Shell official flags high energy costs in S'pore
[SINGAPORE] Shell's global chemicals chief has become the second top official in recent times to raise a red flag over high energy costs here.
Ben van Beurden, Shell Chemicals' executive vice-president, said on Wednesday that this has hurt manufacturing economics here, and "not only affected us, but also our customers".
His remark follows a similar one by Axel Heitmann, the chairman and chief executive of German specialty chemicals group Lanxess, in September.
And an industry executive, contacted yesterday, also said the high energy costs are a serious concern, since energy is a major component of costs for petrochemical plants.
"It's a sore point and painful for the industry. But we hope that the liquefied natural gas (LNG) supplies coming from shale gas developments in the United States and Canada may lead to cheaper feedstock for the gencos here."
Both Shell and Lanxess have billions of dollars invested in plants here, with potentially more coming; both corporations say they have raised the issue with the government.
Mr van Beurden, speaking in a teleconference from London on Wednesday, said Shell has been in talks with the Economic Development Board (EDB) on the issue. He added: "At the moment, energy prices here are among the highest for industrial producers in the region - if not the world."
Responding to a BT query, he raised the issue and also disclosed that Shell was about to announce more downstream investments here, following the expansion of its Pulau Bukom ethylene cracker.
Mr Heitmann told BT in September that Lanxess, which is building synthetic rubber plants here, has raised its concerns over the issue with Trade and Industry Minister Lim Hng Kiang and EDB officials.
Responding yesterday, Eugene Leong, EDB's director for Energy and Chemicals, said: "Rising energy cost is a source of concern for chemicals companies here and EDB is working with relevant government agencies and the industry to address it."
He said that the Singapore LNG terminal, targeted for start-up next year, will give Singapore access to competitively-priced gas from around the world. "It will be an additional source of natural gas for power generation and industry use. This will introduce a new electricity supply and enhance competition in our electricity market."
He said that the EDB was looking at alternate sources of feedstock. In particular, it has been working with interested parties to develop a liquefied petroleum gas (LPG) terminal to provide alternative feedstock for crackers; it is also looking into a gasification plant to meet the needs of the refineries and chemical plants, as well as biomass-based chemical production routes.
Mr Leong added that the EDB, with the National Environment Agency and Energy Market Authority, is working with the industry to pursue energy efficiency measures. This is to improve the "overall investment environment" on Jurong island to ensure that Singapore stays compelling as a global chemicals hub, he said.
Agreeing, the industry executive here pointed out that although energy cost is a downside, there are several positives for the chemicals industry, especially in the synergies from the industry clustering on Jurong island.
He noted that worries over carbon emissions, which spurred the gencos to move increasingly to using environment-friendly gas feedstock for their plants, had added to costs.
Gas here is expensive because its price is pegged to that of oil. The price of piped natural gas from Indonesia and Malaysia is indexed to high-sulphur fuel oil; coming LNG shipments by aggregator BG Group are indexed to Brent crude prices.
But with more LNG supplies expected from the US and Canada, buyers are expecting gas prices to be pegged to a combination of oil and US gas indices, so prices should soften.
One bright spot is that the recent new plantings by the gencos, which has increased electricity supply, have recently lowered wholesale electricity prices here. Some genco officials are in fact concerned about a coming supply overhang, especially with the new gas-fired plants, which will result in some 10,000 MW of capacity chasing peak demand here of around 6,500 MW.
[SINGAPORE] Shell's global chemicals chief has become the second top official in recent times to raise a red flag over high energy costs here.
Ben van Beurden, Shell Chemicals' executive vice-president, said on Wednesday that this has hurt manufacturing economics here, and "not only affected us, but also our customers".
His remark follows a similar one by Axel Heitmann, the chairman and chief executive of German specialty chemicals group Lanxess, in September.
And an industry executive, contacted yesterday, also said the high energy costs are a serious concern, since energy is a major component of costs for petrochemical plants.
"It's a sore point and painful for the industry. But we hope that the liquefied natural gas (LNG) supplies coming from shale gas developments in the United States and Canada may lead to cheaper feedstock for the gencos here."
Both Shell and Lanxess have billions of dollars invested in plants here, with potentially more coming; both corporations say they have raised the issue with the government.
Mr van Beurden, speaking in a teleconference from London on Wednesday, said Shell has been in talks with the Economic Development Board (EDB) on the issue. He added: "At the moment, energy prices here are among the highest for industrial producers in the region - if not the world."
Responding to a BT query, he raised the issue and also disclosed that Shell was about to announce more downstream investments here, following the expansion of its Pulau Bukom ethylene cracker.
Mr Heitmann told BT in September that Lanxess, which is building synthetic rubber plants here, has raised its concerns over the issue with Trade and Industry Minister Lim Hng Kiang and EDB officials.
Responding yesterday, Eugene Leong, EDB's director for Energy and Chemicals, said: "Rising energy cost is a source of concern for chemicals companies here and EDB is working with relevant government agencies and the industry to address it."
He said that the Singapore LNG terminal, targeted for start-up next year, will give Singapore access to competitively-priced gas from around the world. "It will be an additional source of natural gas for power generation and industry use. This will introduce a new electricity supply and enhance competition in our electricity market."
He said that the EDB was looking at alternate sources of feedstock. In particular, it has been working with interested parties to develop a liquefied petroleum gas (LPG) terminal to provide alternative feedstock for crackers; it is also looking into a gasification plant to meet the needs of the refineries and chemical plants, as well as biomass-based chemical production routes.
Mr Leong added that the EDB, with the National Environment Agency and Energy Market Authority, is working with the industry to pursue energy efficiency measures. This is to improve the "overall investment environment" on Jurong island to ensure that Singapore stays compelling as a global chemicals hub, he said.
Agreeing, the industry executive here pointed out that although energy cost is a downside, there are several positives for the chemicals industry, especially in the synergies from the industry clustering on Jurong island.
He noted that worries over carbon emissions, which spurred the gencos to move increasingly to using environment-friendly gas feedstock for their plants, had added to costs.
Gas here is expensive because its price is pegged to that of oil. The price of piped natural gas from Indonesia and Malaysia is indexed to high-sulphur fuel oil; coming LNG shipments by aggregator BG Group are indexed to Brent crude prices.
But with more LNG supplies expected from the US and Canada, buyers are expecting gas prices to be pegged to a combination of oil and US gas indices, so prices should soften.
One bright spot is that the recent new plantings by the gencos, which has increased electricity supply, have recently lowered wholesale electricity prices here. Some genco officials are in fact concerned about a coming supply overhang, especially with the new gas-fired plants, which will result in some 10,000 MW of capacity chasing peak demand here of around 6,500 MW.
