Even the lucrative petroleum and petrochemical industry is under pressure from Middle East and Malaysia (soon - Iskandar):

Refineries may cut production as margins fall in Q4
Double whammy for oil majors: China slowdown, new Gulf competition soon
By ronnie lim


http://www.businesstimes.com.sg/prem...ll-q4-20121220

SINGAPORE refineries, hurting from a drop in fourth-quarter margins, may be forced to trim their production soon if the situation does not improve, an industry official has warned.

The impact of a global economic slowdown, especially in China, will be worsened by competition coming shortly from new refineries in the Middle East, the official, who declined to be named, told The Business Times.

The official said complex refining margins here have fallen by over US$1 a barrel to just over US$4 a barrel from Q3's US$5-plus margins. "Almost all products, especially middle distillates and jet fuel, have been hit by the slowdown in China."

This is confirmed by several industry reports, which showed that refining margins here this month have fallen by around US$2 a barrel to their lowest levels in five months. Other reasons cited for the contraction in refining margins include the worldwide slump in bunker demand and the return of some refineries from maintenance programmes.

"The outlook for Singapore refineries in the next two years is not good, especially with new Gulf refineries coming into the picture," he cautioned.
This includes the soon-to-be-completed 400,000 barrel-per-day (bpd) Saudi Aramco Total Refining and Petrochemical Company (Satorp) refinery, which has started testing some units. Its main product will be around 190,000 bpd of diesel as well as 90,000 bpd of gasoline and 50,000 bpd of kerosene, plus some petrochemicals.

The Satorp refinery - the first of a trio of upcoming 400,000 bpd refineries there - is expected to boost total Saudi diesel capacity and this will affect fuel imports, including those from India and Singapore.

Apart from affecting diesel margins, a Reuters report said that some of the extra Middle East barrels could be shipped into the Singapore trading market to feed growing demand from Australia, where several refineries have been shut. This will pose competition for Singapore refiners, which are aiming to supply to that market.

The industry official told BT that what will happen next depends on the China market and whether the new leadership there succeeds in growing the economy. "Otherwise, Singapore refiners will be forced to look at trimming their throughput shortly, perhaps in Q1," he said.

Oil majors ExxonMobil and Shell, which have their biggest manufacturing operations in Singapore, operate 605,000 bpd and 500,000 bpd refineries here respectively.

According to a recent Oil & Gas Journal survey, this makes their Singapore refineries the 6th and 15th largest worldwide respectively. Topping the list is a 940,000 bpd Venezuelan refinery, followed by three South Korean refineries and Reliance of India's 660,000 bpd Jamnagar refinery.

The third refiner here, Singapore Refining Company (SRC), a joint venture between PetroChina and Chevron, operates a 290,000 bpd facility on Jurong Island.

To gain a competitive edge, both ExxonMobil and Shell have built petrochemicals complexes which are highly integrated with their refining operations here. ExxonMobil is in the process of starting up its second multi-billion-dollar petrochemical complex on Jurong Island, while Shell is expanding the capacity of its Pulau Bukom ethylene cracker capacity by 20 per cent to achieve better economies of scale.

The upgradings are critical given the competition from new refineries in Asia and the Middle East, as well as from upcoming US petrochemical plants using cheap gas from shale gas projects there.

With a final project investment decision expected soon, SRC is also gearing up for a US$500 million expansion comprising a new ultra-low-sulphur gasoline plant and an in-house cogeneration plant to supply utilities.