26/04/30
Q&A: Crisis adds impetus to diversify from oil and gas
Q&A: Crisis adds impetus to diversify from oil and gas
Sydney, 30 April (Argus) — The ongoing energy crisis has impacted Singapore and
other Asia-Pacific countries but has been proving that regional co-operation is
strong, according to Singapore's energy regulator Energy Market Authority's
(EMA) chief executive Puah Kok Keong. The crisis is also showing nations need to
focus on supply diversification, alternative energy and electrification, Puah
told Argus during a recent event in Australia ahead of the upcoming Singapore
International Energy Week (SIEW). Edited highlights follow: What have been some
of the main impacts of the energy crisis in Singapore? Natural gas accounts for
95c of our power generation, and all our natural gas is imported. About half of
it is imported through pipelines from Malaysia and Indonesia, and the other half
is imported through LNG that we bring from around the world. So just on natural
gas, certainly there has been an impact on Singapore. The gas contracts are all
pegged mostly to oil prices. Therefore, the sharp increase in Brent prices also
mean that the natural gas supply to Singapore will be more expensive. The other
thing that's happening is physical disruptions of gas supply to Singapore ,
because about 8-10pc of our gas comes from Qatar, and since the start of the
conflict in the end of February, there was one LNG cargo in April and another
one that was supposed to come in May that have been disrupted. Gas users in
Singapore had to change course, and even the industrial gas consumers will have
to look for alternative supplies. They have existing contracts from other
suppliers where they can have some flexibility to bring in more gas, but if
that's insufficient, they would have to procure more natural gas from
alternative sources. What solutions have worked so far? In the case of natural
gas, one of the timely moves that we've made is that last year, we incorporated
a new government-owned company, Singapore GasCo . It was given the power to be
the aggregator of natural gas demand from the Singapore-based power generation
companies. The reasons why we formed Gasco was to make sure that nationally, we
have diversity of supply, and that we procure enough supply of natural gas to
meet all of Singapore's needs. So when the crisis unfolded, GasCo had already
been operational, and they were able to, on behalf of the generation companies,
aggregate the demand and go up to the market and engage various LNG suppliers on
potential supply contracts. That has been proven to be useful: we have been able
to get many offers from gas suppliers, and it has not been a problem to be able
to get more gas. And as I'm in Australia right now, I have to say it's great
that Australia has been a very reliable supplier of gas to Singapore. In fact,
some of that replacement gas is likely to come from Australia. Is that
alternative supply from Australia coming through GasCo? GasCo will reach out to
all potential gas suppliers and will compare various factors like cost, supply
reliability and timing. They look at all potential sources, even from North
America and Africa. Having considered all these factors, they picked up a few
suppliers that happen to come from Australia. How can Singapore and other
Asia-Pacific countries ensure energy security despite their import dependence?
In Singapore's case, ensuring energy security is particularly important but also
especially difficult. We are a small city state. We don't have local supply —
all our oil and gas are imported from different parts of the world — and
therefore our dependency of energy imports is much greater than many countries.
The key lesson for us is that you must make sure that you have diversified
sources of natural gas that will help to cushion the impact of loss of any one
source. You need to be able to find replacement supplies quite quickly. Is this
crisis going to affect regional energy co-operation, including cross-border
electricity arrangements or even gas pipeline supply? The crisis has led to a
huge spike in oil and gas prices. We are fortunate that countries around our
region are still committed to meet their contractual obligation, and at this
point, we do not see any risk of disruptions to our natural gas pipeline supply.
Quite clearly, countries know that we are in interconnected energy system.
Singapore remains one of the major oil refining and oil trading hubs in this
part of the world — not just for southeast Asia, but for Asia. At this point,
where supply is a little bit more limited compared to before the crisis, many
countries are looking towards Singapore to continue to meet their commitment to
supply to their markets. And this includes Australia as well. Singapore is the
largest exporter of refined oil products to Australia, and we have remained
committed to ensure that this supply continues to be met. In terms of impacts on
electricity imports and exports, I think the crisis has actually helped
countries to see that everybody should contribute to diversify away from our
reliance on oil and gas. Linking the various grids in southeast Asia together is
important because they will allow investments into renewable energy to flow.
Southeast Asia is a big region. There's plenty of renewable energy resources —
solar, hydropower and wind power. The limitation is that where the resources are
located and where the demand is can be quite far apart, and therefore
investments needed to be put in place to make it happen — both for power
generation and transmission — are quite high. And any cross-jurisdiction energy
projects will also involve rather complicated regulatory approvals needed from
both the exporting country and the importing country. It can be overcome, but
it's not easy. Talking about electricity, are there any updates from Singapore's
side on Australian firm SunCable's project to export solar power to Singapore by
2035 ? For our electricity import projects, we have three important milestones.
The first is the conditional approval, which proves that a project, based on the
plans, is technically and potentially commercially feasible. Then we have the
conditional licence, where they will need to show that they've made a
significant progress in obtaining regulatory approvals from governments, and
that they have a clearer sense of the technical requirements and cost estimates
after doing more technical studies. The third phase is after they have put
together all their plans, lined up all their financing and potential offtakers.
This is when the import license can be given. SunCable's project is still at the
first stage of this three-step process. It received conditional approval from
the Energy Market Authority just under two years ago, in October 2024. Do you
think this crisis might help accelerate that project? The project is certainly
ambitious and challenging because of the great distance from Australia's
Northern Territory to Singapore. The cable will have to pass through Indonesian
territories as well to reach Singapore, and therefore the long distance will
definitely meet technical challenges that they have to consider, as well as
regulatory approvals from the relevant authorities. Those are the challenges,
but at the same time, the project does have certain advantages compared to some
of the nearer distance projects. Many of the electricity import projects from
Indonesia or even Malaysia are mainly solar energy plants combined with
batteries, but they more or less belong to the same climate zone as Singapore.
So when we have the monsoon in Singapore, when it rains for maybe one week
nonstop, it may also be raining one week nonstop in West Malaysia or in the Riau
province of Indonesia. That means solar output is going to be quite low. But
Australia is in a quite different climate. So when it's raining in Singapore it
may still be sunshine all the way in the Northern Territory. And there is a good
kind of diversification of our energy sources. Finally, could this crisis affect
the energy transition to renewables because energy affordability might be
prioritised over sustainability? I don't think so. In fact, I think the crisis
has given much impetus to accelerate the energy transition. One is, of course,
the huge increase in the cost of oil and gas. For example, in southeast Asia,
many economies are still quite reliant on liquefied petroleum gas (LPG) for
cooking needs, and the conflict has resulted in a huge increase in the LPG
price. Obviously, this has an impact on the livelihoods of the people living in
southeast Asia. From just that one example, being able to shift away from a
reliance on LPG to other methods of home cooking, such as electrification, is
quite clearly one of the strategies that will make the region more resilient to
external energy supply shocks. So I do think it has given an impetus to look at
what we can do to diversify away from oil and gas and explore alternative
energy, electrification and diversification as a strategy to enhance our
resilience. By Juan Weik Send comments and request more information at
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