Oil & Gas report Part 1 December 2013
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5 6 6 8 8 12 12 13 15
AN EVOLVING ECOSYSTEM EVOLUTIONARY RECAP RIDING THE OFFSHORE WAVE A TWO-WAY SPRINGBOARD ASSERTING ITS COMPETITIVE POSITION BEST PLACE TO DO BUSINESS A STEEP LEARNING CURVE RE-ENGINEERING THE TALENT A REGIONAL CONTEXT
Michael Chia, Chairman, Singapore Maritime Foundation Lawrence Wong, Executive Vice President & Head of Listings Thomas H. McNutt, Head of Regional and Public Affairs, AmCham Arno Bracco Gartner, Energy Division Director, Brunel Simon Crellin, Director, Deloitte Petroleum Services Ernst Meyer, Vice President and Regional Manager, Det Norske Veritas Howard Pang, General Manager, Horizon Singapore Terminals Richard Lorentz, Founding partner and Director Business Development, KrisEnergy Clive Christison, CEO & Director, Integrated Supply & Trading (IST), BP Eastern Hemisphere Maarten van Aller, COO, Floating Production, Petrofac Ben Arnott, Director Oil & Gas Corporate Finance, Standard Chartered
This sponsored supplement was produced by Focus Reports. Project Director: Kirsty Avril Jane Walker. Publisher: Ines Nandin. Contributors: Fraser Wallace. Editorial Coordinator: Roslan Khasawneh. For exclusive interviews and more info, plus log onto www.energy.focusreports.net or write to firstname.lastname@example.org Copyright All rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including photocopying, recording or any information storage or retrieval system without prior written consent of Focus Reports. While every attempt is made to ensure the accuracy of the information contained in this report, neither Focus Reports nor the authors accept any liabilities for errors and omissions. Opinions expressed in this report are not necessarily those of the authors.
SINGAPORE An Evolving Ecosystem
espite a complete lack of hydrocarbon resources within the sovereign territory of Singapore, the city-state has been linked to the oil and gas sector for more than a century. Singapore has been an oil trading hub for over 120 years, and since the 1960s, the country has been a major refining base. Nonetheless it is in the last generation that Singaporeâ€™s oil and gas industry has really undergone a major revolution, with a boom in oil and gas related activities on both the hardware and software side of the business: from storage, shipping, manufacturing and offshore services, to financial and legal services. How does a country with no oil and gas resources of its own achieve this position of regional leader, or justify such an evolution? Is the shift a result of top-down policies or bottom-up business strategies? Finally, yet perhaps most importantly, how will Singapore continue its evolution?
Singapore Oil & Gas report part 1 December 2013
tion for the global oil and gas industry.
On the tangible, ‘hardware’ side, Singapore has
Singapore has also made significant efforts to use its positioning
grown to become a major energy and petrochemi-
as the world’s fourth largest financial center, and fully applies this to
cals hub for Southeast Asia as a result of its solid
its oil and gas ecosystem. Singapore’s exchange, the SGX, has imple-
infrastructure and strategic positioning. Singapore
mented a number of initiatives to attract energy companies seeking
is also one of the world’s top three export refin-
to raise capital to the island state. Moreover, in 2013, Singapore was designated by the Baltic and International Maritime Council (BIMCO)
ing and oil and gas trading centers, with a refining capacity in excess of 1.3 million barrels per day (bpd) in 2012. In 2012, oil exports accounted for 21 percent of total exports. Furthermore, the
Lim Kok Kiang, AMD, Cluster Group Engineering, EDB
as the third named seat for maritime arbitration in BIMCO’s Standard Shipping Forms. On that topic, Chia of the SMF proudly notes that “this is quite a feather in our hat and demonstrates that Singapore has grown into a critical node in the global maritime network.”
so-called ‘little red dot’ is one of the world’s busi-
Despite its resounding success, Singapore has never stood still.
est marine bunkering hubs and a major oil and oil
The IEA’s Southeast Asia Energy Outlook report boldly states, the
product pricing center.
region’s “energy demand [will] increase by more than 80% in the
In addition to this, Singapore is recognized as a
period to 2035.” As a result of the accompanying increase in compe-
premier global offshore hub. Located along one of the most important shipping lanes in the world, the Strait of Malacca, Singapore has enjoyed a maritime tradition for decades. Lim Kok Kiang,
Michael Chia, chairman, Singapore Maritime Foundation
tition across the refining and offshore manufacturing industries, Singapore is constantly reassessing its competitive position and building upon its strengths. In order for Singapore to maintain its regional
assistant managing director of Cluster Group
energy leadership and global competitiveness, it must actively pro-
Engineering at Singapore’s Economic Develop-
mote and develop each branch of its oil and gas industry and assert
ment Board (EDB), highlights how the offshore
its value on the global energy scene.
sector in Singapore began to take off in the 1960s.
RIDING THE OFFSHORE WAVE
“Part of this emergence was down to Singapore’s longstanding position as a marine hub for Southeast Asia. In the 1970s and 1980s, Singapore started to develop its vessel conversion capabili-
Lawrence Wong, executive vice president & head of listings, SGX
Following the emergence of the offshore industry in the 1970s, Singapore was able to convert its traditional skills in the marine and ship repair industry into ship conversions and rig building with great suc-
ties, prior to building a footprint in the offshore oil
cess. To some extent, this reflects Singapore’s capacity to respond
market through jack-up rigs in the 1990s. It was an
to the marine and offshore industry’s constantly evolving market
incremental evolution, which followed a natural skill-set transition.”
dynamics, in line with its national motto “Majulah Singapura” (Malay
In effect, the country’s strategic position along the trade route has
for “Onward, Singapore”). In the offshore industry’s latest upturn, for
enabled it to gradually develop its maritime engineering and manu-
instance, Singapore was the first mover to secure a slew of rig orders.
Singapore’s two largest offshore rig builders, Keppel Corpora-
Today, Singapore is the undisputed global market leader in the
tion Limited’s subsidiary Keppel FELS and Sembcorp Marine’s units
construction of jack-up rigs and conversion of Floating Production Storage and Offloading Vessels (FPSOs). Michael Chia, chairman of Port Authority of Singapore
the Singapore Maritime Foundation (SMF), summarizes that “Singapore will maintain itself as both a shipping hub and a port city; we try to leverage our strength as a trans-shipment port. Combined with the fact that Singapore is also a world leader in rig building and FPSO conversions, it is very much a formidable contender on the hardware side and we fully intend to continue along that path.” Singapore has also made significant leaps in the development of the ‘software’ side of the oil and gas industry. As a crucial trading hub for refined petroleum products and petrochemicals and a leading supplier of a range of offshore assets, Singapore offers a wealth of engineering expertise and is has often been a source of innova-
ENERGY.FO C U SREP OR TS.NE T
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OI L & GA S FI NA NC I A L J OU R NA L
Always Do Better Drilling Headquarter Address: P.O.Box 232 BeiJing 101149China Website: www.cosl.com.cn / Fax:+86 0316 336 7009 Tel: +86 10 84522856 / Email: Zhangfy2@cosl.com.cn
COSL Mexico S.A. de C.V.
COSL Drilling Pan-Pacific Ltd
Address: Edificio de Oficinas TAKIN ,Avenida Isla de Tris # 28, KilĂ›metro 5 ,Fraccionamiento San Miguel ,Ciudad del Carmen, Campeche, C.P. 24157 Tel: +52 938 119 5678 / Email:email@example.com
Address: 6 Temasek Boulevard, Penthouse Level Suit 2,Suntec Tower Four, Singapore 038986 Website: www.cosl.com.sg / Fax: +65 6491 2361 Tel: +65 6491 2360 / Email: firstname.lastname@example.org
Singapore Oil & Gas report part 1 December 2013
PPL Shipyard and Jurong Shipyard, account for 70
company, Singapore provides us with the ideal
percent of global jack-up rig construction. Singa-
platform from which we can make the transition
pore also controls the market for the conversion of
into Western markets.” Despite the rising costs of business in Singapore,
FPSOs, with two-thirds of the global share.
Jack Zhou Minghua, executive director at COSL
A Two-way Springboard Given the positive industry outlook in the region and Singapore’s business environment - condu-
Jin Qingyong, president, COSL Drilling PanPacific
Jack Zhou Minghua, executive director, COSL Drilling Pan-Pacific
Pan-Pacific, agrees. “Although the costs associated with doing business in Singapore have been on the rise in terms of office or land space and human
cive for international operations has and with an ability to attract top
resources, the country more than makes up for that with the structural
global talent - it is easy to see why so many international players have
advantages it offers. Companies based in Singapore are exposed to a
established regional, or even global, operations in the country.
thoroughly international environment, seamless and transparent legal
In this regard, Singapore is often cited as the ideal springboard for Western based companies into the East. However, the opposite holds
and financial systems and an efficient regulatory environment that is highly supportive of business development.”
equally true. As Jin Qingyong, president of COSL Drilling Pan-Pacific,
Going further, COSL Pan-Pacific is looking to leverage Singapore’s
the international branch of COSL China for the jack-up division, puts
oil and gas ecosystem with the establishment of a global supply
it, “Singapore has proved to be the ideal launching pad from which
base in Singapore. Minghua notes that “not only will we be able to
COSL can work towards these long-term goals and establish itself
take advantage of Singapore’s excellent logistics infrastructure and
as a truly international company. In terms of its policies and human
geostrategic location, but the supply base will position us closer to
resource management, among others, Singapore offers a Western
offshore manufacturers including the world’s largest rig producer,
style business platform in an Asian environment. There is a great bal-
ance between Mandarin and English speaking people. As a Chinese
Asserting its Competitive Position Speaking at the opening ceremony of the Offshore Southeast Asia Conference and Exhibition (OSEA) in November 2012, Second Minister for Trade and Industry S. Iswaran highlighted that “with rising offshore drilling and production activities, the demand for offshore rigs, platforms and support vessels is set to increase. Singapore is well placed to ride this offshore wave as our shipyards have
Mr S. Iswaran, Second Minister for Trade and Industry
built up a sound track record of providing costeffective, safe and timely deliveries. We are also able to meet customer’s needs by offering a full spectrum of customized products and in-house proprietary designs for offshore rigs.” Singapore’s supremacy in rig construction could, however, be diluted: its yards must now contend with existing competition from established Chinese yards such as Cosco Corporation (which have recently gained significant traction in rig building through aggressive pricing), as well as South Korean yards. In addition to this, they must also compete with new players that have moved into the sector due to a glut in yard capacity in Asia from the downturn in shipbuilding. Nevertheless, Singaporean rig builders appeared unfazed by the competition from Asia as the flow of new orders continues. During the first nine months of 2013, Keppel heads forward with a USD $10.95 billion order book. The company is slated to deliver 20 offshore rigs this year, a record number for any shipyard worldwide.
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Singapore Oil & Gas report part 1 December 2013
Despite the stiff cost competition, Choo Chiau Beng, CEO of Keppel Corporation, expects that offshore clients will place
GROWTH IN ASEAN PRIMARY ENERGY DEMAND 1,200
ered on time, rather than risking the costs yards were desperate because they ran out of conventional ships to build,” Choo told Bloomberg News. “They were offering crazy terms to attract customers.” Bobby Wong, country manager at the American Bureau of Shipping (ABS) Singa-
greater emphasis on having products delivassociated with project delays. “Chinese
Thailand Indonesia Energy demand per capita as share of OECD (right axis)
OECD and IEA, 2013
pore, states that “although cost is an important consideration for rig owners, brand
This push towards innovation and R&D is also supported by a slew of
track record and quality are also key con-
international organizations in the industry that have made significant
cerns. In this regard, Singapore has earned
investments in establishing knowledge and research centers in Singapore.
its recognition as the hallmark of safety, qual-
Other world leading classification societies that have recognized the ben-
ity and innovation in the marine and offshore industries.” As a leading marine and offshore classifica-
efits of locating their activities alongside their clients. Det Norske Veritas Choo Chiau Beng, CEO, Keppel Corporation
(DNV), for instance, has established two technology centers in Singapore; the Clean Technology Center and the Deepwater Technology Center, in
tion society and key partner of Keppel and
2010 and 2012, respectively. Ernst Meyer, vice president and regional
Sembcorp in Singapore, Wong highlights his
manager for DNV South East Asia and Pacific, notes that these invest-
company’s role in helping clients to achieve
ments were “a result of DNV’s ambition to continue along its growth path
some of the industry’s fastest rig delivery
and spread its innovation genes instilled in the company towards Asia.
times. “As an integral part of the production
Historically, our Asian operations have not played a big role in innovation
process, ABS has a dedicated team of proactive surveyors and engineers on the ground that provide customers with the full range
Bobby Wong, country manager, ABS Singapore
but this is something we intend to change.” Meyer goes on to explain that “this corresponds well with Singapore’s national ambition to be a regional competence center for deepwater and
of services in a timely and efficient manner
clean energy technologies. As such, we have been working closely with
while maintaining the highest attention to
the EDB in order to realize this shared ambition.”
detail. Our efforts support our clients’ abil-
As a company associated with offshore survey, site investigations and
ity to consistently deliver quality and reliable
engineering works, Fugro has also grown into a globally recognized tech-
assets on schedule or even ahead of schedule, as is often the case. The potential losses that would result from delayed projects help to offset the cost premiums relative to the competition.”
nological leader. For its Singaporean offices, 2013 marks forty years since Ernst Meyer, vice president and regional manager, DNV South East Asia and Pacific
Simultaneously, Singapore’s yards are moving up the technological ladder and focusing on niche market segments that require significant investments in R&D and innovation. For instance, Keppel Offshore & Marine (Keppel O&M), and ConocoPhillips are jointly designing a first-of-its-kind ice-worthy jack-up rig to operate in the Arctic Seas, one of the harshest marine frontiers.
Jerry Paisley, regional manager for Asia Pacific Offshore Geotechnics, Fugro
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11 incorporation. Jerry Paisley, regional man-
tures that can be used for drilling units from a safety and operational view
ager for Asia Pacific Offshore Geotechnics,
point,” he says. “In addition to this, we are in the process of developing
Fugro, explains the regional offices role in
some rather interesting concepts in relation of subsea units and the ways
promoting innovation and R&D.
in which they can be monitored and in turn interpreted. Furthermore, we
“The National University of Singapore
are working closely with a number of universities and A-Star to provide
(NUS) has a Center for Offshore Research
insights for the very large hydrodynamic test facility that is being built
& Engineering (CORE) which carries out a
significant amount of research programs.
Arno Bracco Gartner, energy division director, Brunel
The establishment of CORE in 2003 marked the first step in NUS’s plan to help shape the development of Singapore into a center for offshore and maritime research. Within the few years since its inception, CORE has established strong links with the offshore oil and gas industry, and has established an enviable track record in R&D and education in offshore technology. Some of the highend research topics taking place there today are mainly centered on the engineering space, as opposed to exploration and production, and ranges from arctic engineering to methane hydrate research. In that respect, Fugro engages in and funds a number of joint industry projects with various research and academic institutions and industry players. With over 130 jack-up rigs in operation in the Asia Pacific region, we carry out a good deal of survey and geotechnical engineering work to ensure the safety of the sites. Because it constitutes such a large proportion of our work, we are conducting a fair amount of research into improving the prediction and avoidance of jack-up punctures and are actively funding these joint industry projects with NUS.” Similarly, Lloyd’s Register has recently inaugurated its Global Technology Center in Singapore, one of two in the world which is exclusively focused in the energy sector. Although only inaugurated in September of 2012, Claus Myllerup, senior vice president of energy technology at Lloyd’s Register, outlines the advancements the GTC has made already. “We have made significant contributions towards publishing the first floating offshore rules in terms of struc-
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Singapore Oil & Gas report part 1 December 2013
BEST PLACE TO DO BUSINESS
KrisEnergy, an independent upstream company focused on explo-
Singapore has historically been a commodity and
ration, development and production in the basins of Southeast Asia,
refining hub as well as the world’s largest bunker-
pioneered Singapore’s efforts in attracting energy companies to
ing point. This enabled the country to play a criti-
raise capital in the country. Having previously been involved in the
cal role in the development of the region. Today,
flotation of two oil and gas companies including Pearl Energy, which
Singapore remains central to the regional devel-
was subsequently acquired by Abu Dhabi’s Mubadala Petroleum in
opment from a financial perspective as well. The Singapore Exchange (SGX) has made clear its intentions to become a regional center for oil and gas firms seeking to raise capital. Lawrence
Richard Lorentz, co-founder and director of business development, KrisEnergy
2008, the company’s founding trio made a calculated decision to list their latest company, KrisEnergy, on the SGX. Richard Lorentz, cofounder and director of business development at KrisEnergy, admits that their ability to stand out on the SGX was a key motivating factor behind their Singapore listing.
Wong, executive vice president & head of listings at SGX, explains that for any country to develop itself into a successful exchange hub, a number of
A STEEP LEARNING CURVE
fundamental factors are necessary. “For a coun-
By making capital more accessible for regional
try to be an effective exchange platform, it must
energy companies, the emergence of Singapore
have an affinity to the industry in question while offering an attractive business environment,” says Wong. “As a destination with a number of flourishing industry clusters that was ranked ‘best country
as a regional financing center is creating further Simon Crellin, director, Deloitte Petroleum Services
opportunities for junior players to capitalize on the region’s oil and gas resources. Many of the oil and gas assets in Indonesia
Ben Arnott, director, Oil & Gas Corporate Finance, Standard Chartered
to do business’ for the seventh year running by the
and Malaysia, for instance, are now at a rather
World Bank, Singapore fits the bill perfectly. From an oil and gas per-
mature stage, smaller companies are needed to
spective, Singapore is an oil hub, a refinery hub and a commodities
develop smaller fields and rehabilitate the older
hub, and gives Singapore the crucial background it needs to become
fields. Singapore is positioning itself well to pro-
a leading exchange platform for oil and gas companies.”
vide opportunities for investors looking towards these brownfield
When compared to global exchanges such as those in Australia,
Tokyo or London, some might view Singapore as a minnow. How-
Singapore does boast a great blend of economic, fiscal and legal
ever, Simon Crellin, director at Deloitte Petroleum Services, sees
regimes that provide for an excellent business environment, but the
this as an advantage. Although smaller independents on those
challenge for Singapore positioning itself as a regional financial hub
exchanges might have a good story to tell, their share prices have
for energy companies “relates to the absence of an oil and gas list-
been flat-lining. Crellin explains that “there are simply too many
ing track record and the unfamiliarity of investors with the particu-
companies listed, each one is like a tree in a forest, unable to stand
larities of the upstream sector,” says Ben Arnott, director of project
out. By contrast, the SGX has a concentrated list of oil and gas E&P
finance for oil & gas at Standard Chartered.
companies, and because of this, a good story will get a lot more traction than on the larger exchanges.”
In order to overcome these hurdles, the SGX introduced a set of new admission rules and continuing listing obligations to facilitate the listing of mineral, oil and gas (MOG) exploration companies. To
SE Asia conventional E&A drilling activity (2007 to 2012)
achieve this, the SGX first had to develop rules that would cater specifically to the MOG industries, while simultaneously raising
SE Asia conventional drilling activity Discoveries (D)
Success Ratio (D/E)
the financial requirements and standards of any company looking
as energy consultants RPS, that altogether helped craft the listing
rules for MOG companies. Among other initiatives, RPS aims to help
educate investors and routinely advises non E&P companies who
ond, the SGX invested significant resources in educating investors, holding more than a dozen training events over the course of a few months, spearheaded by industry experts, including companies such
are considering getting involved in E&P projects in South East Asia.
Source: Deloitte Petroleum Services Group
to list on the SGX as part of its market development strategy. Sec-
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13 At the outset, many new entrants into the E&P business might not
edent and may be viewed as the most likely guidelines that would
understand the financial risk. Wong reinforces that the “aim is not
apply to upstream oil and gas companies looking to list on the
only to educate ourselves about the dynamics of the MOG industry,
SGX Mainboard.” Wong shares these views, saying that the listing
but also the financial researchers and retail and institutional inves-
allowed the SGX to gain “an invaluable insight into the functioning
tors. That is how you build an ecosystem.”
of the industry and how companies operate at their different stages
As one of the first companies to reach compliance with the new
of development.” As a reflection of Singapore’s pragmatic and open
MOG rules on the SGX Mainboard, Lorentz, of KrisEnergy, acknowl-
approach to promoting business, Wong admits that “when it comes
edges that the process was not entirely seamless. During the devel-
to the technical aspects, we are not experts in the field. Instead, we
opment phase, the SGX, along with the Monetary Authority of Sin-
rely on experts who share their knowledge and insights to help us to
gapore (MAS), shaped the regulations governing the listing of MOG
understand the particular issues at hand.”
companies. “These are not even rules yet,” Lorentz stresses, “so during the KrisEnergy listing process we had to figure out what would
RE-ENGINEERING THE TALENT
satisfy the SGX and MAS based on the guidelines put forward from
Due to a lack of natural resources, Singapore is highly dependent on
a consultation paper. We drafted the prospectus in accordance with
its workforce. This is particularly true for Singapore’s talent intensive
the highest standards of the SGX guidelines that we knew to work.
maritime, construction, engineering and manufacturing sectors. As is
At the same time, we also consulted with the SGX on those points
the case with the rest of the global oil and gas industry, Singapore’s
which we knew to be operationally counterproductive or inapplica-
growth in the energy industry is mired by an aging workforce and a
ble to our industry to help them understand the specific nature of
shrinking talent pool.
the upstream oil and gas business.”
As Arno Bracco Gartner, energy division director at Brunel, a pro-
Lorentz goes on to say that “KrisEnergy’s prospectus set the prec-
vider of specialist knowledge to the international oil & gas, petro-
RPS is an international consultancy providing worldclass, local solutions in energy, mining, infrastructure, urban growth and natural resource management.
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FocDNV_OGFJ_1312 1 DECEMBER 2013
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Singapore Oil & Gas report part 1 December 2013 chemical, power generation and construction industries, explains, â€œa decade ago there was a push by the government to develop ICT, pharmaceutical and financial services. This coincided with a lot of graduates being steered in that direction. As a result of this restructuring, Singapore has lost
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well as engineering, procurement and construction (EPC) services, backed by years of experience and in-depth operational knowledge.
its edge in the engineering space and many companies have been affected by the expanding tal-
Robert Dompeling, group chief executive officer, PEC Ltd
ent gap. In this sector, Singapore is rapidly losing ground to Kuala Lumpur.â€? The issue in Singaporeâ€™s case is exacerbated by the governmentâ€™s push to control the inflow of foreign workers across a number of sectors. Robert Dompeling, group CEO of Singapore-based PEC Ltd, explains that â€œthis was initially brought about with the governmentsâ€™ ambitions to improve labor productivity through The National Productivity and Continuing Education Council (NPCEC).â€? In 2012, the NPCEC identified four new sectors of interest where
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it intended to boost national productivity, including the process construction and maintenance sector. Essentially, these policies aim to improve productivity and raise wages through innovation and automation while introducing tighter foreign labor restrictions. â€œTo put it simply, Singapore businesses are expected to boost productivity so that they can employ fewer workers while offering them better wages,â€? explains Dompeling. These measures will have further implications on safety. As a company focused on the Engineering, Procurement and Construction (EPC) and maintenance services to the oil and gas and petrochemicals sectors, among others, Dompeling stresses that, â€œour people are often working in high risk environments. If our most experienced people have to leave as a result of these policies, this could potentially contribute to the higher workplace incidents due to replacements with inexperienced staff.â€? As a potential remedy, Dompeling suggests that, â€œin order to limit the
OIL & GAS
A S IA
OIL & CHEMICAL TERMINAL
M I DDL E E AST
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OI L & GA S FI NA NC I A L J OU R NA L
15 A REGIONAL CONTEXT Singapore’s refining sector has also come under pressure as a result of increased costs in Singapore, and importantly, increased regional production capacity in countries like China and Vietnam, as well as from the Middle East. However, to what extent are these developments a threat to Singapore’s downstream industry and how can it grow considering Singapore’s land Howard Pang, general manager, constraints? Horizon Singapore In overcoming its space limitations, Howard Terminals Pang, general manager at Dubai-based Horizon Singapore Terminals, points towards the ‘great Singapore area’ expansion project as a potential remedy. Pang explains that “the idea primarily revolves around some of the Indonesian islands that surround Singapore as well as the south Malaysian territory bordering Singapore offering land area that can accommodate the construction of a variety of terminals and ports that will complement Singapore’s limited land and shoreline availability. “As such, they will provide traders and oil companies with greater capacity in peak times,” explains Pang. He continues: “Singapore has historically been the region’s entrepôt which has for long developed and honed the skills and infrastructures needed to support that. In this respect, it would be very difficult
to match and overcome the momentum that the island-state has gained over time.” Clive Christison, director & CEO of Integrated Supply & Trading for the eastern hemisphere at BP Singapore believes that, “Singapore will remain a leading downstream location due to its well engrained and sophisticated petrochemical Clive Christison, complexes… one of the main challenges Sindirector & ceo, gapore faces as of now are attempts by other Integrated Supply hubs to mimic infrastructure and support sys& Trading Eastern Hemisphere, BP tems here. However, the city-state has a clear advantage of years of investments in its physical assets created through honing the specific regulatory policies and cultivating human capital needed to create a synergistic ecosystem. By any measure, these attributes are all very difficult to recreate.” Despite Singapore’s leadership, the island-state faces stiff competition across the oil and gas value chain from aspiring and energy hungry regional nations. However, where some might see a threat, Singapore sees opportunities. The country has demonstrated its aversion to complacency and is continuously looking towards the horizon, seeking to always punch above its weight and champion the industry forward.
negative effects of these hurried policies, the government must tailor its approach towards the needs of the different targeted industries. The authorities should consider relaxing its stance on tightening the foreign labor supply to allow businesses more time to Thomas H. McNutt, head of regional and public affairs, American Chamber of Commerce in Singapore
absorb the changes.” Despite concerns surrounding the lack of locally trained engineers, Dompeling, in line with strong industry-wide opinion, still maintains that Singapore is a great place for business. Gartner, for instance,
shares these views. “Holistically, I do not think the region has ever been so busy,” he says. “The variety of projects and clients is immense, and it is an aspect which illustrates the thriving and developing energy ecosystem of the region.” Thomas McNutt, head of regional and public affairs at the American Chamber of Commerce (AmCham), insists that “Singapore is not turning off the spigot of non-nationals entering Singapore.” The governments’ primary goal is to increase the quality of life of its citizens and it is using foreign labor policies as the lever with which to do this. “It is important to stress that the business-government relationship is not an adversarial relationship, but a collaborative one,” McNutt goes on to say. “As a result, I am sure the Singapore government understands that its policies are increasing costs, but I am also just as certain that the government will closely monitor the effects of those cost increases and adjust its policies as appropriate.”
OIL & GAS FINANC IAL JOU RNA L
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Interview with: Michael Chia, Chairman, Singapore Maritime Foundation
Michael Chia, Chairman, Singapore Maritime Foundation Focus Reports: As an organization linking the public and private sectors in the maritime industry, how has the SMF’s vision of creating Singapore as an International Maritime Center (IMC) evolved or changed since the establishment of the organization in 2004? MICHAEL CHIA: The mission of the SMF has remained the same since we started in 2004. We are private sector-led, with a Board of Directors comprising largely of senior executives from the maritime industry. Our objectives are to provide a forum in the private sector for exchanging, generating and developing ideas and proposals to turn Singapore into an IMC, to act as the catalyst in fostering mutual co-operation among various sectors of the maritime industry, and to serve as the government’s partner from the private sector in promoting Singapore as an IMC and developing manpower to support the maritime industry. Given the breadth of the maritime industry, we typically define the maritime industry as one composed of four core sectors; the port, shipping, offshore and marine engineering as well as the supporting ancillary services. We have found that although these are all integral parts of so-called ‘Singapore Inc.’ these four segments have to some degree been operating independently of each other. We wanted to bring these different but interrelated players together to realize potential synergies and reach the critical mass for Maritime Singapore to gain the government and people’s attention in Singapore. If these units are left on their own, we will
Michael Chia, CHAIRMAN, SINGAPORE MARITIME FOUNDATION
probably not have the combined strength we enjoy now in reaching our objectives, establishing Singapore as a leading IMC and attracting talent. This was a key impetus behind the establishment of the SMF. With that as the background, the SMF pursues various initiatives which are aligned with the Maritime and Port Authority of Singapore’s (MPA) objective of developing Singapore as an IMC. It is interesting to note that although the definition of an IMC may vary around the world, there are not many IMCs in the world. For instance, London is undoubtedly an IMC on the service side but it lacks the ‘hardware’ aspect, as is the case with New York. Oslo is another example of an IMC. For Singapore, we want to develop our maritime industry as a recognized IMC and the MPA has worked diligently towards that goal in terms of attracting various maritime players, especially in the shipping sector.
FR: Singapore has for long enjoyed a maritime heritage which was used a growth platform for other industry sectors. However, where is the local industry headed over the long term? MICHAEL CHIA: Singapore has leveraged on its geographical positioning at the crossroads between East and West. Our strategic position along the trade routes has contributed towards our success so far and will always continue to position Singapore as an important intersection along global trade routes. In this regard, Singapore will maintain itself as both a shipping hub and a port city; we try to leverage on our strength as a trans-shipment port. Com-
bined with the fact that Singapore is also a world leader in rig building and FPSO conversions, Singapore is very much a formidable contender on the hardware side and we fully intend to continue along that path. In addition to this, we have made significant leaps in terms of technological capabilities through focused R&D initiatives. These efforts have enabled Singapore to produce its own marine and offshore structures and designs, carving out its own niche positions in the market place. As a small island-state swimming amongst the icebergs, this allows us to avoid having to compete with the Korean or Chinese giants. This is supported by a lot of encouragement from various authorities in terms of building up competencies, talent development and R&D initiatives. On the other hand, there has been an increasing focus on developing Singapore’s positioning on the ‘paper’, or maritime services, side. After all, the marine and offshore yards, the shipping and port players are the bigger players and comparatively more established. In contrast, as a relatively newer entrant to the Singapore maritime industry landscape, the ancillary service providers would benefit from more support. Hence, we do try and devote more attention to promoting and developing this sector. For instance, SMF was involved in efforts that culminated in Singapore being designated by the Baltic and International Maritime Council (BIMCO) as the third named seat for maritime arbitration in BIMCO’s Standard Shipping Forms. This is quite a feather in our hat and demonstrates that Singapore has grown into a critical node in the global maritime network.
FR: Singapore’s PM Lee Hsien Loong confirmed plans in mid-2013 to relocate container terminals to the industrial hub of Tuas over the medium term due to land constraints. How can the lack of land
Our strategic position along the trade routes has contributed towards our success so far and will always continue to position Singapore as an important intersection along global trade routes. space interfere with, or promote, Singapore’s ambitions to be a maritime hub? MICHAEL CHIA: Indeed, Singapore is an island-state known for its constrained land area. We adapt, and we do our best to manage with the resources we have. This is reflected in the highly compact but productive ship yards. Singapore businesses have learned to be efficient and innovative. In working with our constraints, it is only natural that some of the lower end value added activities have to be relocated elsewhere to free up space for the natural progression of our industries and businesses, particularly the higher value added ones. This has occurred in every developed country so far and if we do not do the same, then we would not be progressing. In sum, the fact that we have to manage such constrains makes us sharper and encourages us to closely assess the best way from which we can derive the greatest value from our limited and precious resources. This applies both to land and human capital and that is why we have to attract the best resources.
Interview with: Lawrence Wong, Executive Vice President & Head of Listings
Lawrence Wong, Executive Vice President & Head of Listings Focus Reports: Following the listing of KrisEnergy, the largest exploration and production company on the SGX, the exchange grew to include 17 Mineral, Oil and Gas (MOG) companies with a total market cap of SGD $5.6 billion. Has Singapore reached its tipping point as an MOG financial hub?
LAWRENCE WONG: I would argue that even today, Singapore is already a financial hub for MOG type companies. This is well demonstrated by the fact that we are among the key exchanges approached by MOG businesses with interests in Asia. As an exchange, when we say that we have an opportunity of becoming a financial hub for MOG industries, it is because we have invested in the necessary infrastructures and because attract the attention of those constituents. Of course, there are always people that would be more interested in going to Canada or Australia, for instance, with good reason. The choice is theirs. As an exchange, there is only so much we can do. We cannot customize ourselves to individual companies because when you go to the lowest denominator, you sacrifice your distinctiveness and people lose track of what it is that you represent. We need to evolve ourselves into a unique platform and communicate clearly what the SGX stands for with regards to MOG in Asia. On the back of that, we are supported by an entire ecosystem that is composed of Singapore’s economy, its thriving business clus-
Lawrence Wong, EXECUTIVE VICE PRESIDENT & HEAD OF LISTINGS
ters and its positioning as a financial center. Therefore, the gains that business can realize from positioning themselves in Singapore extend well beyond the capital considerations, but also encompass a wide range of business advantages. Whether we have SGD $5.6 billion or SGD $56 billion of MOG market capitalization, is personally more a question of time. If we apply the right strategies, each new business listing on the SGX will be better and larger than the preceding one. Also, as our understanding deepens, the faster we can guide them through the process, which is in fact already among the fastest in the world. Hence, I believe that the so-called tipping point is an arbitrary concept; it is far more important what a given market denotes for a company. It is like the many cases in which we have had Chinese companies listing on the SGX, instead of the assumingly natural choice of Hong Kong. They do so because of the matching industry clusters we have here and because we are perceived as a far more international and independent center.
FR: On the topic of independence, some would argue that Singapore is in fact not that independent due to the government’s ownership stakes in a spectrum of the country’s largest businesses, including the SGX. What would you say to investors that might be cautious of the government’s involvement in industry? LAWRENCE WONG: The government is indeed
highly involved in businesses today and with good reason. Keppel Corporation, Singapore’s flagship business, has its legacies from the British colonialists and of the government did not buy into that, the company would not have been where it is today. They have made significant contributions into building the company that it is today and there is no denying that fact. Moreover, the government only has a minority stake in the company, of about 20% through the Temasek Holdings investment company, and have always welcomed any bidder that believes they can run it better to take over their position. This is firmly illustrated by the recent sale of the Singapore Petroleum Company (SPC), to PetroChina. The government therefore plays a positive role in developing the businesses in which it has an ownership. Another important consideration is that all of these companies are internationally orientated and do not compete within Singapore. The SGX competes on an international level with the exchanges of the world, as does Keppel Corp, which generates the lion’s share of its revenues from overseas. Foreign businesses therefore need not be concerned. Besides that, businesses coming to Singapore come her primarily to leverage the advantages the city-state offers which can seldom be found elsewhere in Europe or Asia. Moreover, all of the companies in which the government has an interest in are exchange listed. Everything they do is out in the open and are subject to the same transparency, reporting and governance rules as any other listed company. As far is Singapore is concerned, this all boils down to a matter of perception. Singapore would not have made it so far had it not exercised open business practices and welcomed competition. The government understands that if it is to be successful, it needs to abide by international standards, and not
We are supported by an entire ecosystem that is composed of Singapore’s economy, its thriving business clusters and its positioning as a financial center. its own. Success in business or investment essentially boils down to one thing; trust.
FR: Looking at the bigger picture, what goals have you set for the SGX as you work towards the development of the MOG sector? LAWRENCE WONG: This begins with our positioning as a gateway to Asia. For those with current or prospective interests in Asia, Singapore and the SGX is the ideal platform from which they can reach out to international investors. Likewise, we are a great gateway for potential investors seeking to participate in Asia’s success. That is the underlying concept we are applying to all of the sectors we represent. Our primary objective is to help companies fund their growth potential and capitalize on the regions expansion while allowing investors to participate in that. In that respect, we are dedicated to telling the world who we are and how Singapore can help them capture the sea of opportunities here and in the region. Once we have attracted them to list in Singapore, we will not stop there but will go a step further. Along with the corporate services we provide, we have a team dedicated to helping these companies to reach out to investors.
Interview with: Thomas H. McNutt, Head of Regional and Public Affairs, AmCham
Thomas H. McNutt, Head of Regional and Public Affairs, AmCham Focus Reports: As a heavily export orientated economy, Singapore relies on external economic cooperation. In the earlier phases of ASEAN’s existence, Singapore took a “global” rather than “regional” stance in its external economic strategy but after the 1997 Asian financial crisis, Singapore became much more pro-active in its economic integration with ASEAN. How has this development affected economic ties and political relations with the US and your members? THOMAS H. MCNUTT: In general, the US and Singapore have a very good relationship. I am not sure if the increasing focus on the regional market by the Singaporean Government has in any way impacted the relationship between Singapore and the United States. President Obama’s ‘pivot’ towards the SEA region has indeed reemphasized America’s interest the wider region. From the Singapore side, the shift to a more regional focus makes sense as Singapore recognizes that it is surrounded by markets built on sectors with the potential for huge growth. Indonesia, Malaysia, Thailand could leap forward economically in the near future, and of course Singapore is ideally positioned to engage with those markets. A great diversity of companies have their Asia Pacific headquarters here. The more Singapore and ASEAN can do to streamline regulation in this area, the more attractive the area will be for business, including our members.
Thomas H. McNutt, HEAD OF REGIONAL AND PUBLIC AFFAIRS, AMCHAM
FR: Every company we have spoken to so far has highlighted how they like to use Singapore as a gateway to Asia, a strategy AmCham too seems to be pursuing as demonstrated by the first ever recent business mission sent to Myanmar, among others. From your perspective, what makes Singapore such an excellent springboard into the region for commercial and non-commercial organizations? THOMAS H. MCNUTT: Annually, we produce a publication entitled the ‘ASEAN Business Outlook Survey’, which reports the concerns and aspirations of business leaders. Basically this report is unique because it polls top level American executives across the ASEAN region in which we ask general outlook questions. Revealingly, it found that only in Singapore and Brunei were executives satisfied that there was not a significant problem with corruption. Strengths across the region include personal security and stable government. Respondents in Singapore are dissatisfied by costs, which in one respect can be considered a good thing, as it means there is a booming local economy. That being said, neighboring countries like Indonesia also have strengths, such as the availability of low cost labor. The balance of positives and negatives from each country needs to be evaluated. Executives in this region have a solid understanding of the pros and cons of each country, which results in clear priorities for businesses- almost half of
respondents to our survey answered that they were planning to expand in Indonesia. Stable Government and infrastructure are some of the key factors which result in businesses siting their headquarters in Singapore. In fact, 96 per cent of respondents from Singapore said they had multi-country responsibility. This demonstrates Singapore’s positioning as a springboard to the wider region’s economy. The ASEAN economic community, which aims to be completed by the end of 2015, would represent one of the world’s largest markets. There are a huge amount of opportunities here and that is why the area, particularly Singapore, is such an attractive as a business destination.
FR: As AmCham continues to strengthen its members and its own position in Singapore, what goals would you like to achieve and in what areas do you intend to strengthen the Chambers positioning? THOMAS H. MCNUTT: Corruption must be addressed across the wider region. Broadly speaking, the culture which exists must change from one where corruption is tolerated or accepted as a way of life, to one where it is stamped out. Indonesia is making commendable efforts to stamp out corruption, though some of the Indonesian Government’s other policy objectives such as decentralization of political power make this target more difficult to attain. Every country in the region has made efforts to reduce corruption, and the situation is certainly better than it was twenty years ago. However, there is still a ways to go. As a result, we regularly have presentations on the Foreign Corrupt Practices Act (a U.S. law), which both serves as a constraint to forbid Americans and American companies from engaging in corruption and as a best practices guideline for coun-
The ASEAN economic community, which aims to be completed by the end of 2015, would represent one of the world’s largest markets. There are a huge amount of opportunities here and that is why the area, particularly Singapore, is such an attractive as a business destination. tries in the region. The harmonizing of ASEAN economic practices is another key challenge. To the Singaporean Government’s credit and to countries across the region, they are not only aware of this, but also very focused on driving this harmonization to completion. ASEAN is seeking to achieve the integration of these economies by 2015 and the anticipated completion of this goal is yet another reason why AmCham Singapore is confident our members have great opportunities here at SE Asia’s crossroads.
Interview with: Mr. Arno Bracco Gartner, Energy Division Director, Brunel
Mr. Arno Bracco Gartner, Energy Division Director, Brunel Focus Reports: How would you describe the structure of your Singapore offices and the strategic importance of the APAC region to the company’s global operations? MR. ARNO BRACCO GARTNER: Our Singapore office is both the operational and financial hub for the entire Asia Pacific region. All the contracting, payroll, mobilization, operational support technicalities are covered by this office. Globally, there are two trends, with slightly nuanced differences, that must be distinguished. On the one hand, we have flat lining economic markets in Europe and U.S., on the other hand, we have the oil and gas markets. The two are beating to a slightly different drum. The Asia Pacific region represents a fundamental part of our business model. Although our oil and gas division is still relatively fledgling, having been formed in 1996, it has been the strongest region for Brunel globally. Since that date, South East Asia has absorbed a large flow of the oil and gas investment revenue stream. In 1995 and 1996 the company expanded significantly with the acquisition of six companies: two in the UK, two in Australia, one in the Middle East and one in Singapore – which was our first Asian office. The period between 1998 and 1999 represented a challenging time, with the price of oil plummeting to eight USD a barrel. As such, it was crucial that our new acquisitions became ‘Brunelised’, through consolidation. Our market transformed radically in 2003, when large oil companies started to award global framework agreements. The award of such
Mr. Arno Bracco Gartner, ENERGY DIVISION DIRECTOR, BRUNEL
contracts propelled the ascent of Brunel in this region.
Given your experience in the region, what were some of the most notable developments and trends impacting the recruitment and consultancy sectors? MR. ARNO BRACCO GARTNER: Holistically, I do not think the region has ever been so busy. The variety of projects and clients is immense, and it is an aspect which illustrates the thriving and developing energy ecosystem of the region. Asia has a great reputation for expats. The tax regime, environment and climate are all attractive. Brunel relies heavily on the flexibility and mobility of our contractors. From the annual statistics we can derive that at present about 49 percent of our total workforce, is performing work outside their domicile. Furthermore, Asia Pacific has a great reputation for expats: the tax regime, environment and climate are all highly enticing, with Singapore signifying the pinnacle of favorable destinations.
FR: Yet, many countries are imposing stringent labor laws, with the intention of fostering local employment, at the expense of foreign hires. How is that impacting the company? MR. ARNO BRACCO GARTNER: You have to differentiate between the type of country and project. For instance, as long as Chinese, Malaysian and Singaporean yards are being used for international projects, then the governments are usually a lot more flexible, because the benefits are mutual. In some
countries, the behavior changes when the projects are of a domestic nature, the local content aspect becomes more pronounced - particularly in China and Indonesia. Despite change, the environment is better in Singapore. Indeed, the labor laws have not affected most of Brunelâ€™s workforce, as they are on an employment pass. The industry is constantly changing, oil companies are changing the way they operate by seeking increasingly flexible projects. What can be done better in Singapore to improve the overall business environment? A decade ago there was a push by the government to develop the ICT, pharmaceutical and financial services. This coincided with a lot of graduates being steered in that direction. As a result of this restructuring, Singapore has lost its edge in the engineering space and many companies have been affected by the expanding talent gap. In this sector, Singapore is rapidly losing ground to Kuala Lumpur.
FR: With over half of experienced engineers eligible to retire in the next five to ten years, talent shortages in the oil and gas industry is no longer a company challenge, but a business issue. As the Director of energy at Brunel, how do you intend on tackling these issues? MR. ARNO BRACCO GARTNER: This is a topic I have given many lectures on, particularly in 2004-2006 when it was a very hot project. Contrary to my predictions, the market did not suffer as expected. Nevertheless, this is still a topical subject. Many oil companies who want to realize projects have been thwarted by a lack of resources, which ultimately has a knock-on impact on us, as we are reliant on project activity. Currently, I am not as nervous on this topic as I was eight years ago, and this is partly because of profound technology changes. We have adapted internally by
Holistically, I do not think the region has ever been so busy. The variety of projects and clients is immense, and it is an aspect which illustrates the thriving and developing energy ecosystem of the region. investing in new IT systems and building a global recruitment facility out of Manchester. When clients ask for our help, we can still deliver effectively. Yet, it is a subject that will increasingly shape and impact our long term strategy. In terms of recruitment we have seen the rise and fall of India â€“ it is still a market where the level of English spoken is relatively higher than other potential areas. Russia is another country we have looked at, but since the Russian domestic market is booming, there is a less opportunity. Naturally China is a market of vast potential but there are language and cultural hurdles to overcome.
Interview with: Simon Crellin, Director, Deloitte Petroleum Services
Simon Crellin, Director, Deloitte Petroleum Services Focus Reports: Since July 2010, you have delivered presentations on Asia Pacific Oil and Gas exploration: past, present and future. Within that time period, how has the regional energy landscape evolved? SIMON CRELLIN: As reported by IEA’s South East Asia energy outlook, the need for primary energy has augmented over the last three years, and that trend is set to continue. Whereas, with the exception of 2012 which saw 38 commercial discoveries, the level of exploration activity in South East Asia has remained fairly constant, with approximately 30 commercial discoveries occurring per annum. Today, there is an industry misconception that the size of the discoveries in the region are decreasing, and that the major, low hanging fruit oil and gas fields have all been found. Yet, from a statistical perspective, if one adds up the size of all the annual discoveries and divides that figure by the number of discoveries, the actual size of the discoveries on an annual basis is relatively flat. Of course, such statistics can be contentious and in reality the finding of ‘one or two elephants’ within each year has propped up the ‘average’ discovery size. Nevertheless, exploration is having to move into deeper waters and the more frontier basins to continue this exploration success. There has been recent success chasing known geology and proven hydrocarbon plays into deeper waters in the offshore basins of East Malaysia’s Sabah and Sarawak for example. Indonesia has experienced acute exploration evolution over the last five years. On the Western side of the Makassar Straits, in the
Simon Crellin, DIRECTOR, DELOITTE PETROLEUM SERVICES
mature Kutei basin, there are many established fields primarily producing gas and some oil. By contrast, on the Eastern side of the Straits in the offshore North and South Makassar Basins, fourteen very expensive, high profile deepwater exploration wells have been drilled in the last few years, none of which resulted in a commercial discovery. In Eastern Indonesia exploration efforts offshore Papua since 2010 have also yielded no commercial discoveries to date, although more commitment wells are due to be drilled. I am fairly confident that exploration Offshore Seram will result in some success. The lack of discoveries from recent exploration efforts has impacted on foreign investor appetite in Indonesia, and this has been compounded by internal headwinds including well-publicized corruption cases within SKK Migas, growing local autonomy issues and nationalistically driven politics. Moreover, the disequilibrium between Indonesia’s declining oil production and surging energy demands, only serves to exacerbate the country’s profound energy challenges. As such, the government needs to strike a careful balance between hydrocarbon production exports and domestic market obligation (DMO) volumes, a challenge facing many countries in SE Asia. The introduction of fiscal incentives is also needed to encourage energy companies to explore for and subsequently commercialize reserves. Malaysia is a pertinent example of an APAC country that in spite of considerable energy demands and declining domestic production, has been proactive in introducing fiscal inducements that seek to entice foreign
companies to support the development of the country’s marginal fields and bolster production from mature fields using enhanced oil recovery (EOR) techniques. For instance: Malaysia has recently established RSC contracts, essentially ‘turnkey’ contract arrangements, whereby an oil company operates and develops a field, and in return receives payment out of the revenue generated from production, without owning the field itself. Such top down initiatives aim to abate declining domestic production and strengthen domestic energy security. The importance of such directives is becoming even more pronounced when one considers the huge fuel subsidies in place in Indonesia and Malaysia. Since international crude prices have been approximately 100 USD per barrel for the last five years, the fiscal burden on these Governments from subsidizing fuel for consumers is mounting and this is clearly not sustainable.
FR: With the commercial discoveries of gas in Asia, unprecedented regional demand and potential LNG export directives from the USA, what do you believe will happen to LNG prices in this region over the next few years? SIMON CRELLIN: In terms of gas, Asia is predominately a gas, rather than oil supplier. Over the last decade, domestic gas prices in Indonesia have escalated significantly. Most of the LNG produced in South East Asia feeds into the North Asian market and is being sold at anywhere between 12-18 USD MMbtu. The elephant in the room that has the capacity to overhaul regional LNG prices, is the question of huge unconventional gas supplies, potentially streaming into Asia from the US, in the form of LNG exports. The US Department of Energy (DOE) has approved exports from four projects to date, which do still have various environmental and regulatory hurdles to overcome. Nonetheless, realistically there will be gas exported from the US, as LNG, within the next five years, with prices linked to the domestic Henry Hub gas
Asia is predominately a gas, rather than oil supplier. price. All the major global LNG players, naturally state that they do not believe LNG prices will be decoupled from Japanese crude cocktail prices anytime soon, but, they would say that wouldn’t they! Japanese and other North Asian buyers are already engaging with the potential US suppliers and locking in LNG volumes at lower prices. This is having a knock-on impact on LNG projects due to come on stream within Australia and Indonesia over the next few years, with LNG buyers seeking to renegotiate the pricing in their contracts for offtake from these projects. Clearly, the threat of potentially cheaper gas from the US entering the LNG market in Asia is a major headache for regional LNG developers. The US DOE has to strike a careful balance as to how much gas it allows to be exported. If too much gas is channeled out of the US domestic market, internal gas prices will rise. As such, if gas prices at Henry Hub rise from four to six USD MMbtu, the trading opportunity with Asia becomes a lot narrower.
FR: With the development of Singapore’s new import terminal, Singapore arguably has ambitions to be a regional LNG trading hub. Considering the country only has one terminal, lacks storage capacity and has a relatively illiquid small domestic market, can these long term ambitions be met? SIMON CRELLIN: Singapore has the advantage over regional competitors such as China, as it is already a global oil trading hub. As such it has fiscal and regulatory maturity and reliability in place to realize its ambitions. Geographically it is also very well placed to serve as a regional LNG hub. Yet, to become the region’s eminent gas trading hub, it needs to build its domestic storage and trading volumes.
Interview with: Ernst Meyer, Vice President and Regional Manager, Det Norske Veritas
Ernst Meyer, Vice President and Regional Manager, Det Norske Veritas Focus Reports: How would you introduce DNV in Singapore? ERNST MEYER: DNV has a rooted heritage in the maritime industry since 1864 when it started creating standards for the design, construction and operation of ships in a safe manner. Over time, these activities developed into the classification services we currently offer today which have become institutionalized into the industry since they are required for insurance and port access purposes, among others. Although there are many competitors in the classification business, one in five ships is classified by DNV. With that backdrop, Singapore of course is a very important market for DNV since the country is a significant maritime hub and a major player in the ship building industry. DNV has had a presence in Singapore for over a century, conducting surveys since 1898. However, it was only some thirty years ago that we officially established our current offices to accommodate the growth of the maritime sector. In fact, the ship yards in Singapore had already began moving into the offshore sector which is largely why the country is so well recognized for its production of a range of mobile units today; from drilling rigs to jack-ups, FPSO’s and accommodation modules. In this way, I believe that DNV and Singapore share a common maritime heritage which supported our gradual development into leaders in the offshore industry. From Singapore, DNV caters to the SEA region, spanning a total of nine countries; from Vietnam to Australia. Interestingly, among these countries you will find that
Ernst Meyer, VICE PRESIDENT AND REGIONAL MANAGER, DET NORSKE VERITAS
they all have oil and gas resources, with the exception of Singapore of course. As a result, Singapore has developed into a strong player on the business development side, with numerous companies basing their headquarters here. Singapore has undoubtedly developed a strong set of technical expertise that caters to the needs of international players. Illustrating the relative importance of this industry to the country’s economic performance, the government has made it a national ambition to mold the city-state as a competence based hub in the maritime and offshore industry, among others. Since the days of easy-access shallow water resources are now behind us, the offshore industry in Asia is growing increasingly more advanced. As a result, this is driving the local competencies in the industry to ever higher levels as well and this is precisely where Singapore intends to establish itself as a center of knowledge.
FR: What are the ‘hot topics’ DNV is tackling today in the region? ERNST MEYER: DNV often participates in what we call Joint Industry Projects (JIP’s) which essentially focus on leveraging the industry’s knowledge and resources to solve industrial challenges. In Singapore, we are working closely with the Maritime & Port Authority of Singapore (MPA), as well as twenty other partners, on a JIP to investigate the operational feasibility of LNG bunkering in the country. This is a great example of why JIP are so important to addressing challenging projects since such
an initiative will require the support of players from across the entire value chain. By any measure, this is not something that any particular company can address in isolation. In addition to this, we are working on a couple of other JIP’s with some of the oil majors and equipment venders. These are primarily concerned with creating safer and more reliable offshore operations in demanding environments.
FR: What is your assessment of the feasibility of LNG bunkering in Singapore? ERNST MEYER: Generally speaking, we see that LNG bunkering is becoming an increasingly important alternative to the conventional fuel source. Not only is heavy fuel oil very polluting, but it is also becoming scarcer. This has the effect of driving the price of the fuel higher levels which adds to business pressure the shipping industry is already facing due to falling freight rates. Furthermore, ship owners will soon be subject to stricter emissions regulations enforced by the International Maritime Organization (IMO). As a result, LNG as a fuel seems to fit perfectly within this picture assuming it is technologically feasible and readily available. It is both cheaper and cleaner to burn and therefore makes a lot of sense. The role DNV has played within this is to document to regulators and stakeholders that it is safe to implement. We have also already developed ship classification rules for ships running on LNG fuel. In addition to this, we have analyzed the feasibility of LNG bunkering by assessing the technical elements necessary to bring LNG to the Singapore and then getting it into the ships.
FR: What would it really take to introduce LNG bunkering to Singapore? ERNST MEYER: The interesting thing about Singapore is that it is more or less the shipping world’s main ‘gas station’. As such, the
DNV has had a presence in Singapore for over a century, conducting surveys since 1898. country certainly has the infrastructure and scope of services designed to accommodate to the needs of passing vessels. What’s more, Singapore has also very recently inaugurated its first LNG import terminal, making LNG available. That is one of the key elements to the success of LNG bunkering. The other is how to get the fuel to the ships. This will require significant investments in both infrastructure and the ships themselves which also raises the question of when the ship modifications make sense. At DNV, we have already carried out these analyses to provide the answers to these questions.
FR: What role will Singapore play in the company’s R&D activities? ERNST MEYER: As a whole, DNV spends five percent of its global revenues on innovation. The Clean Technology Center and the Deepwater Technology Center, opened in Singapore in 2010 and 2012 respectively, are a result of DNV’s ambition to continue along its growth path and spread its innovation genes instilled in the company towards Asia. Historically, our Asian operations have not played a big role in innovation but this is something we intend to change. As a result, a few years ago, we began to engage and place expectations on our operations in Asia to be more active in innovation. This corresponds well with Singapore’s national ambition to be a regional competence center for deep-water and clean energy technologies. As such, we have been working closely with the Singapore Economic Development Board (EDB) in order to realize this shared ambition.
Interview with: Howard Pang, General Manager, Horizon Singapore Terminals
Howard Pang, General Manager, Horizon Singapore Terminals Focus Reports: Considering the space limitations that characterize Singapore, to what extent can investment in better management systems of existing capacities maximize usage? HOWARD PANG: The scope or opportunity for operational improvements from a technological point of view is rather limited. Terminals are essentially warehouses. Having said that, the availability of jetties, or lack thereof, perhaps holds the biggest potential to enhance efficiencies for any terminal as it is often where the biggest bottleneck is experienced. Interestingly, Singapore is among the very few locations in the world that allows terminal businesses to own and operate their own jetties. This is greatly beneficial for us as a terminal operator because it enables us to prioritize our customers and plan the logistical aspects of our business in the most efficient manner. Another implication of this jetty-ownership policy is the limited number of terminals that can be constructed in Singapore. By contrast, other developing countries opt for public ports instead. Although this is not a bad idea in itself as it seeks to share and optimise resources, it could have negative consequences because it could encourage “overbuilding”, especially when there is a lack of capable master-planning. In other words, this often leads to overcapacity in terms of storage space, beyond what is optimal. Hence, the constrained number of terminals that can be built in Singapore, as determined by the limit of jetties, has served to ensure that every terminal built here is of the highest quality with each capable of
Howard Pang, GENERAL MANAGER, HORIZON SINGAPORE TERMINALS
turning as quickly and efficiently as possible. It is worth noting that although Singapore is placing a limit on new oil and gas terminal developments as part of a drive to focus on higher value added developments, the country has been fortunate in that its surrounding neighbors are looking to complement its positioning as a hub by providing land for potential storage terminal projects.
FR: What can you tell us more about the so-called ‘greater Singapore hub’ expansion projects? HOWARD PANG: This idea primarily revolves around some of the Indonesian islands that surround Singapore as well as the south Malaysian territory bordering Singapore offering land area that can accommodate the construction of a variety of terminals and ports that will complement Singapore’s limited land and shoreline availability. In a sense, these alternative locations will represent only a marginal difference in terms of freight, allowing them to be considered pursuant to Singapore. As such, they will provide traders and oil companies with greater capacity in peak times.
FR: Besides its strategic location at the cross roads of international trade routes, what is it that makes Singapore one of the world’s largest oil trading hubs? HOWARD PANG: Singapore is a major pricing centre for refined petroleum products and the strong liquidity levels it enjoys as a result should continue to attract more oil traders to the country.
FR: To what extent do the ongoing investments in regional neighbors like China, Malaysia, Indonesia, Vietnam of South Korea represent a threat to Singapore’s positioning as a hub? HOWARD PANG: One of Singapore’s biggest advantages that has helped place it on the world map in terms of trade is its inherent geographical location. In turn, Singapore has historically been the region’s entrepôt which has for long developed and honed the skills and infrastructures needed to support that. In this respect, it would be very difficult to match and overcome the momentum that the island-state has gained over time. Similarly, petrochemical plant or refinery investment projects are by no means small, costing billions of dollars regardless of the location. The question one should be asking here is where to place those investments. Do you place this in a still developing nation with underdeveloped regulatory or unstable political regimes, or do you invest that money in a tried and tested market that is both transparent and heavily pro-business? Singapore is among the very few places in the Far East where you can enter a strategic sector and maintain full ownership of the company with few local content stipulations. These are important considerations to make when making such large investment decisions and geographical location is a critical factor for downstream plants and terminals. In that regard, the premium that Singapore might command is, in my view, more than justifiable. FR: In line with Horizon Terminals mission of maintaining leadership in the Far East region, what growth opportunities have you identified? HOWARD PANG: Over the past six years, we have been quite active in exploring business development opportunities combing
Although Singapore is placing a limit on new oil and gas terminal developments as part of a drive to focus on higher value added developments, the country has been fortunate in that its surrounding neighbors are looking to complement its positioning as a hub by providing land for potential storage terminal projects. through many of the regional countries including Vietnam, Indonesia and China, among others. Being highly selective in our growth strategy, we are looking for opportunities that are large in scale. We seek investment opportunities that can provide at least 500,000 of cubic meters, or more, of storage capacity. Ideally, these targets would be situated in established hub locations. Although we have identified a number of potential locations, a limiting factor of these opportunities is that their respective oil markets are not yet fully liberalized. Instead, these countries tend to have just a handful of state-owned oil companies that have the rights to import crude oil and other products. Without a healthy and independent third party volume trading scene, we do not think it would be suitable to penetrate those markets just yet. As such, Singapore remains to be the focal point for Horizon Terminals and we are believers in the greater Singapore story – seeking opportunities in the surrounding countries which are offering land space such as Malaysia or Indonesia.
Interview with: Richard Lorentz, founding partner and director business development, KrisEnergy
Richard Lorentz, founding partner and director business development, KrisEnergy Focus Reports: What would you say drove investor appetite in the Southeast Asian region? RICHARD LORENTZ: Looking at a map of the region, you can see that it covers a huge area the size of America and until relatively recently there was limited gas infrastructure. In the early days, if you found gas it had to be either huge on an LNG scale, or it had to be located right next to a significant consumer such as a fertiliser plant, otherwise exploiting it would not have been commercially feasible. Years ago when I was exploring in South Sumatra, finding gas was almost worse than drilling a dry hole because you could not relinquish it favourably nor could you monetise it. We were responsible for finding a lot of gas in South Sumatra that ultimately ended up being the Corridor block gas project that sold, and still sells, gas into Central Sumatra and into Singapore. To some extent, that kicked off the Trans-ASEAN pipeline idea. Today, there are gas pipelines crisscrossing the region which has opened up a whole range of opportunities for new developments. Another point to consider was the flight from Southeast Asia to West Africa. Oil companies tend to act like lemmings, pursuing the hottest deals across the world; from West Africa for a while to Brazil, and now East Africa. In the 1990s and early 2000s, it was generally perceived that there were no big-hit targets left in Southeast Asia. Of course, this couldn’t be further from the truth because
Richard Lorentz, FOUNDING PARTNER AND DIRECTOR BUSINESS DEVELOPMENT, KRISENERGY
monster discoveries like the Exxon discoveries onshore Java and the Tangguh gas field in east Indonesia have been made. Hence, there was a vacancy left in the region and when we set up Pearl Energy, we were among the first start-up exploration and production companies to be established in Southeast Asia. Fast forward to today, we are in fact drilling a couple wells very soon which demonstrate great potential.
FR: What is it that a company like KrisEnergy can provide that others have not or could not? RICHARD LORENTZ: Our senior technical people have over 20 years of experience, specifically within our geographical focus. In addition to this, our offices are all predominantly, if not entirely, staffed by locals, with the exception of the Singapore office. This applies to the entire hierarchy within the offices, including senior management, technicians and engineers. Of the 100 or so core people contributing to KrisEnergy’s success today, a third are technical and two-thirds of those are geologists and geophysicists. Almost all of them were born in this region and, if not, have worked most of their adult lives here. This local content gives KrisEnergy a deep understanding of the local geographies and work cultures. If you look at our geographical coverage, from Bangladesh to eastern Indonesia, the geology is broadly similar it is the same age and is composed of sandstones and limestone’s. To date, we have 16 properties,
but have also signed over 200 confidentiality agreements over the last three and a half years. This demonstrates our capacity to screen a lot of potential targets due to our deep understanding of the regional geologies. Almost always, whenever an opportunity arises, we can screen it with great speed because someone in the company will have worked in a particular area at some point in their careers. For instance, there is not a part of Indonesia that Chris or I have not seen in our careers. This also puts us at an advantage when compared to the bigger IOCs, which tend to spin in expats that stay only for relatively short periods of time. This of course limits their effectiveness and familiarity with the local industry. Another important differentiating factor for KrisEnergy is the fact that we are headquartered where we operate. By contrast, a similar sized company listed, for example, on the London Stock Exchange but operating here would certainly lack momentum going forward and excludes itself from the deal flow that goes on by being present here.
FR: How does KrisEnergy intend to increase its average production levels, which in 2012 amounted to under 3,400 boepd in 2012? RICHARD LORENTZ: Broadly speaking, our portfolio contains a good balance of assets across the exploration and production lifecycle. Over the last three and a half years, we have participated in about 27 exploration projects and have made 18 discoveries. Of those discoveries, we are developing six with the first one coming on stream in early 2015 followed by another every six to nine months after that. Those six developments constitute a diverse mix of oil and gas production; two located in Thailand, one in Cambodia and three in Indonesia. Right behind that, is another group of discoveries that still in the appraisal stage. In addition to this, we also have a rich inventory of prospective exploration wells that we are constantly working to
In the 1990s and early 2000s, it was generally perceived that there were no big-hit targets left in Southeast Asia. Of course, this couldnâ€™t be further from the truth because monster discoveries like the Exxon discoveries onshore Java and the Tangguh gas field in east Indonesia have been made. assess to get to the exploration drilling stage. This diversity of assets across our E&P lifecycle demonstrates how we like to penetrate the entire value chain. Moreover, they illustrate the fact that all of our blocks, in whatever phase they are in, have exploration potential. Put together, our multi-target blocks form a good balance between high risk/high impact and low risk/low reward exploration prospects. In increasing the likelihood of success, we always try to be as ruthless as possible when it comes down to our technical assessment over a contract area. As mentioned, we have 16 properties now, but we have turned down over 200 in the past.
FR: With your second exploration and production oil and gas company listing under the belt, what legacy would you leave behind? RICHARD LORENTZ: We intend to shape KrisEnergy as Singapore Inc.â€™s oil and gas E&P arm. We aspire to do in Asia what Tullow Oil is doing in Africa. We want people to view KrisEnergy as a company that is rigorous in its upfront technical work, which is why we have a superior exploration success rate. We are dynamic, we can move and respond quickly to get deals done. We want to build a sustainable oil company.
Interview with: Clive Christison, CEO & director, Integrated Supply & Trading (IST), BP Eastern Hemisphere.
Clive Christison, CEO & director, Integrated Supply & Trading (IST), BP Eastern Hemisphere Focus Reports: BP in Singapore has transformed from its beginning in 1964 as an oil refining and marketing company into a trading and knowledge hub for the region. What is the relative importance of BP Singapore to the Group’s global IST operations? CLIVE CHRISTISON: Having moved away from being a physical refining company in Singapore into a knowledge and trading hub, the history of the local office has been one of growth and is as such of great importance to the group’s regional and global operations. We began with some five employees in the early days of the trading organization but have now grown to include over 400. From a group wide perspective, the importance that Singapore plays internally and externally for BP is incredibly high because of the global nature of energy trading. The markets today are all highly interconnected and to trade in any one given location, one must understand the global dynamics of what is taking place. The ability to share information and stay connected to the world view is critical across all traded commodities. We have, for this reason, established our trading process to reflect a global perspective for all commodities. This allows us to share information quickly and gain insights into global events that affect prices, spreads and ultimately supply and demand. Situated in the middle of Asia, the Singa-
pore office caters to the entire region as well as the Middle East. This area has been the fastest growing demand center for products and crude and also the fastest growing production area in terms of refining capacity. These developments have changed the way markets in the region impact global demand. They have grown to such an extent that they are now more important than impacts from the West. Our remit is therefore to capture as much of that growth as possible and leverage the global trading network we have to trade wisely in local and international markets while ensuring an effective flow of regional information back to our colleagues in Europe and the US to support their activities as well.
FR: With international financial institutions such as JP Morgan, for instance, contemplating the disposal of their energy trading desks, we are seeing a trend towards the ‘de-financialization’ of energy trading away from banks back to oil companies. How will this general shift of energy trading impact your operations? CLIVE CHRISTISON: There are two sides to this. Some on the energy company’s side might consider this a positive development as a result of fewer competitors in the market, but we think otherwise. Competition effectively drives liquidity and transparency, which in turn creates trade opportunities. In the past, we did see banks push into the wider commodities space in a bid to
Clive Christison, CEO & DIRECTOR, INTEGRATED SUPPLY & TRADING (IST), BP EASTERN HEMISPHERE.
diversify their activities and leverage the strong client base they enjoy. However, the change in recent regulatory environments is placing greater constraints on their business, particularly with regards to capitalization requirements of their balance sheet. This is leading banks to strategically reconsider where their core activities lie and whether commoditiesâ€™ trading is a part of that. In addition to this, the heavy balance sheet requirements needed to support a trading organization are also deterring banks away from the energy commodities business. As a result we are seeing a number of banks either exit or dramatically reduce their exposure to commodities trading. On the other hand, as an integrated energy company, the decrease in competition allows us to capture a larger share of the market. Moreover, this provides for a larger talent pool which we can tap into across a number of disciplines including physical trading, paper trading, business development or inter-sales through derivatives trading. Nevertheless, as an industry we must be mindful to balance the number of banks exiting the business because of the positive liquidity, their contribution to transparency as well as their innovative financial instruments. For the benefit of the industry as a whole, we would not want to see them exit the sector.
FR: Early in February 2012 the Monetary Authority of Singapore (MAS) and International Enterprise (IE) proposed the transfer of regulatory oversight of OTC commodity derivatives under the Commodities Trading Act (CTA) to the Securities and Futures Act (SFA) expected to come into play by late 2014. Is this a move in the right direction given the MASâ€™s inexperience in energy trading? CLIVE CHRISTISON: The MAS has adopted a very open approach in the drafting of this
This area has been the fastest growing demand center for products and crude and also the fastest growing production area in terms of refining capacity. These developments have changed the way markets in the region impact global demand. They have grown to such an extent that they are now more important than impacts from the West. proposal. We have been fortunate enough to be in regular discussion with the MAS to understand their motivations and what their priorities are from a governmental and regulatory perspective. Given the importance of the trading industry in Singapore, the authorities have been meticulous in their planning and transparent in their decision making process and have produced a series of white papers on the subject to which, in some cases, we have contributed. We have also had the chance to share our insight with regard to how the commodity markets operate, particularly in the energy arena. In terms of gaining practical user insight, I believe this has helped the MAS find the balance between increased transparency in the oversight and regulation of markets, whilst ensuring those creating policies understand the implications of that transparency, how the market operates, where their focus should be directed, as well as managing trends in international markets and the implications that has in terms of the global market.
Interview with: Maarten van Aller, chief operating officer, Floating Production, Petrofac
Maarten van Aller, chief operating officer, Floating Production, Petrofac Focus Reports: Mr. Van Aller, you joined Petrofac in 2009 with the objective of building Petrofac’s Floating Production business. Currently Petrofac owns five vessels of which three are FPSO’s. What were your targets and would you say you have succeeded so far? MAARTEN VAN ALLER (MVA): We began with the initial goal of investing in the floating production space as a business platform and we have certainly succeeded in doing so. Looking back to when we started, if someone had told us that within a three year period we would own and operate five assets, we would have been very happy with that ambitious target. In that respect, we have lived up to our expectations. However, considering the dynamic nature of industry, it is worth noting that our business model has evolved. We no longer view the floating production business as a standalone investment vehicle, but rather an enabler of wider opportunities for the Petrofac group as a whole. For instance with our assets deployed at the Berantai fields in Malaysia the ownership of an available Floating Production, Storage and Offloading (FPSO) unit has enabled and accelerated the development of the oil and gas field. In fact, we have so far successfully replicated this three times in the Cendor and Berantai fields in Malaysia and the Stella field in the UK Continental Shelf. FR: Having started your role in 2009, what Maarten van Aller, CHIEF OPERATING OFFICER, FLOATING PRODUCTION, PETROFAC
motivated the decision to establish the home of Petrofac’s Floating Production team in Singapore in 2012? MAARTEN VAN ALLER (MVA): Although we have a large presence in Kula Lumpur in Malaysia, the FPSO sector is more developed and focused in Singapore. In addition to this, we view the island-state as a real marine oil and gas hub. This is not limited to the physical aspects of construction and engineering, but certainly also in terms of ancillary support and services including the financial and legal sectors. Furthermore, Singapore is an excellent independent platform from which we can extend our business into the regional markets of Indonesia, Thailand and Vietnam, among others. As such, Singapore is in many ways a great regional platform for business and is a critical location through which many industry players transit for one reason or another, allowing us to interact with many potential partners and clients.
FR: How would you assess the FPSO business model today? MAARTEN VAN ALLER (MVA): Fundamentally, I strongly believe the leasing business is disproportionately skewed. Today’s business model has evolved in such a way that oil companies or resource holders are the big winners. They could lease a state-of-the-art FPSO for five years leaving the residual value risk completely with the contractor.
Unless the contractor could secure a new deployment quickly enough, they risk becoming hugely exposed to the remaining value. We have seen this happen in the past. We should not be assuming disproportionate risks for limited returns with few prospects for extensions. Although such practices continue to permeate through the market today, we are seeing that the mature FPSO players are moving away from such risky practices that primarily benefited resource holders. Again, not deviating from our course and avoiding falling into such risky projects is a key challenge for us.
FR: The FPSO market today has grown increasingly wide and diverse, where is Petrofac Floating Production positioning itself within the market? MARTIN BRUINS (MB): Simply put, we are where Petrofac’s Integrated Energy Services (IES) division is. The typical market where IES operates is not the 500 million barrel fields, it is the NOC’s and small and medium independents which seek to develop the 20 to 50 million barrel fields. As a total of proven reserves still in the ground, these relatively smaller fields form a significant part of the whole. In part, this area of focus underpins IES’s success so far. MAARTEN VAN ALLER (MVA): A clear demonstration of that success, and the speed with which we can respond to new initiatives, is the work we have done at the Berantai fields. This is a new RSC initiative with Petronas where they explored different ways to develop their smaller underdeveloped reserves. Since they are far too big to develop these themselves, they looked towards service companies like Petrofac for assistance. From field development plan to first gas took only 21 months. Taking the conventional path would otherwise take a significantly longer time. However, not every counterpart
Fundamentally, I strongly believe the leasing business is disproportionately skewed. Today’s business model has evolved in such a way that oil companies or resource holders are the big winners. They could lease a stateof-the-art FPSO for five years leaving the residual value risk completely with the contractor. is open to such an approach since it involves a lot of work being carried out in house by us that would otherwise typically be tendered. But the outcomes speak for themselves and it is clear that it is a successful and time saving concept. In terms of net present values, this is critical.
FR: What is the Floating Production business units’ strategy going forward? MAARTEN VAN ALLER (MVA): Owing to our positioning within the larger IES division of Petrofac, we can offer a wide set of unrivaled capabilities. These include sub-surface engineering and field development capabilities which we leverage into the chartering of our FPSO units. In three cases so far, providing the FPSO has been part of a wider play; part of a field development plan, part of a co-investment in a field and part of a risk sharing contract (RSC) type development with Petronas. In this way, we do enjoy a better position as compared to our competitors because we bring to the table a much wider range of services and capabilities, which enables us to negotiate a more favorable deal, for both parties.
Interview with: Ben Arnott, Director, Oil & Gas Corporate Finance at Standard Chartered
Ben Arnott, Director, Oil & Gas Corporate Finance at Standard Chartered Focus Reports: Standard Chartered first opened in India and China in 1858 and in Hong Kong and Singapore a year later. But can you tell us more about the evolution of your Oil & Gas corporate finance team? BEN ARNOTT: Our team is an amalgamation of our oil and gas lending team and Harrison Lovegrove & Co. Limited, an oil and gas focused boutique M&A consultancy we acquired in 2007. As a result, we now have the capability of covering the M&A space for oil and gas, particularly in the upstream sector, as well as meeting the industryâ€™s borrowing requirements. In a broader context, Standard Chartered has a wide scope of offerings catering to the oil and gas industry. In addition to our specialist team, there are a larger number of people at Standard Chartered working in the client coverage area addressing the day to day requirements of the industry as well as specialists in the financing of refining, storage and infrastructure businesses. FR: How fine-tuned are Standard Charteredâ€™s products to the oil and gas industry in comparison to the other hubs like Hong Kong or London? BEN ARNOTT: Given our teams focus on specialized finance, we are always producing customized services for our clients and seldom take a standardized approach. One thing you can say about the banking industry is that it is incredibly client focused. As such, we find a wide range of financial services a client might want will be offered in a bank like Standard Chartered. The goal is to try and cover the whole range of client requirements rather than specializing in one
Ben Arnott, DIRECTOR, OIL & GAS CORPORATE FINANCE AT STANDARD CHARTERED
particular area of service. Although some might follow that type of narrowly focused strategy, we aim to be a full service corporate bank.
FR: Typically characterized by their long term financing needs, some projects have suffered from a liquidity crunch due to banks reluctance to provide long term financing. To what extent is this true in Singapore and Standard Chartered? BEN ARNOTT: To some extent regulatory pressures are encouraging a bias towards shorter term horizons. That is, you could argue that pressures on revenues and profitability may cause financial institutions to lean towards the shorter term. However, on the whole, people working on oil and gas or power projects, where lead times can be long, intuitively understand that this is not an overnight business. As such, we are selective in the projects that we seek, looking for high quality projects with excellent sponsors. If these criteria are satisfied, then we can certainly justify a longer term financing deal in accordance with the project requirements.
FR: Singapore has worked diligently towards shaping the city-state as the financial hub of the region and the SGX has recently communicated it intentions to become a regional center for oil and gas firms. However, how realistic is this ambition? BEN ARNOTT: Singapore is undoubtedly becoming a financial hub for oil and gas companies. However, there are some challenges and limitations. Asia as a whole is
not the most significant player on a global scale from a total reserves and production point of view. In that respect, Singapore needs to position itself appropriately as a key trading location and the gateway to the world’s fastest growing energy consumers. It needs to be able to facilitate the supply opportunities in Asia while serving the demand opportunities as well. As it is, there is not a big stable of listed upstream oil and gas companies on the Singapore Exchange (SGX). Nevertheless, I am impressed with the SGX’s efforts so far but they do have to contend with competition from the likes of the Tokyo Stock Exchange (TSE), Hong Kong Stock Exchange (HKEx) or the Australian Securities Exchange (ASX), for instance. The overall issue for Singapore probably relates to the absence of an oil and gas listing track record and the unfamiliarity of investors with the particularities of the upstream sector. On the other hand, I am confident there is a significant amount of liquidity in Singapore looking to be deployed in these sorts of opportunities as they would be highly appropriate from a diversity perspective. The challenges however would be to build that scale in terms of the numbers of oil and gas companies listing on the SGX. The listing of Pearl Energy in 2005, followed by the more recent listing of KrisEnergy in 2013, has certainly helped to put the SGX on the map in relation to the upstream oil and gas industry. Indeed, the listing of KrisEnergy was global news but although it is not expected to bring about a flood of companies to follow suit, it has set the stage and created more favorable conditions. People are now undoubtedly more likely to consider dual listings for instance and are more aware of Asia’s potential as a source of capital. In terms of advantages, oil and gas companies looking to list on the SGX would be happy to find themselves in a less crowded marketplace. In comparison to the ASX, for
Singapore needs to position itself appropriately as a key trading location and the gateway to the world’s fastest growing energy consumers. It needs to be able to facilitate the supply opportunities in Asia while serving the demand opportunities as well. instance, where a junior oil and gas company might find themselves over shadowed by the myriad of comparable companies trading there.Standard Chartered first opened in India and China in 1858 and in Hong Kong and Singapore a year later. But can you tell us more about the evolution of your Oil & Gas corporate finance team?
Company index American Bureau of
Keppel Corporation.................... 6, 8, 10
Shipping (ABS)................................... 10 Keppel FELS..........................................6 American Chamber of Commerce....15 Keppel Offshore & Marine................. 10 Baltic and International Maritime Council (BIMCO)...................................6
Lloydâ€™s Register.................................. 11
Brunel......................................13, 14, 15
Ministry for Trade and Industry (MTI).......................................8
Centre for Offshore Research and Engineering (CORE)........................... 11 ConocoPhillips.................................... 10 Cosco Corporation...............................8 COSL Drilling Pan-Pacific.....................8
Monetary Authority of Singapore (MAS)...................................................13 National Productivity and Continuing Education Council (NPCEC)..............14 National University of Singapore
Det Norske Veritas (DNV).................. 10
Economic Development Board.2, 6, 10
Fugro............................................. 10, 11
Singapore Exchange (SGX).....6, 12, 13
Horizon Singapore Terminals............15
Singapore Maritime Foundation....... 6
International Energy Agency (IEA).....6
UPCOMING REPORTS BRAZIL 2014 UKCS 2014 SINGAPORE PART 2
Singapore Oil & Gas report part 1 December 2013
Written after exclusive interviews with Singapore's decision makers from NOCs and multinational E&P companies, legislators, financial insti...
Published on Jan 13, 2014
Written after exclusive interviews with Singapore's decision makers from NOCs and multinational E&P companies, legislators, financial insti...