Singapore a bright spot for bleak oil & gas industry: EY

The city is optimal for oil companies looking to set up streamlined trading functions.

Even as prospects dim for global oil & gas (O&G) players parched for capital, some major firms should find a bright spot in Singapore to retain their profitability across the value chain, according to an analysis by EY.

Global deal volumes and values for the industry were down 17.7% and 10.8% respectively in 2019, no thanks to stagnant commodity prices, disappointing results, and low returns. In 2019, oil majors continued portfolio rationalisation and some exited from investments in Asia and Southeast Asia, leading to deal opportunities for smaller local players.

Even with the industry stuck in the doldrums, Singapore should remain attractive to oil companies looking to set up streamlined trading functions, said Sanjeev Gupta, EY Asia-Pacific oil & gas leader.

“With Southeast Asia being a consumption hub, the downstream sector, especially petrochemicals, retail and lubricants, continues to be a focus for oil majors and national oil companies. As companies in Asia look to retain profitability across the value chain, there is increased focus on optimisation of processes and expansion into extended value chain, such as trading. Regional business, financial and industry hubs, such as Singapore, are particularly attractive locations for these oil companies looking to set up streamlined trading functions,” Gupta said.

Across Asia-Pacific, the total deal value in 2019 was $37.72b (US$27b), up 219% due to Aramco’s US$15b investment in Reliance Industries. Deal volume in 2019 saw a growth of 16% over the previous year.

Majority of the deal volume came from upstream, which saw 37 transactions amounting to $4.19b (US$3b). In midstream, there were six deals worth $4.19b (US$3b), whilst activity in downstream was more robust, with 22 deals amounting to $27.94b (US$20b).