Singapore has no domestic oil reserves. The country consumed 763,000 barrels per day (bbl/d) of oil in 2005, flat from the previous year. Oil consumption in Singapore has increased 15 percent since 2000. Despite its lack of domestic oil resources, Singapore is a major oil refining and trading hub.

Although Singapore does not produce oil domestically, local companies have become active in overseas exploration and production. Singapore Petroleum Company Ltd. (SPC), which has been publicly traded on the Singapore Stock Exchange since October 1990, currently holds a 20 percent participating interest in Blocks 102 and 106, located offshore in the Song Hong Basin in the Gulf of Tonkin, Vietnam. In October 2004, the company discovered oil and gas in the first exploration well, Yentu-1X, in Block 106. In June 2006 SPC and its partners began exploratory drilling in the HaLong-1X well, also in Block 106.

SPC owns a 36 percent working interest in the Sampang PSC, located offshore East Java, Indonesia. The Sampang PSC contains the Oyong oil and gas field, the Jeruk oil discovery, and several exploration prospects. In April 2006, SPC and its partners in the Sampang PSC began drilling the Dukuh-1 exploration well. Also in Indonesia, SPC owns a 15 percent equity stake in the Kakap PSC, an oil and gas producing asset located offshore Indonesia in the West Natuna Sea. In May 2006, SPC announced that it successfully tested natural gas and condensate production at the Lukah-1X exploration well in the Kakap PSC.

In August 2005, SPC entered into an agreement with the government of Cambodia for a 30 percent interest in the Block B Petroleum Agreement in the Gulf of Thailand, where SPC and its partners plan to initiate a three-year exploration program beginning in late 2006.

According to Oil and Gas Journal (OGJ), Singapore had a total crude oil refining capacity of approximately 1.3 million barrels per day (bbl/d) as of January 2006. The country’s three refineries are ExxonMobil's Jurong/Pulau Ayer Chawan 605,000-bbl/d facility; Royal Dutch Shell's Pulau Bukom 458,000-bbl/d complex; and the Singapore Petroleum Company’s Pulau Merlimau 273,600-bbl/d refinery. Because of Singapore’s strategic location at the crossroads of the Indian and Pacific Oceans, its deep-water berths, and well-established infrastructure including oil refineries and storage terminals, the country has become an important oil trading and refining hub.

Nevertheless, regional rivals increasingly challenge Singapore's leading position in the Asian market. New refineries in India, particularly the 540,000-bbl/d Reliance Petroleum refinery at Jamnagar that began production in 2000, have reduced Indian demand for imports of refined products. The Melaka refining complex in Malaysia also has become a competitor. In early 2004, Thailand made clear its intentions to try to become a regional energy hub with the completion of its Sri Racha oil center and the implementation of generous tax incentives. The Thai government has examined the possibility of cutting a canal through the narrowest part of Kra Isthmus, north of its border with Malaysia, as an alternative shipping route to the Malacca Strait. The estimated $20 billion project would shorten the passage from the Indian to the Pacific Ocean by up to 700 nautical miles, but the plan has not received sufficient backing from the Thai leadership. To counter the growing competition to its energy hub status in the region, Singapore announced plans in February 2004 to lower by 50 percent corporate income taxes on oil companies that do business in the country.

In February-March 2004, various Singaporean officials traveled throughout the Middle East to promote stronger business ties between Singapore and the region. In April 2004, following a 29-year hiatus, a delegation led by Singapore's Trade and Industry Minister made an official trip to Iran, aiming to build stronger political and business ties between the two nations. The 2004 trips helped solidify the Singapore-Jordan Free Trade Area (FTA), and also helped initiate ongoing FTA negotiations with the Gulf Cooperation Council (GCC), which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Since 2004, Singapore has continued to reach out to the Middle East. Senior Minister Goh Chok Tong, the former Prime Minister, visited Saudi Arabia in February 2005, the first trip to the country by a senior-level Singaporean official in 20 years. In March 2006 Minister Mentor Lee Kuan Yew traveled to Riyadh, which was followed in April with a trip to Singapore by Crown Prince Sultan Bin Abdulaziz al-Saud, the deputy premier of Saudi Arabia.

A shortage of oil storage space in Singapore has spurred expansion of the country's independent storage facilities. Singapore’s major oil refineries hold 88 million barrels of storage capacity, or 88 percent of the country’s total storage capacity. Singapore’s independent storage operators have a total current capacity of 24.4 million barrels, although this number will grow as companies bring new facilities on line. Over the last five years Singapore’s independent storage providers have reportedly been running at above 90 percent capacity. In May 2006 Vopak began operations at its fourth storage terminal in Singapore, adding 2.1 million barrels of capacity at its Banyan site on Jurong Island. Oiltanking expects to complete a new facility in August 2006, also at Banyan, that would add 1.5 million barrels of storage capacity. Oiltanking anticipates that the new site would store clean petroleum products and will be linked by pipeline to its existing storage terminal on the island and also Shell’s Bukom refinery. Another new storage project comes from Horizon Terminals, a subsidiary of Dubai-based Emirates National Oil Corporation (ENOC), which expects to finish constructing a 5.3 million barrel storage terminal on Jurong Island by the end of 2006, likely adding a second phase in mid-2007.

While this growth in petroleum storage in Singapore is driven by high regional oil demand, some independent analysts have expressed concern that the new terminals may lead to excess capacity. In 2006, construction began on the joint Hin Leong Trading/PetroChina Universal Terminal on Jurong Island, which will reportedly have a storage capacity of 14.2 million barrels. In April 2006, Singapore also greenlighted the development of storage facilities in underground rock caverns on Jurong Island with a potential capacity of up to 20.1 million barrels. Phase 1 of the project is scheduled to begin in late 2006 and add 8.8 million barrels of new storage capacity by 2009, with a possible Phase 2 adding an additional 11.3 million barrels in future years if there is sufficient demand. The underground caverns will store petroleum liquids and products like naptha and gasoil.

The rapid growth of Singapore’s petrochemical industry has been a direct result of the country's strong base in petroleum refining. Jurong Island is the center of Singapore’s expanding petrochemicals industry. Companies on the island have benefited from lower operating costs through creating synergistic relationships, sharing facilities, integrated utilities, tax incentives, and proximity to important regional markets.

ExxonMobil, which already operates a 25,400 bbl/d (800,000 metric tons/year) ethylene cracker on the island, has plans to build another cracker of comparable size. Petrochemical Corporation of Singapore (PCS), a joint venture between Shell and a Japanese consortium led by Sumitomo Chemical, operates two other ethylene crackers on Jurong, with a total capacity of 44,500 bbl/d (1.4 million metric tons/year). PCS is also slated to bring a 6,400 bbl/d (200,000 metric tons/year) propylene cracker onstream on Jurong Island by year-end 2006. Shell is carrying out a detailed engineering study for a planned steam cracker at Palau Bukom and is expected to reach a final decision on whether or not to build the facility in 2006. The new plant would reportedly produce 28,600 bbl/d (900,000 metric tons/year) of ethylene when it becomes operational in 2009. ExxonMobil Chemical is also evaluating plans to build a second naptha cracker in Singapore, which would reportedly have a 22,500 bbl/d (one million metric tons/year) capacity. Royal Dutch Shell also is moving ahead with a new naphtha cracker for its Jurong Island facility. The new plant is expected to produce 28,600 bbl/d (900,000 metric tons/year) of ethylene when it becomes operational in 2009. Several other firms also plan to build new smaller petrochemical facilities in Singapore or upgrade preexisting facilities in the coming years.