Investments
We are continuously adding value to our Investments to generate maximum returns for shareholders.

Major developments in 2006 Singapore Petroleum Company Ltd (SPC) revamped its Residue Catalytic Cracker (RCC) unit in 3Q 2006 to enable the refinery to increase the RCC throughput and percentage of high-value product SPC participated in the drilling of six exploration wells, achieving an exploration success rate of 50%   Focus for 2007/2008 SPC will continue to increase its E&P portfolio through further acquisition of high potential assets SPC will further strengthen its refining capability to achieve an optimal level of refinery production Vision Managing portfolio to enhance the value of these investments to bring maximum returns to shareholders.

SPC-branded lubricant products. Keppel T&T increases its M1 stake. k1 Ventures is invested in early childhood education.

Significant Events June k1 Ventures completed the sale of The Gas Company (GASCO) for a gain on disposal of approximately $145 million. September SPC and its partners discovered natural gas and condensate at the Wortel-1 exploration well in the Sampang Production Sharing Contract. October Positioned for further growth in China, SPC incorporated Singapore Petroleum (Guangdong) to distribute and market SPC-branded lubricant products to the domestic automotive, industrial and commercial sectors. A network of Speedy Care outlets will offer one-stop convenience for car care and auto maintenance services. SPC acquired new acreage in Block 101-100/04 in the Song Hong Basin, offshore Vietnam through a Petroleum Production Sharing Contract (PSC) for a 45% participating interest with Santos Vietnam, operator of the PSC, owning a 55% participating interest. Keppel T&T Ltd raised its stake in M1 from 16.60% to 17.01% following a series of open market purchases of M1’s shares. November SPC signed an MOU with PT Pertamina to further cooperate in oil and gas exploration, development and production projects, both in Indonesia and internationally as well as to facilitate information sharing and exchanges. SPC and its partners discovered natural gas and condensate over two sand intervals at the Thai Binh-1X exploration well in Blocks 102 and 106, offshore Vietnam. A second drill-stem test successfully flowed natural gas in the upper sand interval.

Earnings review
Revenue from Investments increased by 109% from $58 million to $121 million mainly due to higher investment income. Despite lower earnings from SPC as a result of the volatile operating environment, product write-downs and higher taxes, earnings from Investments were higher at $242 million or 5% more than 2005, and 95% higher than 2004. MobileOne Ltd (M1) showed year-on-year improvement in performance due to higher service revenue and handset sales. k1 Ventures Ltd (k1 Ventures) achieved earnings of $176 million for the year ended 30 June 2006 and $11 million for the six months ended 31 December 2006. The higher profit for the year ended 30 June 2006 was due to divestment gain of The Gas Company LLC. Overall, Investments achieved higher PATMI with the higher contribution from M1, k1 Ventures and investment activities.

Singapore Petroleum Company (SPC)
Market review
Demand for energy continued to be strong as global Gross Domestic Product (GDP) registered another year of 5% growth in 2006. Asian consumption of energy was led by China and India whose GDP grew by 10% and 9% respectively. Oil and refined petroleum products continued to make up the bulk of energy consumption. Global oil demand in 2006 was estimated to be around 85 million barrels per day.

Operating review
During the year, SPC’s jointly-owned refinery, the Singapore Refining Company Private Limited (SRC) successfully carried out a major planned maintenance of the Residue Catalytic Cracker unit. Notwithstanding the slight reduction in crude volumes processed for the year as a result of the scheduled turnaround, the group achieved an average refining margin of more than US$4.50 per barrel in an environment characterised by robust demand for refined petroleum products and tightness in regional refining capacity.

With a well-planned and co-ordinated turnaround programme for the RCC unit, the group was able to achieve a sustained high utilisation rate at SRC throughout the year with crude runs maintained at 51 million barrels for the full year. The availability of quality products from the refinery had allowed the group’s trading and marketing divisions to turn in strong operating performances in 2006. In the retail service station business, the group continued to leverage its network of 39 service stations and its customer retention programme to deepen its existing relationships with its corporate and retail customers. In October 2006, SPC established a wholly-owned lubricant marketing company in Guangzhou, China, to strengthen its lubricant marketing and distribution activities in that country.

The group has continued to build up its Exploration and Production (E&P) portfolio and currently owns interests in six E&P assets. Its sixth E&P asset, Block T06-3 in Australia was acquired in February 2007.

During the year, SPC also sought to increase its interests in Block B located offshore Cambodia from 30.0% to 33.3%, subject to the approval of the Cambodian authority. In its pursuit to expand the group’s E&P portfolio, SPC entered into a Memorandum of Understanding (MOU) with PT Pertamina to further strengthen the co-operation between the two companies in oil and gas exploration, development and production.

Business outlook
The outlook for the group remains positive as regional refining capacity additions are expected to be constrained by high construction costs and the shortage of skilled manpower. The International Monetary Fund has projected that global GDP growth would be around 5% for 2007. Asian economies are also projected to stay on a strong growth path led by China and India. Demand for refined petroleum products is thus anticipated to remain robust and this, coupled with the projected tight refining capacity, is expected to result in continued healthy refining margins in 2007.

In E&P, with most of the facilities and equipment already installed, first oil production from the Oyong field is expected in 2007. The group continues to pursue acquisition or farm-in opportunities for new acreages and production assets to augment the group’s E&P portfolio. In the downstream business, the group will be looking to strengthen its refining capabilities with further upgrading and enhancements. This will ensure its refinery facilities remain relevant as the region’s fuel specifications are progressively tightened in the next few years.

k1 Ventures
Operating review
k1 Ventures achieved record profits in 2006 by realising a substantial pre-tax profit of $170.1 million from the sale of The Gas Company, LLC (GASCO). Consequently, k1 Ventures made a significant capital distribution of 6 cents per share for shareholders.

k1 Ventures also benefitted from solid performances of its operating subsidiaries. The results of Helm Holding Corporation’s operations, the largest independent locomotive and railcar leasing company in North America, positively impacted k1 Ventures’ cashflow and profit attributable to shareholders. Mid Pac, a retail gasoline supplier in Hawaii, also contributed positively to the financial results.

In addition to the gain from the sale of GASCO and positive operating results of the operating companies, k1 Ventures recognised a gain on the sale of investments in Savi Technology and Biosensors. k1 Ventures is working towards the maximisation of value of the operating companies. The firm will continue to focus on growth and expansion, by seeking additional investment opportunities that are accretive to earnings and cashflow.

MobileOne (M1)
Operating review
M1 continues to be a significant contributor to Keppel T&T both in terms of earnings and cashflow. M1 registered a net profit growth of 2.2% from $161.0 million to $164.6 million on the back of improved margins. During the year, Keppel T&T received cash dividends amounting to $37.7 million which included a special dividend of $16.9 million. Keppel T&T acquired an additional 3% equity interest in M1 during the year. In December 2006, M1 became the first operator to offer a nationwide wireless broadband service that allows new and innovative services to be launched through its upgraded 3G network. Keppel T&T will participate in this new space through its stake in M1.