Is Singapore’s ‘leading offshore hub’ status under threat?
The global energy pendulum is swinging towards Asia and as Southeast Asia pursues its road to modernity, the region is poised to play a central role in this seemingly inevitable shift. Over the next twenty years, the IEA anticipates Southeast Asia’s energy demand to surge by 80 percent. Furthermore, over the next five years, Southeast Asia is expected to receive record levels of offshore investment, fueling the expansion of the region’s upstream industry.
In a fiercely competitive and rapidly evolving environment, Singapore’s conventional position as the region’s premier offshore hub is in a state of flux. For senior executives, 2014 promises to be a decisive year. Today, both Singapore and a raft of oil and gas companies are assessing how best to ride the crest of the regional offshore wave. In the face of internal headwinds, the Lion City is choosing its battles wisely and leveraging its competitive advantages to remain the conductor of Association of Southeast Asian Nations (ASEAN) offshore orchestra. Whether Singapore can sustainably remain a ‘hardware’ player, providing large-scale offshore and oilfield storage, manufacturing and logistics capabilities, is a question that elicits mixed opinion.
Although Southeast Asia is rapidly emerging as an energy consuming giant, the confounding paradox remains: why does the region’s per-capita energy use stand at a relatively paltry level? With a growing population and surging urbanization, the region’s energy demand challenge is further compounded because over one fifth of the population – or approximately 134 million people – lack access to electricity. Furthermore, with indigenous production dwindling, the ASEAN states face a nexus of energy uncertainties, but are working in overdrive to tackle the challenge.
In assessing the seismic shifts in global energy demand, Craig McMahon, the lead Asia upstream analyst of consulting specialist Wood Mackenzie, does not mince his words: “The future global energy demand story is heavily focused in Asia Pacific.” In the face of colossal energy demand, high oil and gas prices, in addition to rising imports, the ASEAN states are striving to maximize the potential of their hydrocarbon reserves. According to BP’s 2013 Statistical Review of World Energy, the ASEAN states hold approximately 17 billion barrels of proven oil reserves and 7.2 trillion cubic meters of natural gas reserves, which equates to the total amount of proven natural gas in North America.
Martin Kobiela, general manager and operations director at the international mooring and installation company InterMoor, explains the region’s desire to negate its energy problems. “In Southeast Asia, there is a real hunger for new energy supplies because the region recognizes the scale of the challenge and is extremely focused on the need to establish new energy supplies and infrastructure.” To paraphrase the ancient Chinese philosopher Sun Tzu, in chaos comes opportunity, and the energy vitality of the region is certainly generating myriad growth opportunities for oilfield service companies like InterMoor.
To capitalize on the buoyancy of Southeast Asia’s oil and gas market, international oil companies (IOCs) are pivoting their strategic eye eastwards. Since 2007, to illustrate the upstream dynamism within the Tiger Community, exploration and appraisal drilling in Southeast Asia comprised of 12,000 wells. Though the low hanging fruit may have gone, the ASEAN region is blessed with an abundance of energy resources, deep offshore potential and with a variety of markets to choose from, oil and gas companies are eager to occupy a square on the ASEAN energy chessboard.
Total, the French IOC, prides itself on its pioneering and sophisticated deepwater capabilities and is certainly striving to spearhead the development of the region’s fledgling deep offshore industry. Jean-Marie Guillermou, president E&P of Total Asia Pacific remarks, “Generally Asia Pacific is evolving into a mature upstream area and as such we are increasingly pursuing hydrocarbons in frontier markets.” In Myanmar, the French E&P giant recently drilled a deep offshore well in the M-11 Block with its partner PTTEP and acquired an ultra-deepwater (2,500m) block in the Philippines. The company also remains optimistic about discovering deep offshore oil in Brunei despite the initial exploratory results being rather disappointing.
Despite a desperate need to reinvigorate its offshore sector, Indonesia remains a hydrocarbon titan. In 2012, the world’s fourth largest amount of hydrocarbons were discovered in Malaysia and with its implementation of an array of fiscally enticing and creative policies, it is arguably the energy poster child of the region. Furthermore, upstream activities in Thailand, Vietnam, and the Philippines are gaining pace. Additionally, Myanmar’s opening of its energy doors has generated a buzz of corporate excitement, with NOCs and IOCs extremely keen to take part in its oil and gas growth story.