Market insights

Looking Ahead for Singapore’s Chemicals Sector

14 November 2016 by Neha Ghanshamdas of Global Business Reports

Today, a new set of dynamics is at play, keeping Singapore and its chemical industry on their toes. The Singapore Economic Development Board’s (EDB) Energy & Chemicals, Executive Director, Damian Chan and Director, Cindy Koh share more about the active measures in place that’ll sustain Singapore’s future value proposition to chemical companies.

Damian Chan, Executive Director, Energy & Chemicals, Singapore Economic Development Board

Notwithstanding today’s uncertain economic climate, a number of players in Singapore are riding on the back of increased margins due to lower feedstock prices. In fact, many investments have been made on the island over the past three years. What continues to incentivize multinationals to come to Singapore and set up their operations here?

DC: Firstly, Singapore’s infrastructure capabilities have been critical for continuing to attract new companies to our frontiers. Over the past 20 years Jurong Island has come to serve as a centerpiece for all energy, petrochemical, and specialty chemicals activities. Jurong Island’s key value proposition is integration, from the perspective of being connected to both customer and supplier, often literally over the fence through pipes. This significantly reduces time to customers, lowering logistics and transportation costs. Another contributing factor to Jurong Island’s plug and play infrastructure is the presence of service providers such as third party logistics providers (3PLs) and utilities players.

Secondly, Singapore’s business environment plays an important part in the city-state’s competitiveness equation. Chemicals is a capital intensive, and in many cases technology intensive, industry. Hence, predictability with regards to government policies, rule of law and Intellectual Property (IP) protection, make Singapore a trusted and secure environment for sensitive and large investments. Especially in the energy and chemicals space where companies tend to take a long-term view, predictability and stability are critical, aligning well with Singapore’s attributes. However we cannot simply rest on our laurels and rely on such attributes or value propositions to attract investments. We need to continue to improve ourselves to make sure that we remain competitive and sustainable. In today’s environment—whether in the context of commodity markets, business growth, or political developments around the world—there is a great deal of uncertainty. Consequently, being able to provide some degree of resilience, or flexibility to respond to changes, becomes increasingly important. Accordingly, we have been working to improve Singapore’s energy and chemical companies’ resilience. The Jurong Island v2.0 initiative will be of paramount importance to this, and we are beginning to see the fruits of this labor.

Cindy Koh, Director, Energy & Chemicals, Singapore Economic Development Board

In 2014 specialty chemicals comprised 9.7% of Singapore’s chemical cluster’s total output. How is the EDB working to promote specialty chemical research and production in Singapore? How are initiatives such as the joint industry sectorial planning (JISP) for specialty chemicals affecting the growth of this market segment?

CK: Innovation is key for companies to formulate the right products, and deliver customized solutions to Asian consumers, whose needs could be quite unique. JISP is a joint initiative between EDB and the Agency for Science, Technology and Research (A*STAR) that spans across multiple research institutes including the Institute of Chemical Engineering Sciences (ICES), the Institute of Materials Research and Engineering (IMRE) as well as the Institute of High Performance Computing (IHPC). We realize that there is increased pressure to improve R&D yield for specialty chemical companies, and hence a need to keep costs down. This is where IHPC comes in with modeling and simulation, for example. JISP is a deliberate effort on the part of EDB and A*STAR to try and identify scientific and technology areas in which companies have capability gaps, and where A*STAR and EDB could invest public funds to develop these capabilities within our research institutes.

How is Singapore working to promote the production of specialty chemicals?  What will prompt more companies to come and conduct innovation here?

CK: The global specialty chemicals market will grow at a compound annual growth rate (CAGR) of about 5.4% from 2015 to 2025, with Asia Pacific growing at a CAGR of 6.35% and contributing 45% of the global market share. This presents numerous opportunities for specialty chemical companies, who have to maintain a strategic presence in Asia to capture these growth opportunities. While Singapore is a small market, the country has a dense ecosystem of specialty chemical companies’ customers. And what is important to note is that these customers are looking beyond Singapore and innovating for the Asia Pacific market. The challenge for specialty chemical companies is getting the right solutions out to the market at the right time, making the ability to respond quickly crucial. Over the last five years, we have seen specialty chemical companies leverage Singapore’s strengths, such as our strong research capabilities and IP protection, access to regional problem statements from their regional customers in Singapore and availability of manufacturing infrastructure, to set up their strategic hubs here. These strategic hubs include commercial, innovation and manufacturing functions. The co-location of commercial, innovation and manufacturing activities in Singapore has a strong reinforcing effect and make these companies more nimble in meeting customers’ needs. 

Have you identified any more opportunities or gaps in the Asian chemical supply chain that Singaporean manufacturers could potentially fill?

DC: We are actively working on developing the higher olefins chains, such as C5s. While typically one cracker does not produce enough C5s to result in a world scale C5 complex, the island has the benefit of having four crackers. Hence we could aggregate C5s that come out of the crackers to produce a world-scale C5 complex, which is something that we are keen to develop.

While Singapore does continue to boast a host of structural advantages, challenges such as space certainly remain. JTC and other players have stepped up with innovations such as the Jurong Rock Caverns. How are these being utilized and what other innovations are in the pipeline in the context of space optimization?

DC: The construction of the first phase of the Jurong Rock Caverns has been completed.

This underground storage facility was conceived for the purpose of storing crude and condensates, and has stocked condensates for one of the aromatic complexes on Jurong Island. The next stage is to see how we can use the caverns for crude storage, which would add another degree of resilience to our refineries.

Further to this, we are constantly looking at other ways to optimize space. When it comes to chemical plants, because of safety, there is some limit to the extent they can optimize space. On Jurong Island however, there are logistics facilities and warehouses that are exploring ways to better utilize automation technologies such as robotics to help with space conservation. The EDB is also working to be more judicious with projects, and taking care to ensure a high level of land productivity.

CK: JTC is developing a new chemicals hub, which is the first of its kind in Singapore, in Tuas. The facility is catered towards specialties and small footprint type plants, serving as a multi-story facility for chemical companies to set up some of their blending and packaging activities. It is unique in that it includes shared facilities and services, which helps companies save on upfront capital requirement, operating costs and improve process efficiencies.

Labor has been a hot topic among all industrial stakeholders. While the issue is policy-driven, what are some initiatives being headed to combat labor related challenges? How successful have these and additional mechanization efforts been in combatting the shortage of workers?

DC: Initiatives such as the Process Construction and Maintenance Management Committee (PCMMC) are progressing well. We launched PCMMC two or three years ago to bring together plant owners and contractors represented by the Association of Process Industry (ASPRI) and identify ways to improve productivity and save on labor, especially reliance on foreign labor. This would also reduce maintenance and construction costs. There were some low hanging fruit we have identified and worked on, such as worker housing, which should ideally be proximate to Jurong Island. The EDB has worked with ASPRI on this front, which is currently constructing a new foreign worker dormitory close to Jurong Island, in tandem with an in-house training facility.

We have also set up a turnaround scheduling system to smooth out peaks and troughs in demand. Often times there are increased costs for maintenance or construction due to the sheer number of jobs. Other initiatives such as mechanization will take longer to implement. A productivity council has been formed as a result of PCMMC, whose members are exploring mechanization and identifying parts of the maintenance or construction process that can be better mechanized. Additionally, we are making efforts in the field of worker certification. Lastly, an important component moving forward is benchmarking. We are currently working with the Construction Industry Institute (CII) at the University of Texas Austin on benchmarking of projects. PCMMC has a three-year agreement with CII to help with benchmarking projects, which will in turn support efforts in the fields of mechanization and certification.

Data analytics is expected to play an important role moving forward in increasing the competitiveness of the petrochemical sector. Can you speak more broadly about this?

DC: Data analytics will play a role in enhancing competitiveness as well as health and safety. The Industrial Internet of Things (IIoT) is potentially transformative for many industries. Even for a sector that is rightfully conservative—due to the importance of health and safety— there are many opportunities for new technologies to help boost competitiveness and sustainability. For example, we can use data analytics to improve energy efficiency within our chemical plants. Technology company Emerson for instance, has set up a pervasive sensing center of excellence in Singapore. They have been working with chemical players on Jurong Island such as Denka to apply sensing technology and bring about cost savings as well as enhance health and safety. The other major controls and automations company Yokogawa has also just set up a co-innovation center with the aim of working with companies in the chemicals industry to deploy IoT technologies. However, it is important to note that we need to continue to improve awareness surrounding new technologies. IoT is still relatively new and given the nature of the industry, education efforts have to be made to help companies better crystalize the benefits of adoption.

What will continue to set Singapore apart in the international chemical industry for the long term?

DC: We have to go beyond the hygiene factor, and no matter how commodity prices shift, work to ensure that Singapore remains competitive. Eventually oil prices will increase again, and we have to shield ourselves against volatility. Developments such as the LNG terminal, increasing the number of LNG aggregators for greater energy security and competitiveness, along with efforts put towards feedstock diversification such as Vopak’s new LPG terminal on Jurong Island, all contribute to this goal.

But aside from looking at resilience from a cost perspective, market connectivity should be taken into account. We believe that Asia will continue to be the world’s long-term growth story. Consequently Singapore’s status as a hub due to its location in the heart of Southeast Asia will continue to hold us in good stead. Furthermore, we will leverage key attributes that we have built over the years, such as strong financial institutions and logistics networks to complement our manufacturing capabilities. For example, Singapore is home to many customers of the specialty chemicals companies that are not just conducting sales and marketing, but engaged in manufacturing and R&D (such as P&G, a major customer to consumer chemicals companies). Having a critical mass of companies from different business areas that drive demand from an innovation perspective is key, and many of these firms have established their hubs in Singapore. By bringing their manufacturing and R&D here, companies will be very well connected to their customers, and improve their market resilience.

What is your outlook and vision for Singapore’s chemicals sector over the course of the next three to five years? 

DC: We hope to continue to be vibrant from a growth perspective. We observe a great deal of growth stemming from specialty chemicals, including the types of jobs the segment creates. With more technologies emerging, the nature of jobs will also evolve, and there will be a demand for more IT savvy talent, as well as analytics-trained capital. Technology enablement of the sector is a critical part of how we see it transforming. Another key part of Singapore’s vision is for the energy and chemicals sector to grow in a sustainable way.

Do you have a final message about Singapore and its resilient industry?

DC: Singapore remains committed to the development and growth of its energy and chemicals sector. We are dedicated to ensuring that the country remains a long-term competitive location for energy and chemicals companies. The EDB specifically is here to serve as a long-term partner to these companies, and ensure that they are successful in Asia at least partly because of Singapore.

 

Singapore Chemical Ecosystem

This interview is part of a Special Report on Singapore first published in IHS Chemical Week. You can also find the report here.