Business Times - 02 May 2006
Two mega oil projects hinge on polls: PM
He urges voters to send the right signal as political risks will count in Shell, ExxonMobil's decisions
By CHUANG PECK MING
(SINGAPORE) At least two multi-billion dollar oil projects are at stake in this general election, according to Prime Minister Lee Hsien Loong - in addition to all the other issues.
Shell and ExxonMobil are separately considering whether to go ahead and pump billions of dollars in new steam crackers - and their decision will ride on how this election pans out, he said yesterday at the NTUC May Day Rally.
'You can be sure they are watching very carefully this general election to decide whether to proceed with their project,' he said. 'They are due to do so within the next year or so, so I think we better send them the right signal, don't take any chances.'
Mr Lee said it's not just financial projections the oil giants ponder when deciding on the projects.
'They (also) look at the political risks: What kind of country is it, what kind of government does it have, what kind of unions does it have, what do the workers do, will we have a problem?'
Shell and ExxonMobil have sunk billions of dollars here because they know Singapore is safe, he said. 'But before they put in more billions, they will watch to see whether Singapore is going to continue to be safe, whether the new generation, new PM, new team, new Singaporeans will be as safe as the old generation or team.'
Let's take a closer look at what PM Lee said:
"Two mega oil projects hinge on polls."But what is really on Shell's mind when it thinks about the possible new cracker on Jurong Island? What factors would really make Shell consider Singapore in a favourable or unfavourable light?
"You can be sure they are watching very carefully this general election to decide whether to proceed with their project ...."
"They (also) look at the political risks: What kind of country is it, what kind of government does it have, what kind of unions does it have, what do the workers do, will we have a problem?"
Let's ask Shell itself. Mr Harshad Topiwala, Shell's General Manager for the Asia-Pacific/Middle East region, is quite happy to tell us all about it. Mr Topiwala mentions factors such as:
(1) the growing need for a new cracker in this part of the world, due to Asia's growing market for petrochemical derivativesFunny. Mr Topiwala doesn't mention the phrase "political risks" at all. He didn't even mention "political stability". He didn't say anything about "unions" or even "workers".
(2) the impact of a new Singapore cracker on other Shell investments, including the Daya Bay (Nanhai) complex currently under construction in China
(3) the reduced capital expenditure and fixed costs, due to the fact that Shell already has existing infrastructure on Jurong Island that they can add to and build on
(4) the proximity to customers in key growth markets (presumably countries such as Malaysia, Indonesia, Thailand and China)
(5) the technological ability of the new cracker to handle a whole range of heavy liquids, thereby enabling Shell to produce a wider range of products.
Mr Topiwala didn't say that Shell's oil project decision "hinges on the polls" or that Shell would want to "watch the polls very carefully". He also didn't say anything about the new PM and the "new Singaporeans" being as safe or not as safe as the old PM and the "old Singaporeans".
In fact, it's interesting to note that Topiwala's considerations (as listed by me above (1) to (5)) are quite completely disconnected with election results in Singapore.
For example, whether the PAP wins 65 seats or 75 seats or 84 seats in Parliament simply does not affect:
(1) how quickly Asia's market for petrochemical derivatives will grow;Strange, isn't it? How come PM Lee is so mistaken about what's on Shell's mind? Maybe he needs to meet Mr Topiwala for a cup of tea.
(2) how the new Singapore cracker would affect Shell's Daya Bay (Nanhai) complex in China;
(3) the savings to be gained from Shell's existing infrastructure on Jurong Island;
(4) Singapore's geographical proximity to customers in key growth markets;
(5) the technological ability of the new cracker to handle a whole range of heavy liquids.