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.