Beyond Shell’s refinery sale, Singapore’s oil industry faces more existential questions

ON MAY 8, global oil giant Shell announced that it was selling its Singapore assets on Pulau Bukom and Jurong Island. Following the announcement, market watchers were quick to say that the deal does not compromise Singapore’s status as an oil hub. After all, the Singapore facilities were not shuttered and will still be operated by the buyer: a joint venture between commodity trader Glencore and a unit of Indonesian petrochemical giant Chandra Asri. Yet, the exit of such a major player from refining activities here has nonetheless raised questions about whether Singapore’s rising carbon tax might result in furtherdepartures.onewaytolookatthedealisthroughthelensofshell’sowncalculations. The move is merely one of several divestments and exits that the multinational is making, from leaving China’s power market to shrinking its European offshore wind activities. Shell itself has framed the Pulau Bukom and Jurong Island deal as part of efforts to reduce carbon emissions and focus on more profitable operations. This does, however, suggest a second and more worrying context in which to view the deal: as an indication of Singapore’s declining competitiveness in oil refining, not least as its carbon tax continues to rise. Market watchers have acknowledged that Singapore is a costlier base for refining operations, compared to competitors such as Malaysia, China and India. Here, one response might be that even if Singapore sees a scaling down of refining activities, it can still play a leading role in other aspects of the petrochemical industry. In its May 8 announcement, Shell’s downstream, renewable and energy solutions director Huibert Vigeveno stressed that Singapore remains important “as a regional hub for... (its) marketing and trading business”. Analysts, too, have said that Singapore is likely to retain its status as an oil trading hub even if oil majors exit the downstream sector of refining. One might even argue that the decline of oil refining in Singapore is to be welcomed, in line with the shift away from fossil fuels. Indeed, herein lies a deeper and more existential issue, hinted at in Vigeveno’s further comments: “As Singapore continues to decarbonise, Shell looks forward to a continued partnership with the country, and with our customers in the region.” Perhaps the worries prompted by the Shell deal should be less about Singapore’s edge in oil refining, and more about the Republic’s commitment to decarbonisation – which implies not just the exit of oil majors from fossil fuel businesses here, but the entire country’s move away from a key industrial pillar of its economy. Amid the global shift towards sustainable energy, strength in fossil fuels may become a weakness more broadly. Singapore’s government has recognised this. Thus, for instance, its planned reinvention of petrochemical base Jurong Island as a sustainable energy and chemicals park, under the Singapore Green Plan 2030. The flip side of these ambitious hopes, pinned to technological advancements that remain nascent, is the very real cost of moving out of carbon-intensive industries. High-profile as Shell’s deal may be, it will not result in the closure of refining facilities, nor the loss of jobs, nor necessarily any hit to Singapore’s gross domestic product. The Republic’s sustainability journey, in contrast, implies all of the above. Even as Singapore lays out its plans for a green future, it could also present its calculations for the costs that must be incurred.