Singapores strategic location at the entrance to the Strait of Malacca, through which roughly one-third of global sea commerce passes each year, has helped it become one of the most important shipping centers in Asia. The Port of Singapore, one of the worlds busiest in terms of shipping tonnage, is a key component of Singapore’s prosperity and economic health. Singapore is also a leader in new biotechnologies, petroleum refining, and the manufacture of computer components.
Recognizing that Singapores future growth depends on overcoming energy resource limitations and a small domestic market, the government of Singapore has vigorously encouraged local firms to regionalize their operations and to invest abroad. The government also has undertaken efforts to attract additional foreign investors to Singapore. China, India, and the fellow Association of Southeast Asian Nations (ASEAN) have been identified as priority countries in Singapores regionalization drive. During his May 2003 visit to Washington, Former Prime Minister Goh Chok Tong signed a Free Trade Agreement, which came into effect on January 1, 2004, as well as a Memorandum of Intent of Cooperation in Environmental Matters. Trade between Singapore and the United States traditionally has been strong. The United States is Singapores second largest trading partner, and Singapore is the United States eleventh largest export market, receiving $20.6 billion in U.S. exports in 2005.
Singapores economy has recovered from the lingering effects of the 2001-2003 global recession and an outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 that curbed tourism and consumer spending. In 2005, Singapore’s real gross domestic product (GDP) grew at a rate of 6.4 percent, lower than the 8.4 percent rate in 2004. Economic forecasts suggest Singapores real GDP will grow at 5.3 percent in 2006 and 4.9 percent in 2007.
Singapore has no domestic oil reserves. The country consumed 763,000 barrels per day (bbl/d) of oil in 2005, flat from the previous year. Oil consumption in Singapore has increased 15 percent since 2000. Despite its lack of domestic oil resources, Singapore is a major oil refining and trading hub.
Although Singapore does not produce oil domestically, local companies have become active in overseas exploration and production. Singapore Petroleum Company Ltd. (SPC), which has been publicly traded on the Singapore Stock Exchange since October 1990, currently holds a 20 percent participating interest in Blocks 102 and 106, located offshore in the Song Hong Basin in the Gulf of Tonkin, Vietnam. In October 2004, the company discovered oil and gas in the first exploration well, Yentu-1X, in Block 106. In June 2006 SPC and its partners began exploratory drilling in the HaLong-1X well, also in Block 106.
SPC owns a 36 percent working interest in the Sampang PSC, located offshore East Java, Indonesia. The Sampang PSC contains the Oyong oil and gas field, the Jeruk oil discovery, and several exploration prospects. In April 2006, SPC and its partners in the Sampang PSC began drilling the Dukuh-1 exploration well. Also in Indonesia, SPC owns a 15 percent equity stake in the Kakap PSC, an oil and gas producing asset located offshore Indonesia in the West Natuna Sea. In May 2006, SPC announced that it successfully tested natural gas and condensate production at the Lukah-1X exploration well in the Kakap PSC.
In August 2005, SPC entered into an agreement with the government of Cambodia for a 30 percent interest in the Block B Petroleum Agreement in the Gulf of Thailand, where SPC and its partners plan to initiate a three-year exploration program beginning in late 2006.
According to Oil and Gas Journal (OGJ), Singapore had a total crude oil refining capacity of approximately 1.3 million barrels per day (bbl/d) as of January 2006. The countrys three refineries are ExxonMobils Jurong/Pulau Ayer Chawan 605,000-bbl/d facility; Royal Dutch Shells Pulau Bukom 458,000-bbl/d complex; and the Singapore Petroleum Companys Pulau Merlimau 273,600-bbl/d refinery. Because of Singapores strategic location at the crossroads of the Indian and Pacific Oceans, its deep-water berths, and well-established infrastructure including oil refineries and storage terminals, the country has become an important oil trading and refining hub.
Nevertheless, regional rivals increasingly challenge Singapores leading position in the Asian market. New refineries in India, particularly the 540,000-bbl/d Reliance Petroleum refinery at Jamnagar that began production in 2000, have reduced Indian demand for imports of refined products. The Melaka refining complex in Malaysia also has become a competitor. In early 2004, Thailand made clear its intentions to try to become a regional energy hub with the completion of its Sri Racha oil center and the implementation of generous tax incentives. The Thai government has examined the possibility of cutting a canal through the narrowest part of Kra Isthmus, north of its border with Malaysia, as an alternative shipping route to the Malacca Strait. The estimated $20 billion project would shorten the passage from the Indian to the Pacific Ocean by up to 700 nautical miles, but the plan has not received sufficient backing from the Thai leadership. To counter the growing competition to its energy hub status in the region, Singapore announced plans in February 2004 to lower by 50 percent corporate income taxes on oil companies that do business in the country.
In February-March 2004, various Singaporean officials traveled throughout the Middle East to promote stronger business ties between Singapore and the region. In April 2004, following a 29-year hiatus, a delegation led by Singapores Trade and Industry Minister made an official trip to Iran, aiming to build stronger political and business ties between the two nations. The 2004 trips helped solidify the Singapore-Jordan Free Trade Area (FTA), and also helped initiate ongoing FTA negotiations with the Gulf Cooperation Council (GCC), which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Since 2004, Singapore has continued to reach out to the Middle East. Senior Minister Goh Chok Tong, the former Prime Minister, visited Saudi Arabia in February 2005, the first trip to the country by a senior-level Singaporean official in 20 years. In March 2006 Minister Mentor Lee Kuan Yew traveled to Riyadh, which was followed in April with a trip to Singapore by Crown Prince Sultan Bin Abdulaziz al-Saud, the deputy premier of Saudi Arabia.