to build cost-efficient capacity.
This is partly the result of the mixed-feed cracker technologies employed by ExxonMobil and Shell Chemicals enabling the use of refinery products that can have low alternative values in fuels markets.
Shell Chemicals brought on-stream its 800,000 tonne/year cracker in Singapore in March. It can crack a full range of feedstock from very light to very heavy, including hydrowax from a revamped hydrocracker.
And ExxonMobil is expected to have commissioned its second cracker on Jurong Island by 2012, which, like its first cracker in Singapore, will be closely integrated with the company's refinery.
These two investments will see the country's ethylene capacity rise from 2m tonne/year to 4m tonne/year.
"This puts us on path to increase our ethylene capacity to 6-8m tonne/year in the long term," said Liang Ting Wee, Director of Energy and Chemicals at the Economic Development Board (EDB) in an emailed response to questions. The EDB is part of the Singapore government.
The eventual ethylene target suggests that several more crackers might be built in Singapore, leading to considerable industry speculation about likely investment candidates.
Further use of refinery bottoms is a feedstock option for additional crackers.
"There is a global trend towards cleaner and low-sulphur transportation fuels," Liang added.
"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 currently 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 range of petrochemical raw materials.
To this end, he said that "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.
"LPG could be used as an alternative feedstock to naphtha for crackers, as well as other industrial users."
One obvious potential supplier of LPG is Qatar Petroleum, which in November last year acquired equity stakes in two local Shell Chemicals/Sumitomo Chemical joint ventures - cracker operator Petrochemical Corp of Singapore and the downstream company, The Polyolefin Co.
"I'm hopeful that condensates and LPG would flow from Qatar to Singapore as a result of Qatar Petroleum taking an investment in these joint ventures," said Ben van Beurden, executive vice- president of Shell Chemicals when the deal was announced.
Biomass is another option being evaluated.
"In the area of biomass, we are keen to position Singapore as a leading location for biomass-to-chemicals conversion technologies," said 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.
"Examples of biomass available in this region include palm-based materials such as palm oil, palm kernel oil and empty fruit bunches, sugar cane, starch-based materials such as cassava and sago palm, as well as cellulosic biomass materials."
As for energy efficiency and the environment, Liang added: "We are also looking to enhance the sustainability of the chemical industry through R&D in emerging areas such as carbon capture and utilisation. The availability of concentrated streams of CO2 on Jurong Island can present exciting opportunities for companies."
Work is also underway to create a comprehensive master-plan to meet the long-term water needs of Jurong Island, while reducing dependence on supplies from the Singapore mainland, continued Liang.
This could include use of seawater for cooling towers and recycling waste heat for applications such as water desalination, he said.
Logistics improvements being considered included the feasibility of a second road link between Jurong Island and the mainland, a new container barging terminal and an island-wide pipeline grid system, he added.
All of this gives a useful insight into not only how the future could shape-up for Singapore, but also for the petrochemicals industry as a whole.
Beyond the current down cycle, significant new capacities will be needed to meet emerging market demand.
The debate taking place in Singapore shows that meeting this demand has become a lot more complicated, thanks to factors such as a greater need for logistics efficiency and energy efficiency and environmental challenges.
And to finish as we started on feedstock, ethane gas shortages in the Middle East could mean that this next wave of capacity is built largely outside the region.