Mr S Iswaran at the 22nd Asia-Pacific Petroleum Conference

SPEECH BY MR S ISWARAN,MINISTER OF STATE FOR TRADE AND INDUSTRY, AT THE 22ND ASIA-PACIFIC PETROLEUM CONFERENCE, 5 SEPTEMBER 2006, 6.30 PM AT THE STAMFORD BALLROOM, RAFFLES CITY CONVENTION CENTRE

Mr Cheng Hong Kok, Director & Executive Committee Member, Singapore Petroleum Co Ltd

Distinguished guests

Ladies and Gentlemen

Good evening

I am happy to join you here for the annual Asia-Pacific Petroleum Conference, better known to industry veterans as APPEC.It is good to see the industry come together once again in Singapore and I would like to extend a warm welcome to all of you.

Now in its 22nd year, APPEC continues to be one of the central events of the oil industry in Asia.This year, I am told that Platts is also launching its inaugural “Top 250 Global Energy Players Awards” in conjunction with APPEC, adding further excitement to the conference and reinforcing its importance in the industry’s calendar of events.The “Top 250 Global Energy Company” ranking compiled by Platts last year is instructive in its diversity.Although oil and gas companies clearly dominated, the rankings also include companies with their core business in coal, utilities and power. It reminds us that the energy industry consists of much more than just the oil super-majors, that there is a vibrant, global ecosystem. 

From the supply side, there is a general consensus that oil will continue to have a central role as the world’s dominant energy source.However, with oil prices hovering consistently at the current high levels, we have also seen its impact across other energy and energy-related sectors including the prices of gas, electricity, palm oil, and even silicon.This is helping to accelerate developments in alternative forms of energy supply.

On the demand side, Asia’s need to fuel its growing economies has been the main demand driver for energy in the world in recent years.For oil, according to the BP Statistical Review of World Energy 2006, Asia accounted for nearly half of the increase in global demand in the last 4 years.

Against this backdrop, significant opportunities exist for Singapore across the entire spectrum of the energy sector - starting with oil, an industry that has been associated with Singapore for well over a century. Singapore has flourished as Asia’s oil hub.Our refineries have been operating at full capacities, and our logistics throughput reached more than 137 million tons of oil and oil products last year.Trade has also grown strongly with physical oil trade reaching US$250 billion and paper trade exceeding US$230 billion in 2005.Moving forward, we in Singapore are committed to maintaining and strengthening our role as Asia’s oil hub and gearing ourselves up in various ways. Let me touch on some aspects.

Refining

In refining, Singapore is a major centre, ranking alongside Rotterdam and Houston as one of the largest in the world. Singapore’s position looks likely to further strengthen as our existing refineries continue to upgrade their operations to take the lead in meeting the increasingly stringent environmental requirements as our region moves into cleaner fuels.New players are also setting up new capacities in Singapore to cater to the rising Asian energy demand.For example, Concord Energy, a home-grown oil trader, announced earlier this year its decision to build a US$200 million condensate splitter on JurongIsland.

Logistics

In logistics, Singapore’s storage capacity has reached 90 million barrels this year, including 20 million barrels of independent storage.The independent storage capacity will more than double within 2 years when a series of new storage projects currently under construction comes online.With investors from all over the world including Europe, Middle East, and Asia, these projects attest to Singapore’s international appeal as a base to serve Asia’s demand.

The Jurong Rock Caverns on JurongIsland will enhance our logistics capacity further.Work on the caverns is scheduled to start at the end of this year and the first caverns are expected to be ready by the end of 2009.These caverns open up the possibility of integration with aboveground storage, resulting in land savings for Singapore while providing more capacity, enhanced safety and security for the industry.

Trade

Singapore’s trade infrastructure has been boosted by the recent opening of Singapore Exchange’s AsiaClear in May this year, the first over-the-counter clearing house in Asia for energy derivatives.With support from 16 clearing members and 14 inter-dealer brokers, AsiaClear has also recently expanded its portfolio to include fuel oil swaps. This facility provides an additional level of sophistication to our trading community by enabling credit risk mitigation for the oil, commodity trading and shipping industries.

There are also efforts being taken in Singapore to develop talent for the trading industry. The SingaporeManagementUniversity, with support from International Enterprise Singapore, has recently launched a new International Trading track under its Bachelor of Business Management degree programme. I am especially glad to note that the trading industry has been actively involved in the design of the programme and given strong support with opportunities for industrial attachments for students.SMU tells me that their students are enthusiastic about the programme and this augurs well for the future.

Gas and alternative energy

Moving beyond oil, we are developing new areas in energy to complement our position as an oil hub.For example, our proposed terminal for Liquefied Natural Gas, or LNG, will not only enhance Singapore’s energy supply but could also offer possibilities for LNG trading.

In addition, we are moving into alternative energy sources such as solar, wind, biofuels and fuel cells.Vestas, for example, is setting up an R&D center in Singapore for research into wind energy.Peter Cremer has also announced its decision to build a biodiesel plant, the first of its kind in Singapore.These are all exciting industry development opportunities which tap renewable sources of energy that will bring diversity and sustainability to the energy sector.

Asia’s robust demand for energy will create many exciting economic opportunities for energy companies around the world.As Asia’s traditional energy hub and with a strategic location at the confluence of trade routes, Singapore is well positioned to tap on these new opportunities. Beyond building on the oil refining, logistics and trading industry, Singapore is also developing new strengths in other energy areas such as gas and alternative energy.

We are happy to host this conference which is an important platform for industry players and experts to exchange news on the fast evolving global energy landscape and to shape strategies to meet emerging trends.

I wish all of you a successful and fruitful conference. Thank you.