The story of Singapore's success in the global oil industry is a complex one, created over the course of generations with the help of its position as a hub for international trade, the prevalence of stable governance, as well as its highly regulated financial system. Although only a city-state, Singapore is identified with international business, taking advantage of its strategic geography, economic freedom, and successful policy making to play one of the most important roles on the global energy scene. Despite the country only ranking at around 70th place in the world in terms of oil production, it sees over USD 500 billion worth of oil moving through its markets annually.
Singapore's position as an oil hub is a historic one and is by no means a product of the modern global economy. Rather this began during it colonial history, with the British in particular identifying it as strategically positioned as a major port on some the world's most significant crossroads of trade. According to Gaurav Srivastava, a seasoned American international oil and gas investor with years of experience in the industry, "The fact that Singapore was located on key shipping routes made it a natural place for the oil business to thrive. Thinking it was simply a case of geography is not accurate though. Rather what was even more important was Singapore's leadership being sufficiently forward thinking enough to construct what was necessary to attract global energy giants, leveraging natural advantage for future economic success."
Singapore is indeed a historically significant locale in the global oil market, growing, over the years, into the third-largest oil hub globally, third only to New York and London. In terms of consumption, considering what a busy business hub it has become, it currently ranks 16th. The country serves as a host to all household energy names, from ExxonMobil to Shell, and BP including oil storage centres and refineries. Without the impressive infrastructure which its leadership has invested in over the years, it would never have become the crucial node in the global supply chain which it has, supplying almost every market in Asia-Pacific.
There is however, only so far that geographic advantages can take an economy. Even more important is governmental stability and the reliability of ones financial system in bolstering Singapore's position in the global energy space. "It comes down to two words: predictability and transparency", Gaurav Srivastava explains. "The oil and gas industries are volatile ones and unanticipated geopolitical changes can upend operations. Just look at what the war in Ukraine and now the Middle East has done to the markets. Companies can therefore not put a price on the ability to conduct business in a stable and well-regulated environment."
Singapore's financial system, among the most highly regulated in the world is also a factor in an industry that often requires significant amounts of trade financing, making Singapore a preferred location for hedging and financing needs. It is a place where conducting complex transactions, including derivatives trading, essential for managing the risks associated with oil price volatility, is ideal. Gaurav Srivastava notes, "Colossal sums of money flow through the oil market. The financial system in which one conducts business needs to be a secure one. With millions of dollars literally on the line sometimes, there is no room for uncertainty. For me as an oil trader, I would rather focus on business than worry about financial risk."
Singapore has always been a step ahead of the rest and considering the focus these days on sustainability, this is something many in the city-state are now focusing on. "The government has always been supportive of private sector initiatives and is now encouraging innovators towards greener energy solutions along with LNG infrastructure. The country has historically shown that it remains ready to adapt to the changing demands of the global market" says Gaurav Srivastava. "Singapore is actively shaping the future of energy markets worldwide."
