Pek Hak Bin, Partner, Head of Energy and Natural Resources, Tim Rockell Director, Global Energy Institute, KPMG Singapore
“In a very competitive environment, we strive to help clients cope with the complexity of the industry and its changing nature. Moreover, KPMG’s platform supports clients in coping with their performance issues, growth aspirations and financial solidity. We aim to provide clients with a roadmap for their sustainable development and expansion,” states Pek Hak Bin, Partner and Head of Energy and Natural Resources, KPMG Singapore.
In a rapidly evolving energy landscape with many emerging competitors, why was Singapore chosen as the base to launch the Global Energy Institute in 2013?
Pek Hak Bin: KPMG is a global company and brand name. We have a footprint in countries throughout the world. Though we are principally a consultancy firm, we have developed a very strong industry sector focus too. The energy sector has emerged as the second largest and fastest growing sector within the sphere of KPMG’s global network—the company sees an abundance of opportunity and potential in the energy sector.
On analyzing the global energy landscape, Asia Pacific represents the fastest growing region. It is no coincidence that Singapore was chosen to represent KPMG’s second Global Institute. We have regional and global clients and when one thinks of a hub, the value chain network first and foremost has to be there. Singapore, despite having no energy resources, is the pre-eminent hub for clients because of its infrastructure and well-connected regional platform.
APAC’s energy landscape is growing and evolving rapidly. Considering the surging demand needs of the region now and in the future, the region needs gargantuan investment to meet such demand and bring energy to the consumer. Singapore has emerged as an excellent place for energy financing, with a mature financial infrastructure and developing capital raising market. Lots of our clients use Singapore to access capital and finance their regional projects. Ultimately, for stakeholders looking to participate in the APAC energy story, Singapore is an excellent place to locate.
TR: Singapore is rapidly emerging as a premier energy hub and as such, the market is becoming increasingly drawn to Singapore, indeed many of our clients are setting up their regional headquarters here. Due to an array of factors the island city-state is the perfect location to provide our service range to not only clients in Singapore, but the wider Asia Pacific region as well.
Interestingly, the decision was made globally by KPMG to put the Institute’s first expansion from Houston into Singapore. That strategic move is both rational and symbolic, conveying the central importance of this energy hungry region to KPMG’s global outlook, growth and strategy.
The Global Energy Institute in Singapore is the first international foray of the original institute in the USA. What is the mission and purpose of the institute?
Tim Rockell: KPMG is trying to replicate the tremendous success of our Energy Institute in Houston, where we have had our global energy conference for the past 11 years. We launched the Global Energy Institute with the intention of providing our clients with a platform offering the latest industry thinking. We have various methods to reach our clients, including conferences, shared industry forums, and webcasts. In addition we provide hard material such as publications, surveys and opinion pieces. One chief aim of the institute is to connect with clients and transfer relevant information into our clients’ hands efficiently and quickly. Ultimately, the institute will serve as a knowledge-sharing platform, so that KPMG’s strong pool of energy specialists can reach out to the industry.
LNG trading is one area Singapore is striving to become a regional market leader in. With the development of Singapore’s new import terminal, can the country realistically achieve its ambition to become an LNG trading hub?
PHB: The demand for LNG in Asia Pacific is anticipated to increase by three-fold over the next 20 years. With the development of technologies, which is unlocking unconventional sources of hydrocarbons, gas is becoming increasingly widespread and accessible. Many countries in the region are pivoting towards gas as their premier source of energy, primarily because it is cheaper and cleaner than its fossil neighbor’s coal and oil.
Singapore was far sighted in setting up the LNG import terminal. Initially, the primary purpose of the terminal was to bolster Singapore’s energy security and reduce the reliance on pipeline gas from neighboring countries. From a practical business sense, many countries in the region are building their LNG terminal capacity, particularly in China and Indonesia and thus there is potential for Singapore to develop into an LNG trading hub, as the demand will be there.
Secondly, LNG has traditionally been traded on a bi-lateral basis. Typically LNG pricing is tied to the development of the specific gas fields, as upstream entities are naturally reluctant to invest significant capital unless they have a stable and fixed contract price for the gas produced. In addition, Asian buyers are using oil indexing for contracts because there is no LNG price index in the region. However, this process is evolving. We are beginning to see approximately 15 percent of the gas supply being traded on a spot basis. As such, there is a need for spot trading capabilities and Singapore can facilitate that need. Hence, we are witnessing the likes of Shell, Chevron, BP, Conoco, Gazprom and Total setting up LNG and gas trading arms in Singapore. The country also has a very strong foundation for commodity trading, particularly oil and oil products, and can leverage this experience. Due to these factors, I believe Singapore is in a strong position to take a leadership role in establishing itself as the regional LNG pricing hub.
In what ways does KPMG Energy and Natural resources help oil and gas companies capitalize on the nascent potential in the region?
PHB: Companies are trying to grow their footprint and capabilities to capitalize on this regional growth. In a very competitive environment, we strive to help clients cope with the complexity of the industry and its changing nature. Moreover, KPMG’s platform supports clients in coping with their performance issues, growth aspirations and financial solidity. We aim to provide clients with a roadmap for their sustainable development and expansion. As a leading global professional services company, we have vast experience in corporate finance, M&A, capital raising and energy price risks—these are all services we offer clients in APAC.
TR: The majority offerings sit across a range of our services. So when a client has an issue, we can pull together a team with industry expertise that understand our client’s challenges and draw upon the synergies of many of the sub-sects of KPMG, allowing us to present to the client a holistic approach and solution across the oil and gas value chain.
With the increasing presence and stature of NOC’s in the industry, how is the client base of KPMG evolving?
PHB: We have a blend of IOC and NOC clients. NOCs are in a very strong growing mode and are positioning themselves for impressive expansion. Importantly, their mandate is not only commercially driven. They have a responsibility to help countries deal with their internal energy security issues and safeguard their country’s interest. In addition, as IOCs strategically swivel towards Asia, we are seeing a greater number of IOCs coming to us and leveraging our support structure to overcome bespoke challenges.
TR: We have just written a paper on this issue. NOCs are certainly an augmenting force in the industry. We are increasingly seeing bi-lateral deals taking place between NOCs in the Far East and Middle East. One substantial difference between an NOC and IOC is the disparity between governance and regulation. The NOCs have one shareholder, the government, and is regulated by a ministry. In many emerging markets where there is oil, there is a big push to get more economic value out of every molecule of oil. These countries are striving to diversify their economy and build other industries on the back of capital gained from oil.
In 2011, Asia was perceived as the M&A hotbed of the world. How do you assess ASEAN’s M&A outlook for 2014?
PHB: I see strong growth trajectory in the ASEAN M&A market. The fabrics of the energy industry differ acutely to other industries, and this is driven by inorganic growth—acquiring assets to propel expansion. If one assess the energy landscape, taking into consideration increasing energy demand, buoyant investment mood and the aspiration of companies to grow in Asia, one can only see more M&A activity in ASEAN.
How important is Asia Pacific to KPMG’s global O&G services and long-term, sustainable growth?
PHB: Asia Pacific’s oil and gas industry is very important to KPMG. We are very bullish on the potential of this region. Over the next three years, from an already high base, we are aiming to double our growth and size.
TR: Traditionally, the energy sector has not always been seen as a natural place to build one’s career. Nonetheless, we are seeing interns and graduates join us at KPMG and they are receiving a first-hand insight into the vibrant nature of the industry. Increasingly, our younger employees are absorbing the vast opportunities this industry provides. Indeed, part of the Institute’s role is to not just work with clients but talk to people and support them in the development of their careers. As we look ahead, this feature will become a growing element within the Global Institute.