The shale revolution is transforming the US economy, and it could soon make its impact felt in Singapore.

A stronger US economy and lower energy costs would benefit Singapore, and a future hike in shale exports may tie in well with the Republic ' s ambitions to be a liquefied natural gas (LNG) trading hub. But the petrochemical, logistics and other industries serving oil and gas players will be keeping a close watch on how shale-driven tectonic shifts in the world ' s energy supply would alter their global competitiveness.

Shale gas production has soared in the US over the last five years, thanks to wider deployment of hydraulic fracturing technology, or fracking, to tap the unconventional source of gas trapped in impermeable shale rock.

The shale boom has lowered US domestic energy costs relative to Europe and Asia, and is credited with spurring the renaissance in US manufacturing. Natural gas there now sells for a fifth of the price it carries in Asia.

That picture of US economic strength is a positive one for the global economy and thus externally-oriented Singapore, said economist Manu Bhaskaran of Centennial Asia Advisors.

More than 9 per cent of Singapore ' s total non-oil domestic exports headed to the US last year, making it the third most important export-destination for Singapore. As Capital Economics ' analysts noted, concerns that US manufacturing renaissance could hurt Asia ' s economies are overblown. Much of Singapore ' s exports to the US are intermediate goods and exporters here may well benefit from higher US demand for inputs.

New sources of energy will also be a plus for Singapore, a net energy importer and destined to stay one, given that diversity is likely to offer energy security and more favourable pricing.

The US ' s shift from being an importer of natural gas to a potentially significant exporter throws up "interesting opportunities for consumers like Singapore", as Minister in the Prime Minister ' s Office and Second Minister for Trade & Industry and Home Affairs S Iswaran noted at an energy conference in April.

"We are beginning to see Asian LNG importers negotiating for more attractive terms, or certainly differentiated terms, whether it ' s in terms of index diversification, shorter contract terms, and also more competitive pricing," he said.

In a consultation paper on Singapore ' s LNG import framework last month, the Energy Market Authority said that the framework ought to "keep future options open and allow domestic gas buyers to benefit from opportunities . . . such as the emergence of new gas supplies and movements in gas prices".

"If we are open and flexible, so that we can take advantage of pricing changes and diversity, and not get locked into long contracts, the better these developments will be for us," said Tilak K Doshi, head of the energy economics division at the National University of Singapore ' s Energy Studies Institute.

Progress in shale production in this region - especially in China and Australia - could float Singapore ' s ambition of being an LNG hub too. The first LNG terminal here started operations on Jurong Island in May with the stated aim of anchoring both physical and financial LNG trading, break-bulk services and bunkering here.

Also being debated is the potential impact on Singapore ' s key petrochemicals industry.

The US petrochemical sector has been a key beneficiary of increased shale gas production. The revival of activity and investment in crackers was thanks to a bountiful supply of shale, a less expensive feedstock than refined oil products such as naphta, which currently go into Singapore ' s liquid crackers.

"If these American companies can sit on cheap gas and build and produce there, Singapore will become less competitive," said Dr Doshi.

But taking a longer-term view, the Economic Development Board ' s director of energy and chemicals Eugene Leong said that liquid crackers here remain important to meet the growing demand for higher olefin products.

"Liquid crackers and shale gas crackers produce different products, and Singapore has been attracting chemicals projects requiring higher olefin feedstock," he said. Examples of higher olefin products include synthetic rubbers made by Asahi Kasei, Lanxess, Sumitomo Chemicals and Zeon - companies which recently invested in Singapore. "The competitiveness of our energy and chemicals industry goes beyond feedstock,"

Chemicals plants here are closely integrated with liquids crackers, which are in turn integrated with a strong refining base.

And even if the cost of raw materials is higher here than in the US, Singapore ' s established logistics infrastructure and proximity to rapidly growing Asian markets have kept its total costs competitive, he said.

Frost and Sullivan ' s consulting director for its chemicals, materials and food practice Amit Bajpayee agrees that proximity to Asia ' s surging demand is key. It is thus more important, in his view, for Singapore ' s petrochemical sector to ensure that it is the "least cost-inefficient" in the region.

After all, its loss of competitiveness relative to shale gas crackers in the US will be shared by Asian peers, as Accenture partner Ogan Kose pointed out. "The only way to counter-balance it is for shale gas to be developed in Asia as cheaply as it is in the US. China would be a good example, and they may be able to reduce the production costs if they don ' t have to spend too much on environmental concerns," he said.

In fact, shale ' s larger and longer-term impact on Singapore may fall more heavily on its position as a transport and logistics hub rather than on its petrochemical sector, said Joergen Oestrom Moeller, research fellow at the Institute of Southeast Asian Studies. "The world has built up a fantastic logistics transport network with tankers, oil and gas ports and terminals" but shale gas will change this radically in the next 10 years and beyond, he noted. As more shale gas is uncovered right where demand for energy is greatest - in the US, China, Russia, India and Europe - gas will be transported via pipelines on land rather than by ships.

Also likely to be affected in the longer term is Singapore ' s production of offshore rigs to support the drilling of conventional oil and gas wells, Dr Moeller said. The potential decrease in conventional exploration may shift demand away from these players. Major rig builder Keppel Corp has said it will monitor the growth of shale oil and gas and evaluate how it could respond to the development.