(EnergyAsia, April 29 2013, Monday) — Singapore’s energy regulator and natural gas companies will meet again next month to help shape guidelines on the import of additional volume of liquefied natural gas (LNG), said trade and industry minister S. Iswaran.
The Energy Market Authority (EMA) initiated the first round of industry consultations last year after UK’s BG Group had successfully placed 90% of its exclusive contract to import and supply the first tranche of three million tons to Singapore’s domestic users.
Amid increasing competition for LNG supplies throughout Asia, Singapore has been forced to quickly address the challenge of securing additional volumes. LNG prices in Asia have stayed strong in the US$14-$18 per million BTU range the last two years following the loss of Japan’s nuclear power capacity in the aftermath of its earthquake-tsunami tragedy.
China, India, South Korea and Southeast Asian countries have all joined in the global scramble for LNG supplies.
Singapore is scheduled to start up its first LNG import terminal this quarter after successfully importing its first cargo from Qatar last month. Starting with two tanks with a total capacity of 3.5 million tonnes, the terminal will be expanded to six million tonnes by end-2013 with the addition of a third tank. It will be expanded to nine million tonnes by 2015 to support LNG trading, redistribution and bunkering.
Speaking at the inaugural KPMG Global Energy Conference in Asia, Mr Iswaran said the new Jurong Island terminal will enhance Singapore’s energy security.
“Ultimately, our aim is to ensure that end users of gas in Singapore will have more options and flexibility in securing stable, secure and competitively priced gas to meet their needs,” he said.
With LNG set to play a significant role in the country’s energy mix, Singapore’s planners are seeking to implement an import framework that helps achieve energy security through a diversity of reliable supply sources while ensuring end-users receive competitively priced gas.
Mr Iswaran said regulators have several considerations in assessing what makes for a viable LNG import framework.
“First, while Singapore’s incremental gas demand in the near-term may be relatively small, our total demand for gas could eventually increase to about 15 million tonnes/year by 2024. It’s a substantial volume, and any procurement framework for future LNG must be able to effectively address this future demand for us.
“Second, future LNG import should enhance the price competitiveness of our gas supply and also help to minimise volatility. This could be achieved through a diversified portfolio of LNG from multiple supply sources and, where possible, a blend of contract durations and price indexation.
“Third, the future LNG import framework should take into consideration the available capacity and operational efficiency of the LNG terminal, and the number of users it can effectively accommodate.
“Finally, the framework should allow our domestic end users to benefit from opportunities that may arise from developments in the global gas market, such as the emergence of new gas supplies and movements in gas prices.”
Last year, the EMA published a consultation paper to seek industry views on the two options for Singapore’s future import of LNG.
The first was the model of the regulated sole importer as the framework which has been adopted by South Korea, Japan, Taiwan and Thailand. Under this framework, a regulated sole importer is tasked with procuring all future LNG demand for end users in the country. It also simplifies negotiations on terminal access and operational issues.
The second option is the multiple aggregator framework which has been adopted in the EU and the US. Under this model, importers could either be appointed by EMA through a competitive request-for-proposal process, or it could emerge from the natural competition between players in the LNG import sector, resulting in natural aggregation.
Mr Iswaran said there has been considerable debate over the strengths and weaknesses of these two models. Some industry players argue that demand aggregation under a sole importer would allow for scale in procurement that would help to secure more favourable LNG prices and terms. On the other hand, some are concerned whether a sole importer would be able to secure the most competitive terms for end-users. They note that allowing multiple aggregators will allow for price discovery, and that recent empirical data suggests that there are limits to the price advantage that can accrue to volume buying.
With the debate still far from resolved, he said the EMA will launch a second phase of industry consultation next month on a proposed LNG import framework for Singapore.