After an incredibly successful 2022, what is the current state of Singapore's chemicals and energy industry given the 44% reduction in investment in 2023?
The Singapore chemicals and energy sectors are performing strongly despite the recent decrease in our overall fixed asset investments (FAI), which totaled S$12.7 billion in 2023. This overall figure was a reduction from the previous year; however, it remains above our average mid to long term target range of $8 to $10 billion, and our results for 2022 were exceptionally high. Despite a reduction in our overall FAI from 2022, the chemicals industry in particular showed robust growth from 2022, accounting for one-third of our investment in 2023, indicating a robust pipeline of projects still coming into Singapore. Over the years, Singapore has established itself as a leading hub in Asia for energy and chemicals, hiring 27,000 people, ranking among the top five for energy exports and top ten for chemicals exports. This success is largely due to our strategic location with strong connectivity in the heart of Asia, which allows companies to efficiently produce and export their products.
In the U.S, the Inflation Reduction Act has incentivized companies within the chemicals value chain to adopt more sustainable practices. What challenges have you faced with the implementation of the carbon tax in Singapore?
The carbon tax in Singapore was introduced not as a revenue-generating tool but as a price signal to encourage companies towards sustainable practices and energy transition, in line with our commitment to achieving net zero emissions. The funds collected from the carbon tax are directed back into the industry to support initiatives that improve energy efficiency and reduce carbon intensity. For instance, through the Resource Efficiency Grant for Emissions, we have funded various projects aimed at enhancing energy efficiency across the industry. This approach aligns with the goals of companies themselves and helps in transitioning towards more sustainable operations.
Singapore, from the early leadership of Lee Kuan Yew, is used to being a first mover in the region. Can you describe the challenges of being a first mover when it comes to sustainability initiatives?
Bring a first mover in sustainability, especially in the energy and chemicals sector, involves pioneering new practices and technologies to meet modern demands while reducing environmental impact. This role requires innovation and strategic planning, as seen in our efforts to transform Jurong Island into a sustainable hub through our Sustainable Jurong Island Strategy. This strategy focuses on developing sustainable products and production processes, significantly improving energy efficiency, and investing in technologies like carbon capture and storage. Collaborative initiatives with industry leaders like Shell and ExxonMobil are vital to this strategy, as they help reduce the carbon footprint of operations on Jurong Island.
Industry, government and academia often sit close to one another in Singapore, allowing for an easier path to market for innovative ideas. What role do venture-backed startups play in advancing the green agenda within Singapore's chemicals and energy sector?
Venture-backed startups are crucial for driving innovation and reducing costs in the transition towards sustainable energy solutions. Our commitment to supporting these efforts is evident in the establishment of the Low Carbon Energy Research Funding Programme, which has already committed significant funding to foster new technologies and partnerships. This initiative supports a range of projects from concept to market, providing a testbed for startups and established companies to develop and scale sustainable technologies.
One of the key strategies to reduce the costs associated with carbon capture technologies involves leveraging Singapore's strong R&D infrastructure.
For instance, the Institute of Sustainability for Chemical, Energy and Environment (ISCE2) is developing a specialized testbed infrastructure, the Low Carbon Technology Translational Testbed (LCT3). LCT3 will enable both established companies and startups to experiment, scale, and refine innovative technologies in a controlled environment. By testing these technologies in real-world conditions, researchers can identify efficiencies and cost-saving measures that make the technologies viable for commercial use.
With the ambitious goal from the Jurong Island Sustainability Initiative aiming to hit net zero by 2050, what advice would you give to other chemical and energy hubs around the world on tackling the green agenda sustainably?
Singapore is steadfast in its commitment to achieving net zero emissions, despite being disadvantaged in alternative energy options due to our geographic and resource limitations. Our initiatives, such as the focus on hydrogen and carbon capture and storage, are tailored to our unique position as a small island nation with less natural and renewable resources compared to our neighbors. We leverage regional partnerships to enhance our capabilities, focusing on mutual benefits and shared goals for sustainability. While it is challenging, especially with the ongoing reliance on low-cost fossil fuels, our approach involves understanding our specific constraints and opportunities, and collaborating closely with industry partners who are also committed to these environmental goals.
Regarding the perceived slowdown in CAPEX projects on Jurong Island due to the carbon tax, what is your response?
Contrary to concerns about a slowdown, Jurong Island continues to attract significant investment, particularly in the energy and chemicals sector, which accounted for a substantial part of the S$12.7 billion fixed asset investment last year. Companies remain keen on investing in Singapore because of the ongoing transformation into a sustainable hub, which presents new opportunities. Initiatives like Neste's EUR 1.6 billion expansion and ExxonMobil's upgrades to produce cleaner fuels are examples of how companies are adapting and finding value in our vision for a sustainable Jurong Island.
How do regional partnerships benefit Singapore, and what prevents companies from moving their manufacturing out of Singapore while keeping R&D within the country?
Regional partnerships are crucial for optimizing the distribution of manufacturing processes that are better suited to different locales within the ASEAN region, such as recycling technologies like pyrolysis for converting waste plastics. This arrangement makes sense where feedstock is readily available and can be processed locally before being brought into Singapore for final production. For R&D, Singapore's strong infrastructure and proximity to manufacturing can accelerate innovation and market readiness of new products. Thus, while some aspects of production might be more viable elsewhere, the integration of R&D and manufacturing in Singapore remains attractive due to our efficiency, connectivity, and advanced technological capabilities.
Why should companies choose Singapore, specifically Jurong Island, for their investments in the chemical industry?
Singapore, and particularly Jurong Island, offers a compelling proposition for companies focusing on energy transition and aiming for net zero emissions. Our initiatives, such as significant investments in carbon capture and storage and hydrogen technologies, position Jurong Island as a leading hub where companies can access advanced, sustainable energy resources. The combination of government support for R&D in low-carbon solutions, along with our strategic vision for reducing urban intensity while capturing growth from energy transitions, makes Singapore an ideal location. Companies looking to produce sustainable, lower-carbon products find Singapore not just a market, but a nexus for innovation and development, well-equipped to meet future consumer demands.
