Questions about Singapore's gas dependency<\/p>\n
Andrew Symon, The Straits Times, Asia News Network, Singapore<\/p>\n
Is Singapore's reliance on natural gas imports via pipeline a
\ndangerous dependency?<\/p>\n
This is one thought in many minds after the recent technical
\nfailure at the Singapore end of an import pipeline from Indonesia
\ncut fuel supply to electricity generation plants.<\/p>\n
For up to two hours, a third of the island-city was left
\nwithout power, an event almost unprecedented for the normally
\nultra systems-efficient Singapore.<\/p>\n
Singapore's reliance on imported pipeline natural gas is not
\nunusual by international standards.<\/p>\n
Europe, Belgium, France, Greece, Luxembourg, Sweden, Finland,
\nSpain and Portugal are more than 95 percent dependent on imported
\ngas from Norway, Russia and central Asia, and Algeria. Germany,
\nAustria and Italy are more than 75 percent import reliant. And
\nthese are countries where natural gas plays a dominant role.<\/p>\n
In South-east Asia, imported pipeline gas is emerging as an
\nimportant component of the energy mix.<\/p>\n
For while the region's gas reserves are plentiful, they are
\nunevenly distributed. Thailand, which has one of the region's
\nlargest gas supply systems, relies on pipeline gas from Myanmar
\nfor 30 percent of its supply. Malaysia complements its domestic
\ngas supply for its peninsular system with Indonesian gas from the
\nWest Natuna fields in the South China Sea -- the same ones that
\nsupply Singapore -- and plans to take gas from Indonesia's south
\nSumatra.<\/p>\n
In fact, cross-border gas pipelines, rather than a cause for
\nconcern, can bind countries, contributing to regional harmony in
\nthe same way as other close trade and investment links.
\nPolitically, there should be an alignment of interests between
\ngovernments.<\/p>\n
Nevertheless, the damaging malfunction of a valve at the
\nstation receiving gas from Indonesia's West Natuna fields at
\nSakra on Jurong Island, operated by United States company
\nConocoPhillips, has triggered a wider scrutiny of Singapore's
\noverall natural gas program and the pipeline import system.<\/p>\n
Singapore now relies increasingly on pipeline import natural
\ngas from Indonesia: From the offshore West Natuna fields 650km to
\nthe north-east, which began flowing in January 2001, and from
\nfields 500km away in south Sumatra, which began supplying gas in
\nAugust last year via Batam island.<\/p>\n
This Indonesian gas, being delivered under 20-year contracts
\nto several different wholesale buyers, is on top of the earlier
\nand smaller gas supply from Malaysia, which began in 1993. This
\n3km connection was the first international pipeline in East Asia.<\/p>\n
The Indonesian gas supply is now about three times the volume
\nof that from Malaysia and is contracted to increase
\nsubstantially. For Indonesia, the pipeline sales for the present
\ncontracts are worth US$17 billion.<\/p>\n
Singapore, in just a few years, has shifted from almost
\ncomplete reliance on oil as fuel for power generation and
\nindustrial boilers, to natural gas as the first fuel of choice.
\nNatural gas is both a cheaper and cleaner fuel than oil.<\/p>\n
But is the power cut a reason to doubt the wisdom of this
\npolicy? Will Singapore face a rerun of the water import supply
\nstory where the sometimes acrimonious renegotiation with Malaysia
\ngave rise to the specter of the taps being turned off and
\nSingapore without water?<\/p>\n
The natural gas situation though is different and should not
\nbe a cause for alarm.<\/p>\n
First of all, Singapore has immediate and substantial oil
\nbackup should there be a gas interruption. As one of the world's
\nmajor oil refining centers, there is no shortage of oil on hand.<\/p>\n
Accidents are not, of course, a risk limited to cross-border
\npipelines. One of the worse interruptions in recent times
\noccurred in the entirely domestic Australian system when all
\nsupply was cut to Melbourne and surrounding areas for two weeks
\nas a result of an explosion at the ExxonMobil-run Lonsdale
\nprocessing plant in 1998.<\/p>\n
Singapore, unlike Melbourne at that time, receives piped
\nnatural gas not from a single source, but from three pipeline
\nsources, thereby reducing the damage that interruption to one can
\ncause.<\/p>\n
Multiple supply sources also mean more competitive economic
\npressures on gas prices. As a result of the gas supply pipelines
\nfrom Indonesia, Singapore is in a better position to negotiate
\nany renewal of the contract with Malaysia when the existing one
\nconcludes in 2007.<\/p>\n
Singapore could diversify gas supply further through the
\nimport of liquefied natural gas (LNG). This could have merit,
\nespecially as it is a good time for Singapore to be negotiating
\nLNG purchase.<\/p>\n
But set against this is the need for Singapore to have
\nsufficient new demand as it is now already committed to take
\nlarge volumes of pipeline gas under long-term contracts from
\nIndonesia that have barely begun.<\/p>\n
Under the prevailing commercial practices, Singapore would
\nhave to take reasonably large volumes of LNG under medium- or
\nlong-term contracts.<\/p>\n
LNG is also not a cheap option as a receival port and
\nregassification facility to introduce LNG into the domestic
\npipeline system cost US$500 million (S$850 million). And while
\nLNG prices are falling, they would still likely be more expensive
\nthan piped natural gas.<\/p>\n
Malaysia's ability to supply more gas to Singapore appears
\nlimited, given existing peninsular demand. Yet, introduction of
\nlarge flows of new pipeline gas from the Thai-Malaysia Joint
\nDevelopment Area (JDA) off the lower Gulf of Thailand, to north-
\nwest Malaysia, set for next year, could mean surplus available to
\nSingapore. The JDA will also link to the Thai system further
\nnorth.<\/p>\n
Decisions then about managing Singapore's natural gas supply
\nover the longer term are enmeshed with regional gas pipeline and
\nmarket developments. Singapore could be linked to a much larger
\ngas pipeline supply system. Singapore could be thought of as
\nbeing part of a developing gas corridor that includes Thailand,
\npeninsular Malaysia, Indonesia's Sumatra and Java and the
\nsurrounding seas from which most gas is sourced.<\/p>\n
This could provide more options for gas sales and purchases. A
\nregional pipeline third-party access regime, for example, would
\nallow producers not party to original supply contracts to use
\nexisting pipelines, assuming sufficient capacity, to reach new
\nconsumers. Gas from the Thai-Malaysia JDA could be sold to
\nSingapore through peninsular Malaysia's system.<\/p>\n
Certainly, thinking about regional gas flows has been going on
\nfor some years under the auspices of ASEAN and energy ministers
\nhave endorsed indicative cross-border pipeline plans: The \"ASEAN
\ngas grid\".<\/p>\n
The hard task remains of establishing binding agreements over
\nthe necessary common policy, legal and regulatory conditions for
\nmulti-country pipeline gas flow.<\/p>\n
But one important step towards such agreements is now being
\ncontemplated by governments -- an ASEAN energy treaty or, as some
\nsuggest, a simpler course, membership of the international Energy
\nCharter Treaty (ECT).<\/p>\n
ASEAN became an observer to the Brussels-based ECT processes
\nin December last year. The treaty, which grew out of European
\nconcern to guarantee free energy flows in their region, sets down
\nrules of conduct and requires, among other things, governments to
\nguarantee their non- interference in cross- border energy trade,
\nand acceptance of agreed dispute resolution procedures.<\/p>\n
The writer is a visiting research fellow at the Institute of
\nSoutheast Asian Studies in Singapore.<\/p>",
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