Boston, MA -- (SBWIRE) -- 06/04/2014 -- Singapore's regional dominance in the downstream will be challenged by refining capacity expansion in the region and high crude oil prices that are eroding margins. However, the future of Singapore's place in the global oil and gas industry could lie in its likely emergence as the preferred hub for growing gas trade in the Asia Pacific region.

The main trends and developments we highlight in the Singaporean oil and gas sector are:

- Recovery in the US and Europe should provide economic support for export-dependent Singapore in the near-term, which will in turn prop up oil consumption. We forecast consumption to increase to 1.39mn barrels per day (b/d) by 2018, though fuel efficiency gains and growing alternatives to oil will see slower growth to about 1.41mn b/d by 2023.
- There will likely be a shift in Singapore's oil product consumption mix. Heavy fuel oil would also lose market share to gasoil as the marine sector continues to move towards cleaner fuels. Other oil products could also see a slowdown in growth, as naphtha loses its appeal vis-a-vis LPG and natural gas as petrochemical plants make the switch to gas-based feedstock for their operations.
- Singapore's refining capacity will see a slight boost in late 2014/early 2015 when the Jurong Aromatics Corporation (JAC) brings its new plant online, increasing the country's nameplate capacity from 1.38mn b/d to 1.47mn b/d. However, we do not expect further growth beyond this point, as it faces growing competition from large mega-refining projects in some of the largest centres of Asia Pacific demand growth.
- Downstream investment will be targeted at technological improvements to boost productivity and to shift production in Singapore towards cleaner, higher quality fuels and more sophisticated products aimed at industrial consumers.
- Government policies will push Singapore's gas consumption further upwards. We forecast gas demand to climb steadily to 12.5bn cubic metres (bcm) in 2018 and to reach 15.8bcm by 2023, with favourable gas prices relative to oil and growing gas import capacity in the form of liquefied natural gas (LNG) promoting gas use especially in the industrial sector.
- LNG imports are set to eclipse pipeline imports in fulfilling Singapore's gas needs, supported by the growth in the country's LNG import capacity and an active government decision to move the country towards reliance on LNG supplies. We expect a proposed second LNG plant in Singapore to move ahead, increasing the country's LNG import capacity from 6mn tpa (8.16bcm) at present to 22.38bcm by 2023. This is a conservative forecast with considerable upside.
- Net imports of LNG into Singapore is expected to be slightly lower than its total import capacity as we expect some of these volumes to be re-exported as part of Singapore's growing role in the likely emergence of spot LNG trading hub within the Asia Pacific region.

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