Mr S Iswaran at the Platts Top 250 Global Energy Company Rankings and ASIA Leadership Awards Dinner

SPEECH BY MR S ISWARAN, SENIOR MINISTER OF STATE FOR TRADE & INDUSTRY AT THE PLATTS TOP 250 GLOBAL ENERGY COMPANY RANKINGS AND ASIA LEADERSHIP AWARDS DINNER HELD ON 20 OCTOBER 2008 AT 7:35 PM, ST REGIS SINGAPORE 

“ENERGY INDUSTRY IN THE MIDST OF UNCERTAINTY”

Platts President Victoria Chu Pao,

Distinguished guests,

Ladies and Gentlemen,

A very good evening to you all.I am pleased to be here this evening, to celebrate the achievements of the most successful energy companies in Asia.

A New Global Paradigm for Energy

The 1970s were a turbulent time for the energy industry and the rest of the world.However, since then, and until recently, we have enjoyed two decades of relative stability.For twenty years from the mid-1980s, oil prices were within a band of between 10 and 30 US dollars per barrel.While demand grew rapidly, its effect on prices was tempered by a combination of rapid development in energy exploration, discovery and production, and by the interventions of the Organisation of Petroleum-Exporting Companies (OPEC). This balance has been a crucial factor in providing a low-inflationary environment that has contributed to stability and certainty for investors, thereby facilitating economic growth the world over.

However, the energy industry is entering uncharted territory, and the rules of the game are changing as we speak. First, we have started to see the rise of the “New Seven Sisters”. With the majority of known hydrocarbon resources in the domain of these national oil companies, the implications are profound as they rise in prominence.The energy industry will need to rethink its business strategy and the extent of cooperation needed to bring oil to market.Governments also will need to rethink their strategies in procuring energy.Second, the delicate balance between demand and supply has been gradually unravelling in recent years.Rapid economic growth, brought about by affordable and seemingly abundant energy supplies, has arrived at the same time as a slowdown in the expansion of traditional hydrocarbon resources.The juxtaposition of these factors, coupled with a rising risk premium on oil and greater speculative activity, has resulted in a structural increase in the price of energy, as well as price volatility.The marginal cost of extracting that last barrel of oil is no longer US$30 – 50.Even as we take a respite from US$140 oil, the days of 20-dollar oil appear far behind us.

The Need for Open, Competitive Markets

The current financial turmoil certainly has not helped. These events have caught many by surprise and have exposed the true uncertainty we face in this complex interconnected world. As Governments and policymakers, we will move quickly and decisively to address these issues.That said, the volatility in the financial markets is expected to persist for some time to come.More than ever, we must keep the faith in the markets and ensure that they work well – for continued flows of information, transparency and price discovery.This is where organizations such as Platts play a vital role.Platts is more than just an observer.Its clarity and independent benchmarking and analysis, are key to the workings of global, competitive energy markets.

The Singapore Story

Our relationship with Platts extends more than two decades.The launch of Platt’s price assessment for oil products in Singapore in the 1980s was a significant milestone in the development of our oil industry.It provided more than just price information. It was a platform which has since helped attract many international companies, such as those of you here, to anchor their trading activities in Singapore.From our humble beginnings as a small kerosene distribution hub for Shell in the 1890s, to our first export-oriented refining investments made in the 1960s, oil trading in Singapore has grown by leaps and bounds.We are one of the world’s premier bunker ports and the oil product pricing hub for the Asia-Pacific, with over US$300 billion in physical oil trade and US$600 billion in derivatives trade last year.

The demand for oil may soften in the near term but the backdrop for global energy resources will remain one of tightening supply and rising demand.Going forward, Singapore will face increasing competition as new refining capacity in China, India and the Middle East come onstream over the next few years.We remain sanguine and committed to growing this sector and its value add through greater complexity, by leveraging on our strengths across the value chain in petrochemicals, logistics, distribution and trading. Our fundamentals are strong and this will ensure that we remain competitive.

We value the contribution of all the industry players gathered tonight.We would not be where we are, without you.While the global energy industry is largely based on oil, gas and chemicals at present, we need to prepare for the future by diversifying our energy industry to include alternative energy, such as solar power, biofuels and clean technology.

The task in the years ahead is challenging.However, I am convinced that the energy industry is home to some of the clearest thinking, the best long term planning, and the sharpest strategies in the world.In that regard, Singapore will be hosting our inaugural International Energy Week in the first week of November.This will be an opportunity for industry leaders, policymakers and academics to network, meet and exchange ideas on energy options and strategies for the future.I hope you will join us then.

Once again, thank you for the pleasure of joining you this evening and I congratulate all the award recipients on their successes.I wish you all the very best in this challenging yet promising industry.