The Energy Market Authority (EMA) has granted licences to homegrown Pavilion Gas and Anglo-Dutch resources giant Royal Dutch Shell to import the next tranche of liquefied natural gas (LNG) as the Republic looks to further enhance its energy security and fortify its position as an oil and gas hub.
Announcing this at the opening of the Singapore International Energy Week on Monday (Oct 24), Minister for Trade and Industry (Industry) S Iswaran said each of the importers will have exclusivity to supply Singapore with one million tonnes per annum (Mtpa) of LNG for up to three years.
The pair emerged victors in the two-stage Request-for-Proposal (RFP) process that started in June 2014 with the objective of appointing up to two LNG importers to supply Singapore with the resource beyond the first 3Mtpa from BG Singapore Gas Marketing. BG has since merged with Shell.
"These two companies were selected on the basis of the reliability, flexibility and competitive-pricing of their LNG supplies. They have also secured strong support from buyers. Singapore's gas consumers will benefit from the new and improved terms offered by the two companies," Mr Iswaran said in his opening remarks. He added that the improved terms include shorter term contracts and alternate price indices, which allow prices to be more competitive.
Singapore's next tranche of LNG imports by Pavilion Gas and Shell is expected to commence from next year. Beyond this, EMA also plans to allow third party spot imports and new piped natural gas imports on a case-by-case basis. "This will further augment the diversity of gas supply sources in Singapore, and encourage more gas-on-gas competition in the domestic market," Mr Iswaran said.
Natural gas accounted for 95.3 per cent of Singapore's fuel mix for electricity generation last year, rising to 95.5 per cent in the first three months of this year, data from the EMA showed. The Republic's natural gas imports reached 10.36 million tonnes of oil equivalent (toe) last year, according to EMA data, with 7.78 million toe delivered via pipeline from Malaysia and Indonesia, and 2.58 million toe in LNG imports.
Bloomberg New Energy Finance analysts said Singapore's LNG consumption may rise to more than 3Mtpa from 2022 and 11Mtpa by 2030 when its natural gas pipeline contracts with Malaysia and Indonesia expire around 2023.
Energy prices have been kept lower for longer than expected due to an oversupplied oil and gas market, slowing demand and weak global economic outlook, Mr Iswaran noted.
"Global oil demand growth continues to be slow, reaching a four-year low in the third quarter of 2016, although there are some preliminary signs of recovery. The International Energy Agency expects global oil demand growth to be 1.2 million barrels per day this year, with similar growth expected for next year. Nonetheless, it is uncertain when the global oil market will re-establish a sustainable equilibrium," he said.
"The outlook for gas is even more muted, with the excess supply expected to continue for some time. Wood Mackenzie estimates that the global gas market could be left with 70 million tonnes in uncontracted supply by 2021," he added.
The minister also announced that EMA is seeking views via a consultation paper on how the Republic can store energy that has been produced and use it at a later time. The concept, called the Energy Storage Systems (ESS), can be used to support the usage of intermittently generated renewable sources such as solar energy. For consumers, ESS can offer protection against voltage dips as well as optimise energy consumption through demand-side management services.