Singapore Could Grant Tax Rebates to Refineries for 2024-25

Singapore could grant up to 76 percent tax rebates for petrochemical companies and refiners for 2024 and 2025. The move aims to ease cost stress amid growing competition from refiners in the Middle East and China.

The Middle East, with countries like Saudi Arabia and the UAE, is a major player in the global refining and petrochemical industries, leveraging lower feedstock costs due to abundant oil reserves. This provides a competitive advantage in production costs. China, rapidly expanding its refining and petrochemical capabilities, is also a formidable competitor, bolstered by substantial investments in infrastructure and technology.

Singapore’s strategic location at the crossroads of major shipping routes between the East and West enhances its role as a global refining and trading hub. Its advanced port and logistics infrastructure further strengthen its position in the global supply chain.

New carbon taxation rates and the Carbon Pricing Act

As of January 1, Singapore implemented a new carbon taxation rate under the Carbon Pricing Act. Businesses emitting over 25,000 tons of carbon annually now pay S$25 (US$18.57) per ton, a significant increase from the previous rate of S$5 (US$3.71) per ton that was in effect from 2019 to 2023. From 2026 to 2027, the rate will increase to S$45 (US$33.44) per ton and to between S$50 (US$37.15) and S$80 (US$59.45) by 2030.

Introduced in 2018 and effective from January 2019, the Act imposes a carbon tax on large emitters to incentivize reductions in GHG emissions and promote sustainable practices. This tax is an integral part of Singapore’s strategy to achieve its climate targets and lessen its carbon footprint.

Companies covered by the Act are required to measure, report, and verify their GHG emissions to ensure transparency and accountability. Independent verification of emissions data is mandated to maintain accuracy. The revenue generated from the carbon tax is reinvested into various initiatives, including funding for green technology development, emissions reduction incentives, and support for industries affected by the tax.

The Act targets large industrial facilities such as refineries, petrochemical plants, and power generation companies, but does not extend to sectors with lower emissions or those not required to report emissions.

The crucial role of oil refining in Singapore’s economy

Oil refining is a cornerstone of Singapore’s industrial sector, playing a pivotal role in the nation’s economic landscape. As one of the world’s top three oil trading and refining hubs, Singapore’s strategic location and advanced infrastructure support its thriving petrochemical and energy sectors. The country can refine approximately 1.1 million barrels of crude oil per day, contributing to six percent of GDP.

The refineries are operated by Shell, ExxonMobil and the Singapore Refining Company. These companies are deemed critical to Singapore’s national security under the country’s new Investment Review Act, which was enacted in March this year.

The bulk of the crude is exported to Indonesia while significant amounts are exported to New Zealand, Australia, Hong Kong, and China.

A hub for major petrochemical plants

Singapore is not only a global leader in oil refining but also a major hub for petrochemical production. These plants play a critical role in the global supply chain, producing a wide range of products, including 6.7 million tons of ethylene and 4.4 million tons of propylene annually.

ExxonMobil operates one of the world’s largest integrated refining and petrochemical complexes on Jurong Island. The facility includes a steam cracker capable of producing 1.9 million tons of ethylene per year.

Shell’s Pulau Bukom manufacturing site is one of its largest integrated refineries in the world, with a crude distillation capacity of 500,000 barrels per day. The Chevron Phillips Chemical plant has a production capacity of 850,000 tons per year of high-density polyethylene.

Singapore’s petrochemical exports are valued at over $45 billion annually, with key markets including China, Indonesia, Japan, and the United States.

Singapore’s petrochemical industry is at the forefront of innovation, with companies investing over US$500 million annually in research and development to enhance product quality and process efficiency. Sustainability initiatives are also a priority, with Shell aiming to reduce the carbon intensity of its operations by 50 percent by 2030 and ExxonMobil investing in advanced recycling technologies to reduce plastic waste.

Conclusion

Singapore’s strategic role as a leading hub in the global oil refining and petrochemical industries is underscored by its advanced infrastructure, significant production capacity, and influential position in international trade. The recent increase in carbon taxation under the Carbon Pricing Act highlights the country’s commitment to addressing climate change and transitioning towards a more sustainable future. While the new tax rates present challenges, including increased operational costs and competitive pressures, the potential for up to 76 percent tax rebates for refiners in 2024 and 2025 aims to alleviate these stresses and maintain Singapore’s competitive edge.

• Previous Article AWS’s US$9B Infusion Boosts Singapore’s Cloud Hub Status
• Next Article Instant Mobile Transfers from Singapore to Four Countries: A Breakthrough in Cross-Border Payments