Starting an Oil & Gas Consultancy Firm in Singapore

Increasingly, exploration and production sites are found in perilous terrains or countries with tumultuous political and economic situations. Importunate regulations, talent shortage, clamorous relocation process, imperious authorities, and acute cost pressures, are just a snippet of the woes that the industry tackles.Sustaining market share and profitability requires expert handling of such challenges, which is why operators are increasingly engaging consultants with expertise in Oil and Natural Gas (O&G). By engaging such consultants, operators can benefit from the combined experience of seasoned O&G professionals, consolidated knowledge of industry best practices, objective approach, ready evaluation tools and proven solutions.This article is an extract from our more detailed report on the Oil and Gas industry in Singapore and is meant for individuals who may be contemplating starting an O&G consulting business in Singapore. Note that this is neither a comprehensive compilation of all relevant information on this topic nor a substitute for professional advice.

Range of Consulting Services Offered in Oil & Gas Industry

The consulting practices for the O&G industry are either specialized or multidisciplinary, offering solutions in a multitude of areas, such as Strategic Business and Operations Management, Engineering and ICT, Financial Management, Tax, Regulatory Affairs, and Human Resources. For instance:

• The services of consultancy practices that specialize in Strategic Business and Operations would encompass opportunity assessment, risk & cost minimization, assets or field optimization, regulatory compliance, and market analysis.
• The services of a Human Resource consulting practice are not only limited to identifying talents and managing the hiring process, but also include onboarding, international deployment and expatriate staff management.
• Likewise, Engineering consulting practices provide services in areas such as economic analysis, planning and execution of plants, project management, and technical evaluations and inspections.
• Legal practices specializing in the O&G sector are also on the rise, considering this sector involves high risk, huge budget, and projects with environmental implications, economic and regulatory complexities that are negotiated through contracts. The rise in the number of arbitrations has also expanded the scope of legal practices.

The clients of such consultancies are diverse – ranging from government bodies and small and medium enterprises (SMEs), to large national and international companies operating in the O&G sector, financial institutions, private equity investors, as well as the legal community when they requires expert opinion and witnesses. Singapore, owing to its status as the regional oil-trading hub, is witnessing a surge in the number of consultancies servicing the O&G sector. The following is an overview of the sector, and the prospects and process of setting up an O&G consultancy practice in Singapore.

Singapore an undisputed O&G hub

Singapore is the largest oil trading hub in Asia and the third-largest in the world. It is also the world’s No. 1 bunkering port. Singapore is a major oil and gas equipment and services hub for the region and the world, and is the leading oil field supply base in Asia, with its reach extending all the way to the Middle-East and Russia. Its strategic geographic location along the shipping routes, which accounts for over half the oil that is moved across the globe every day, gives it a distinct edge against other countries vying for the status.

Singapore is home to more than 95 leading oil and gas, petrochemicals and specialty chemicals companies from around the world.  Most of the world’s largest oil and gas equipment manufacturers, as well as oil field service companies, have set up their Asia Pacific headquarters in Singapore.

Singapore entirely relies on imports of O&G. Despite the absence of oil and gas fields, Singapore’s stability, conducive business environment, excellent connectivity as well as proximity to regional fields, have sustained the growth of this industry that has now become the backbone of the economy.  The oil industry accounts for 5% of the nation’s GDP and US$43bn of its manufacturing output.

Recent multi-billion dollar investments have also put in place some of the world’s most technologically advanced refinery infrastructure and petrochemical plants in Singapore. It has deep-water berths that can accommodate large oil tankers. Jurong Island, on the southern edge of Singapore, contains very large crude carrier (VLCC) anchors and transmission networks for liquefied natural gas (LNG), liquefied petroleum gas (LPG), and petrochemicals. With a view to further expand the infrastructure for the industry, the government has embarked on its first subterranean storage project, Jurong Rock Caverns (JRC), which is expected to create 1.47 million cubic metres of storage space.

Key advantages of Singapore

Singapore’s stable business environment and strategic location at the heart of Asia, alongside its excellent infrastructure and extensive trade networks, effectively attract a steady stream of business and development opportunities. The competitive corporate tax regime and incentives also draw in considerable  investments into the industry; this open policy furthers the growth of the sector.

Transparent pricing system and minimal government interference are acting in favor of Singapore in attracting O&G players to the island state. Therefore, the potential market for consultants will soon expand with the growing production and consumption base in the region.

The recent investments in infrastructure development has phenomenally expanded the storage, refining and cracking capacity of this sector in Singapore; therefore we can soon expect to witness a surge in trading volumes for pricing purposes. A free-trade agreement between the European Union and Singapore that removes taxes on jet fuel and diesel imports to the continent will come into force as early as 2014, potentially boosting petroleum shipments to the EU. The demand for supporting services will also grow in tandem with the trading volumes.

As a regional financial center, the presence of international banks enables easy trade financing, and many of the operators find the foreign currency funding from Singapore financial institutions much more competitive. Therefore consulting businesses engaged in financing and insurance practice have a significant volume of business.

Singapore is forecast to evolve into a LNG hub, mirroring its present status as the regional oil hub, and experts believe that Singapore will soon become the pricing center for LNG. The significance of Singapore will magnify in the regional markets and bring a boost to the entire industry ecosystem.

Singapore’s first LNG import terminal is primed to begin operating in second-quarter of 2013. By 2015, Southeast Asia is expected to have ten LNG terminals with total capacity of 34 billion cubic meters. Singapore, being a regional hub and equipped with the requisite infrastructure, will be the hotbed of projects, mergers and acquisition. This will correspondingly increase the demand for professional consultants.

Furthermore the availability of well qualified workforce, immigration policy favoring meritorious foreign professionals will enable a plug and play environment for consultancy firms. Also, it’s worthwhile to mention that World Bank ranks Singapore as #1 in the world for ease of doing business. Complex tasks such as registering a Singapore company can be accomplished in less than one day.

Singapore is strategically located between the Indian and Pacific Oceans, allowing companies to have easy access to large regional markets. The flight connectivity between the producing and consuming markets is comfortable and it is easy to service clients by locating your consultancy in Singapore.

O&G operators are set to reap sustainable growth in the long term

Amidst the growing competition from the regional markets, the Singapore government has declared its unreserved commitment to retain its strong leadership position in the regional O&G sector. The country’s policy to promote a self-regulatory open market with limited intervention, attractive tax regime, neutral political position, and robust industry ecosystem, will continue to fortify Singapore’s position in the sector and ensuring a proliferation of business volumes and demand for supporting services. Consultancies servicing the O&G operators are set to reap sustainable growth in the long term.