PM Lee Hsien Loong at the Shell Singapore 125th Anniversary Gala Dinner

SM Lee Hsien Loong | 11 November 2016

Speech by PM Lee Hsien Loong at the Shell Singapore 125th Anniversary Gala Dinner on 11 November 2016.


Mr Chad Holliday, Shell Chairman, Ms Goh Swee Chen, Shell Singapore Chairman, distinguished Guests, ladies and gentlemen.

A very good evening and happy 125th birthday to Shell Singapore. This is not the first Shell birthday which I have attended. The first one was your 100th anniversary in 1991. I am not quite as old as Shell Singapore but I have worked with Shell for quite a long time. I am very glad that now on your 125th anniversary, we are celebrating this significant milestone together.

Shell has a special place in Singapore’s history. As you heard from Swee Chen, you started in 1891, with our first oil storage facility. You established our first refinery in 1961, our first Pioneer Certificate! I am very happy that you are still thriving here, growing your operations, and contributing to our development.

After the refinery, came other manufacturing facilities, downstream businesses, corporate functions and now you have one of the largest corporate HQs in Singapore. In fact, one of the largest corporate HQs in Singapore, 3,200 employees including more than 2,000 Singaporeans.

The Government and Shell have had many fertile exchanges of ideas. We drew from Shell’s experience with Scenario Planning and set up our own Scenario Planning Unit in the early 1990s. We studied Shell’s human resource management system, a bit earlier in the 1980s, and developed our own HR system in the government based on that, with concepts of developing people for their potential. You have evolved your systems since then, we have evolved our systems since then, but it was a fruitful criss-crossing of ideas.

I have a small personal connection with Shell too. My grandfather, my father’s father, used to work as a store-keeper for Shell many years ago. My connection as a little boy, when I was about eleven, I took part in the Shell Traffic Safety Games at the East Coast. Swee Chen asked me just now whether I had any picture of it because she tried to look for one and did not find any. I said, “I don’t and just as well because I remember riding a bicycle and losing my shirt.” Every dollar was taken from me for some traffic transgression or other, which may be why you invited me here today.

It is such long-term relationships are important for countries as well companies, especially at a time of change and uncertainty. We have just witnessed a momentous US Presidential Election. An election whose outcome will impact not just the US, but every country in the world. We are all pondering the implications and the next moves. Countries and companies also have to deal with political and strategic uncertainty. Conflicts in the Middle East, tensions between neighbours in East Asia and the South China Sea, strategic tensions between US and Russia, the question of where the relationship between the US and China will go.

In this midst of these worries, it is worth remembering the underlying positive factors in Asia that have not changed. Our demographics are favourable which means most Asian countries have young populations. The economies are developing, boosted by a rising middle class and rapid urbanisation. China continues to grow, albeit more slowly than before, and with their One Belt One Road initiative, it will continue to generate demand for the region. India under Mr Modi has regained its growth momentum, and is developing a more competitive dynamic between the states.

So there are opportunities for countries in the region like Singapore as well as companies like Shell who are present in the region, but we have to take a long term view. That is how energy companies like Shell do business. When you decide to build a cracker or a refinery, from the decision to the construction to full operation, it takes multiple business cycles. You cannot hope to time the market precisely, so the investment has to make sense based on long-term fundamentals. The fact that you have been in Singapore for 125 years shows the importance of taking a long-term view and sticking to it.

The energy and chemicals industry is a significant component of our manufacturing sector. It contributes one third of our manufacturing output, it provides more than 25,000 good jobs, around 70% of which are PMET jobs, Professional, Managers, Executives or Technical jobs. It offers the highest remuneration per worker across all manufacturing sectors. But just as the world is changing, so too the energy industry is changing with it. We all have to adapt, both as the companies as well as host countries.

Right now, we are currently experiencing low oil prices. There is a glut in crude supplies, lower demand than expected, shale oil and gas in the US are changing the global supply balance. Countries are investing heavily in renewables, as the cost of renewables continues to fall. Renewables now make up half of new electricity capacity being installed around the world, although it is still a small proportion of the total already installed capacity. Because of renewables, it has put significant pressure on upstream businesses of energy companies, as well as on economies that rely heavily on the oil industry.

In fact, although Singapore is neither an oil producer, much less an exporter, we too in a way rely on the oil industry because the offshore and gas sector is important to us in the manufacturing. With oil down, our rig businesses, our offshore support-based businesses are also all down.

We are trying to read which way the market will go. Nobody can be sure how long these conditions will last, but as with any business, diversification and nimbleness is the key. For an integrated energy company like you are, even though the upstream is slowing now, downstream businesses are growing, because feedstock costs have fallen.

And as technology advances, opportunities to manage energy better and to diversify to new sources. For example, you are transforming itself into an Energy Solutions company. You have a newly set-up New Energies business is looking into investing in new mobility fuels such as biofuels and hydrogen and integrated energy solutions. I have been having a very fascinating conversation on this with my dinner partner just now, getting educated.

What does Singapore have to do to adapt to the changes in the landscape? I would say three things. First, we have to deal with and overcome our carbon constraints. Second, we have to transform the industry. And thirdly, we have to upgrade our workers.

First of all, we are concerned with climate change and carbon constraints. We made commitments in Paris and will honour our national pledge to reduce emissions intensity. We will do it in an economically efficient way that will enable us to remain competitive. We make sure that economic incentives are aligned with these efforts.

Thus in Singapore, we believe in pricing energy right, whether it is fuel for vehicles, or electricity for households or for that matter, electricity for industries. We cannot and will not subsidise energy prices. We do help lower income households with their electricity bills, but through direct targeted assistance to the households in a form which does not encourage them to consume more electricity because it is under-priced. In fact, the electricity is fully priced but we give you a grant, use it carefully.

Next, we prioritise actions to reduce emissions that are least costly, hopefully even yield a positive return, where doing them gives us economic benefits. For example, mandating minimum energy efficiency standards for new buildings, as well as household appliances like lamps, refrigerators and air conditioners. Finally, we are working together with the biggest emitters to reduce emissions. Manufacturing accounts for around 60% of Singapore’s emissions and among the top emitters in industry are the petroleum refining, chemicals and semiconductor sectors, which contribute to three-quarters of industry’s emissions.

Therefore, we are encouraging these industries to become more efficient, including refineries and petrol-chem. We are not best-in-class by some distance, partly because our refineries are older, as you heard, Shell’s refinery was built back in 1961, before anyone has heard of carbon emission and global warming. It is not so easy to compete with newer plants elsewhere, in terms of efficiency and carbon efficiency. So, we need to explore options to upgrade our technologies and improve our plants. I note that Shell had installed a co-generation unit at Bukom last year to improve efficiency. You have chosen to stay in Singapore, so we are committed to work with you to meet our carbon targets in a sustainable way.

Upgrading plants and refineries is one piece in the broader task of upgrading our industries. To get our industries to thrive and to move up the value-chain, first of all, we must maintain the right macroeconomic and fiscal policies, and offer an efficient, business-friendly environment. At the same time, we have to go beyond broad strategies, to work with each industry from the bottom-up, to address its specific needs and challenges. So together with our businesses and workers, we are developing industry transformation maps, in our jargon, ITMs. Industry transformation maps for individual industry and we are planning to develop 23 of these maps, which will cover together industries which accounts for 80% of our economy.

The Energy and Chemicals industry will have its own industry transformation maps. It is still work in progress but just to give you a flavour of what we are doing. We are exploring how new technologies, like robotics, automation or the Industrial Internet of Things (IIoT) can raise productivity. For example, Shell has partnered a local start-up, Avetics, to use drone mounted cameras to inspect manufacturing facilities. Instead of having people manually climb up and down the pipes and reactors, you fly a camera over on a drone, faster, safer, saves time and manpower.

We are also supporting the industry’s move into specialty chemicals, which is a promising growth area. They produce less carbon emissions, they occupy less land, and the products are of higher value. We are identifying technologies and capabilities to invest in, to make Singapore an innovation hub for specialty chemicals. So, Shell as a company, you do a lot of research. If you can do more research and do it to Singapore, I think that could be a win-win proposition.

We are also reviewing our policies to create a more dynamic gas market. EMA ran a competitive Request for Proposal (RFP) to appoint up to two new importers for Singapore’s next tranche of liquefied natural gas (LNG). I congratulate Shell on being appointed as one of the term importers and I was happy to learn just now that Shell also has a license to operate in LNG bunkering service in Singapore.

We are also allowing third-party spot import of LNG, as well as new piped natural gas supplies on a case-by-case basis and we are developing a domestic secondary gas trading market. We are also exploring sharing of resources (such as power, steam, and cooling) across companies, recycling or re-use of by-products from the refineries and petrochemical plants, including carbon capture and utilisation. These are all part of the ITMs, industry transformation maps. It is important that we get the picture right at the stratospheric level but you have to come down and deal with specifics and get it right when the rubble meets the road. We hope with these industry transformation maps, we will be able to make progress, industry by industry, upgrading the industry and Singapore. I look forward to working with all key players in this industry as well as with the unions.

To transform the industry, we need not only world-class infrastructure, but also world-class workers and workforce. The key is to keep our workers up-to-date with relevant skills throughout their working life which will benefit both the companies as well as the workers themselves. Shell has always done this. You have many workers who have been with you for many years. We want to encourage more companies to do this and for more workers to upgrade themselves. For that, our strategy is the scheme which we have branded SkillsFuture.

In May this year, we introduced the SkillsFuture Earn and Learn Programme for the energy and chemicals sector. It is an 18-month programme of structured on-the-job training (OJT) and mentorship across eight companies, which has opened up new pathways for polytechnic and ITE graduates to progress as process technicians.

Shell has been one of the most active companies participating in this, hiring 14 process technicians through this program. Most encouragingly, of which 70% are female. If I make the calculation correctly, you have ten female technicians who have come in through this program. I am very glad that you are participating and I am very happy that the unions are cooperating with you to push for SkillsFuture and worker upgrading because the unions in Singapore work with the Government and the industry, and encourage workers to participate, and work out arrangements which enables workers to upgrade themselves in the course of their working careers. This is part of our tripartism model, which is a key reason why Shell has been successful in Singapore.

I am very happy that last week, the Shell union and Shell have signed an MOU to enable the union to represent the lower grades of Professional, Management and Executive (PME) workers collectively. I hope that both the union and company will continue to strengthen their relationship and work closely together with Government to achieve such win-win outcomes.

It is a unique Singapore formula, especially important in such uncertain times when people must feel that they are in this together, that others care for them and that we are not just remotely somewhere else on another planet but sharing their concerns, their worries, their hopes and their dreams.

So, if we work together, we can ride the technology wave, and prepare our workforce and economy for change, adapt and seize new opportunities and make sure that not only Shell but Singapore, will celebrate many more significant milestones for years to come. So, congratulations and happy birthday once again. Thank you very much.

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