Insight 219: Singapore in the Global Energy Transition

The global energy mix of the 21st century will be fundamentally different from that of the past. The shale gas revolution, increasing role of renewables, and the effects of global climate change are transforming the energy world as we know it. This transformation creates tremendous opportunities for diversification, but brings new economic risks to small open economies.       

While the global energy transition relieves consumer countries of traditional oil and gas supply issues, it puts unprecedented pressure on the business models of petro-states, notably the Gulf Cooperation Council (GCC) countries, and energy transit states like Singapore.

Little noticed by the wider public, since the 1970s, Singapore has been a major beneficiary of the carbon economy. Its economy has been highly dependent on the oil industry and on downstream activities specifically. Singapore generates around one quarter of its net exports from oil-related activities (including petrochemicals and plastics). Petrochemicals and plastics are critical for Singapore’s trade balance. Since the 2000s, petrochemicals and plastics have represented a solid and growing part of Singapore’s net exports — even surpassing services. For example, in 2016, the net export value of plastics was equivalent to almost half of the net export value of insurance and financial services (see Figure 1).

In 2017, with just the exports of oil and refined crude in the forms of plastics and petrochemicals alone, Singapore generated a net-export volume almost as much as Kuwait generated from its total oil export.[1] Singapore imports most of its oil from member countries of the GCC and further processes and re-exports it.[2] In 2017, Singapore had gross fuel imports worth US$73 billion total — by comparison, France had gross fuel imports worth US$59 billion in the same year.[3] Singapore re-exported a part of that in the form of refined petroleum oils (see Figure 2). Another portion of the fuel was used as feedstock for further processing — in the form of petrochemicals and plastics — and export (see the amethyst coloured boxes in Figure 2).

Singapore’s openness makes it vulnerable to international market developments and to energy decisions in Asia and the GCC countries. Located at a critical juncture between the world’s largest energy consumer, China, and the GCC producer countries, Singapore has been at the centre of energy relations between Asia and the Middle East for the past four decades.