Ambassador Choo Chiau Beng is the Chief Executive Officer of Keppel Corporation and Chairman of Keppel Land, Keppel Offshore & Marine Ltd and Keppel Energy. He sits on the Board of Directors of k1 Ventures Ltd and is a Board Member of the Energy Studies Institute, a Board & Council Member of American Bureau of Shipping and the Chairman of Det Norske Veritas South East Asia Committee. He is also a member of the American Bureau of Shipping's Southeast Asia Regional Committee, Special Committee on Mobile Offshore Drilling Units and Singapore University of Technology and Design's Board of Trustee. He is presently Singapore's Non-Resident Ambassador to Brazil.
Q1. As a major corporation that has been implementing sustainability efforts across its different businesses, from environmental performance to governance, what can you advise other companies on how to make sustainability work for them?
Amb Choo Chiau Beng: More companies are realising that sustainability is strongly tied to their long-term competitiveness. Consequently, the first step in making sustainability relevant for businesses is to know that the core elements of any company's sustainability strategy are largely similar to the core elements of its business strategy.
However, there is no "magic bullet" in sustainability. What businesses need to do is find out what is important to them and their stakeholders and do what works for them. For a diversified group like Keppel, we feel this most acutely.
Beyond that, communicating your efforts to your stakeholders is also important as it demonstrates transparency and accountability which are hallmarks of sustainable businesses.
Keppel firmly believes that while our businesses are driven by earnings, what we do must also have a positive impact on society, the community, employees and all other stakeholders. The Group has constantly strived to contribute to communities where we operate, from touching lives and protecting the environment to supporting the arts, championing safety and leading best practices in governance.
As part of our efforts, Keppel Corporation has just published it first Sustainability Report for 2010. We hope to build on this first report as a platform to engage our stakeholders so that we can improve.
Q2: Keppel has led the charge as one of the first Singapore companies to spearhead investments abroad. What are some of the lessons learned that you can share?
CCB: A key factor of success is the need to align the interest of your partners and suppliers with your own. Having a keen appreciation of what your company brings to the table is the first correct step that you must take. Working with like-minded partners and suppliers is critical in ensuring success.
At Keppel, we believe in our "Near Market, Near Customer" strategy, and that is why we were among the first to expand beyond Singapore to countries like the Philippines, Brazil, Vietnam, Azerbaijan and Kazakhstan.
Another important aspect is assimilation. You have to immerse yourself in the local culture, adapt and understand how things are done there. Likewise, we also take special effort to develop local talent and to inculcate them with Keppel's values.
Q3. As Singapore's representative in ASCOPE (ASEAN Council on Petroleum), what do you see are the major impediments to the realisation of the Trans-ASEAN Gas Pipeline (TAGP) project?
CCB: With increasing industrialisation, urban migration and an expanding middle class, the 10-member countries in ASEAN see the need for greater energy cooperation in the region. The region is rich in energy resources. However, demand for energy in many of the member states outstrips domestic supply capabilities and requires intra-regional supply to support their growth.
Each of the ASEAN country is at a different stage of development of their energy markets. In the ASEAN context, Singapore's energy market is fairly liberalised. In contrast, other countries are closed markets operated by a monopoly utility. Differences in market structure, degree of liberalisation, regulatory and legal frameworks have to be surmounted in order to achieve the realisation of TAGP.
Beyond the need to establish a strong regulatory basis and harmonise fiscal differences, a project of this immensity also requires significant financial resources for the construction of the necessary infrastructure. Each member country also has different priorities and competing projects for funding. To seek stable and reliable funding is a challenge, especially in these volatile times.
Q4. Latin American countries are one of the world's major energy producers as a region. As Singapore's Non-Resident Ambassador to Brazil, what kind of international impact do you feel Latin America's new energy geopolitics will have?
CCB: With their hydrocarbon discoveries, Latin American countries are now realising that oil and gas are important components of how they are conducting their foreign relations.
Therefore, we see the ties between Latin America and the rest of the world growing more rapidly. Foreign investments by Latin American companies are also expected to become more significant globally.
As for Brazil, its national oil company, Petrobras, is one of the largest oil companies in the world. With its extensive exploration programme, offshore operators, shipyards, equipment vendors all have to plan their programmes with Petrobras' requirements in mind.
One such requirement is its need for local content to support its national aim to boost employment and economic growth. Realising this, Keppel has been running a yard in Brazil since 2000. Keppel's yard has delivered several key projects to Petrobras, complying with the latter's requirements. We are developing another yard to support the demands for offshore oil production.
Brazil is a supplier of crude oil and transportation fuels around the world, including the US. This has enabled it to have greater economic interdependence with its neighbours and to contribute to the regional energy landscape.
As an emerging key energy player, Brazil is likely to raise its political and economic profile in the world through forums and international organisations such as the Organization of the Petroleum Exporting Countries (OPEC) and the UN Security Council. Securing the rights to host the Olympics and World Cup is also an indicator of its growing presence on the world stage.
With the huge energy reserves in Latin America and the increasing global demand, it is expected that their economies will grow. How they keep pace and assert their influence on the world stage will depend on their governance, fiscal, trade policies and international relationships, among others.
Q5. The ability to mine deepwater fields for new frontier energy sources outside of OPEC could help meet the challenges of rising oil prices and supply issues. As the largest rig building and marine group in the Asia-Pacific region, what do you see the future of the deepwater industry to look like in the next 10 years?
CCB: Despite the turmoil in the global markets and unrest in the Middle East and North Africa (MENA), the fundamentals of the offshore and marine industry remain intact. With rapid growth in demand for energy, conventional oil and gas fields are being depleted rapidly.
Oil companies are developing new oil and gas fields in more challenging environments and deeper water depths. The long-term outlook for global deepwater exploration remains positive.
Deepwater oil production is projected to grow about 5 to 10 million bbls/day over the next 10 years and increased rig capacity is consequently required to meet this target.
Following the Macondo oil spill, there is also a sharper bifurcation in the demand for deepwater rigs, with operators increasingly looking at newer-generation rigs. More than half of the current floater fleet are over 25 years old and newer rigs will be required for replacement and to meet increased demand. Keppel's suite of proprietary designs can address the demands for higher specifications and more capable drilling rigs to work in harsher environments.
The increase in demand for deepwater rigs is driven by Brazil, the Gulf of Mexico's Lower Tertiary Trend and West Africa. We are also starting to see an increase in deepwater activity in Asia. In the Gulf of Mexico, deepwater drilling is gradually returning with more operators receiving permits. We expect the situation to recover over the next five years.
Numerous deepwater projects in Brazil have come onstream recently. Deepwater sources now make up approximately 90 percent of Brazil's new oil and gas output. Petrobras has an extensive exploration programme and intends to order more than 60 deepwater rigs over the next decade.
Petrobras is currently tendering another 21 units that have to be built in Brazil and Keppel expects to get a fair share of these orders. Other than Petrobras, other players such as OGX are also emerging in Brazil. Keppel has already completed a floating production storage and offloading (FPSO) conversion project for OSX, an OGX subsidiary, and has secured a second such project from them.
Africa currently sees the most capital expenditure for deepwater projects. Oil majors like BP, ExxonMobil, Chevron and Shell have invested significantly in West African countries such as Angola, Nigeria and Ghana.
Until recently, production in Asia has been in shallow offshore fields. But there is now a growing number of deepwater projects. Demand for deepwater drilling and production units and services remains strong, and we can expect a resurgence in orders for the deepwater drilling and production units in the future.