Oil sector's self-sufficient home rises from sea, as Barry Porter reports

PUBLISHED : Thursday, 18 November, 1999, 12:00am
UPDATED : Thursday, 18 November, 1999, 12:00am

Quietly rising out of the sea off Singapore's southwest coast is a giant, space-age artificial island, twice the size of Hong Kong's Chek Lap Kok.

Amid little international fanfare, Jurong Island is being reclaimed at similar breakneck pace.

Nicknamed 'Chemical Island', it was originally intended to be completed in four phases up to the year 2030, providing a 2,650-hectare high-technology new home for the republic's burgeoning oil, chemicals and petrochemicals industries.

Instead, it should now be finished by the end of 2001, 29 years ahead of schedule despite East Asia's recent economic slowdown.

'Demand [for land] has been faster than expected,' says Tan Suan Swee, director of chemicals at the government's Economic Development Board (EDB).

'We were quite conservative when we started,' he claims.

The island is unique in East Asia.

Not only are tenants clustered to feed raw materials to one another through a sophisticated maze of interconnected piping, they are also all wired up through a dedicated Internet portal to help them do business more effectively and electronically.

'We are preparing Jurong Island for the new age of IT,' says Trade and Industry Minister George Yeo Yong Boon.

The palm tree-lined tropical island is self-sufficient and boasts integrated logistics, information services, maintenance, health and safety, leisure facilities and spare parts.

Such synergies have provided significant cost savings through economies of scale, higher productivity and cuts individual storage needs.

Tenants have been full of praise of the supply-chain benefits.

Roger Moore, managing director of DuPont in South East Asia, said: 'I think it is an outstanding plan for integrating chemical concerns.' Prime Minister Goh Chok Tong likes to tell a story of how Hiroshi Itagaki, chairman of Japan's Teijin Chemical, could not believe EDB chairman Philip Yeo's sales pitch during a promotional trip to Tokyo a few years ago.

At the time, the site Teijin had been offered was nothing more than water.

So Mr Itagaki secretly flew out to Singapore and hired a helicopter to see the project for himself to assess progress.

'He was convinced,' Mr Goh said.

Teijin went on to set up a 60,000 tonnes-a-year polycarbonate factory which began commercial production in September.

Today, just seven years after the S$7 billion (about HK$32.57 billion) land reclamation began, 53 companies have committed to investing a combined S$21 billion on the island.

Forty-two are already operational, employing 6,300 workers and producing petro-chemicals worth S$11 billion annually on the island.

Another six will come on stream next year.

The government hopes total investment will double to S$40 billion over the next 10 years, helping provide a second firm pillar to Singapore's manufacturing sector to balance electronics.

'The chemical industry is an exciting new growth sector for us,' said Mr Yeo.

'Electronics make up half of manufacturing.

'As it is a very cyclical industry, we will diversify more into other manufacturing industries to make the sector more resilient,' the minister said.

Manufacturing comprises 23 per cent of Singapore's economy. Chemicals, in turn, contribute 23 per cent of total manufacturing output. The government would like this to rise to 30 per cent in 10 years.

When completed in 2001, the authorities believe Jurong Island will be able to support up to five cracker plants and 150 downstream companies, providing employment for 30,000 people.

This is in addition to continuing, existing chemicals investments on Singapore's main island and a few smaller outlying islands.

Singapore is already the world's third-largest refining centre, after Rotterdam and Houston. It is the regional headquarters of many of the industry's biggest names, from Exxon and Esso to Dow Chemical and DuPont.

Caltex went one further this year by becoming the first multi-national corporation to shift its entire global headquarters to Singapore from the United States.

Jurong Island is the amalgamation of seven small islands with a combined land mass of 991 hectares, merged and recently linked to the mainland by a US$238 million eight-lane causeway.

The site was until recently accessible only by water.

Singapore's strategic location on the key shipping lane between the Middle East and Japan makes it geographically well located for a chemical hub. It is also the established refining centre for crude oil extracted by Indonesia.

Singapore began refining 30 years ago, and has four refineries operating today providing feedstock for downstream industries.

Shell has traditionally been the largest, with two refineries providing a combined capacity of 440,000 barrels a day.

On Jurong Island itself, Esso operates one refinery and Singapore Refining Co (SRC) operates a second, bringing Singapore's total refining capacity up to 1.24 million barrels a day.

SRC is a consortium comprising British Petroleum, Caltex and Singapore Petroleum. Its chief executive, Tony Anderson, is a big fan of the Jurong Island concept.

'The co-ordination has been tremendous. The EDB has been very active in finding companies that can feed off one another. Often these things evolve over 20 years but this is happening in a 10-year time-span,' Mr Anderson said.

Exxon Chemical is in the process of investing US$2 billion in a cracker plant on Jurong, Singapore's third.

Its Singapore managing director, Jean-Pierre Vanlander, is similarly full of praise of the integrated Jurong concept and government support.

'I haven't seen anything like this before,' he said.

Jurong Island received another major boost recently when Shell and BASF said they would go ahead with plans to set up a 550,000 tonnes a year styrene monomer plant and a 250,000 tonnes a year propylene oxide unit.

Under a 50-50 partnership, the two companies will invest S$845 million in the projects, which are due on stream in 2002.

The island will also serve as a landing point for a pipeline from Indonesia's West Natuna gas field, providing Singapore's domestic fuel needs.

In addition to balancing out electronics manufacturing, Singapore is keen on chemicals because it is not too taxing on the republic's limited human resources.

The EDB's Mr Tan said: 'The chemicals industry is very capital intensive. It utilises a lot of technology, so the remuneration per capita and value added is very high.' Value added per worker in the chemicals sector is eight times the national manufacturing average, while fixed investments per employee is normally 35 times above average at US$1 million per employee.

Poval Asia, for instance, has opened a S$170 million polyvinyl alcohol plant on Jurong which requires just seven skilled staff to operate thanks to high automation.

One of the very few complaints tenants have had has been in finding sufficiently specialist local staff.

As a stop-gap, foreign talent is being brought in until Singapore's polytechnics and universities can begin pumping out sufficient trained graduates and post-graduates.

College intake has been increased over the past couple of years and new courses added to remedy one of the last remaining sticking points.