1. Good morning to colleagues and energy leaders from industry and government, and a very warm welcome to those who have joined us in Singapore from afar. I had the pleasure of attending the 16th LNG Supplies for Asian Markets Conference last year and I am glad to be back again for the 17th edition. The theme for this year’s conference is “Energy security vs LNG market fundamentals.” It aptly captures the critical and also conflicting considerations facing policy makers and industry leaders today.
2. The Russia-Ukraine conflict has brought energy security concerns to the fore. Global energy markets experienced extreme volatility in the past year, with gas indices hitting record highs. The curtailment of piped gas from Russia to Europe also led to a sharp increase in LNG imports to Europe. Overall, the LNG market will likely be tight in the coming years and demand from Asia remains robust.
3. In the longer term, natural gas continues to face structural headwinds as the global energy transition accelerates in tandem with increased climate ambition and action. The International Energy Agency projects that demand for natural gas will plateau by 2030, based on the existing policies of governments around the world, or even fall, if countries achieve their clean energy commitments.
4. We are thus confronted with a key question: will the LNG industry thrive or shrink, amidst these near-term shocks and longer-term shifts? I would like to suggest that the LNG industry can maintain and even strengthen its key role in global energy markets by supporting the transition to a clean energy future and transforming alongside it.
a. Firstly, LNG remains vital to meeting the world’s energy needs and ensuring energy security;
b. Secondly, LNG has a pivotal role in the changing energy equation; and
c. Governments and industry must work together to address headwinds facing the LNG market and enable a successful energy transition.
5. Let me elaborate on why and how.
LNG remains vital to meeting the world’s energy needs and ensuring energy security
6. Natural gas is a vital component of the global energy mix today. It accounts for 23% of the world’s energy supply now, compared to 16% in 1973. This was largely facilitated by the development of the LNG market which enabled international trading of natural gas. Global LNG trade reached its highest-ever level in 2021, with the Asia Pacific region comprising the largest share at 42% of imports. With well-established supply chains and infrastructure, LNG is important in ensuring the security and reliability of countries’ energy supplies. Natural gas also supports decarbonisation efforts by replacing other fossil fuels and bridging the gap to nascent low-carbon technologies.
7. Natural gas plays an important role in Singapore’s energy mix. Today, around 95% of our electricity supply is powered by natural gas, up from about 20% in 2000. Switching to natural gas has enabled us to reduce the carbon intensity of our energy sector. Natural gas will continue to be a dominant fuel for Singapore in the near future, alongside our other key energy switches- of solar, regional imports, and emerging low-carbon alternatives.
LNG’s place in the changing energy equation
8. However, the LNG trade has to contend with deeper shifts in global energy markets. Countries are stepping up their climate ambitions. The growth in demand for natural gas in the coming years is projected to moderate from the average growth rate of the past decade. As security, economic, and environmental considerations evolve, the LNG industry is coming under intense pressure to transform.
9. If the LNG sector can position itself to bounce back from current shocks and capture opportunities from tomorrow’s shifts, it will have the resilience to thrive and improve with each wave of change.
10. In the near term, the industry’s key challenges are to navigate tight market conditions and make the necessary capital and infrastructure investments to meet the growing demand for LNG. While such investments are costly and there are risks that LNG assets could be left stranded should demand for LNG fall in the future, the penalties for inaction are too hefty to contemplate. Given the uncertainties over the deployment and development of clean energy technologies, there is no question that we must commit to continued investments into LNG even as we navigate the energy transition.
11. Amidst the risks lie opportunities for the LNG industry, especially in decarbonising the LNG value chain. For example, a significant amount of methane emissions is generated from producing and transporting natural gas today. By eliminating routine venting and flaring and conducting regular leak detection and repair campaigns across the LNG value chain, we can reduce methane emissions and increase acceptance of LNG as a transition fuel, especially for countries without immediate access to renewables.
12. Singapore is a signatory to the Global Methane Pledge announced at COP-26, and the Joint Declaration from energy importers and exporters on reducing greenhouse gas emissions from fossil fuels at COP-27. The Global Methane Pledge calls on countries to take actions to reduce global methane emissions, and we should continue to do so in the areas of LNG production and consumption.
13. Taking an ecosystem approach, LNG industry players can collaborate with generation companies to improve the efficiency of natural gas generation units. For example, H-Class Combined Cycle Gas Turbines (CCGTs) will ensure that new and re-powered generation plants continue to be as energy- and emissions-efficient as possible. Efforts to decarbonise the LNG value chain can also unlock green financing opportunities for LNG projects, given the increasing importance of Environmental, Social and Governance (ESG) investing.
14. In the longer term, natural gas can be pivotal in facilitating the adoption of hydrogen as a key low-carbon fuel. While investments in hydrogen have been growing rapidly, the global low-carbon hydrogen market remains nascent and comes at a price premium. Additional equipment and energy-intensive processes are required to convert or liberate hydrogen from its carrier form. Natural gas can bridge this gap. It can be used to produce hydrogen, for instance, through the process of steam methane reforming. Together with carbon capture, utilisation and storage (CCUS) technologies, carbon emissions can be reduced.
15. Singapore recognizes the critical role that natural gas plays in our 2050 net-zero ambition and the global energy transition. As such, we continue to enhance the efficiency of our power plants to further reduce carbon emissions from electricity generated using natural gas. The Energy Market Authority plans to introduce emission standards for new and re-powered fossil fuel-fired generation units from 2023 onwards including the requirements for hydrogen compatibility. EMA has recently conducted an industry consultation on the emission standards for power generation units.
What governments and industry can do to address headwinds facing the LNG market
16. I have outlined how the industry can transform itself to pursue a more robust and resilient growth trajectory. Governments are also key stakeholders in this journey. Partnerships between government and industry are crucial in overcoming the headwinds facing the LNG market and enabling a successful energy transition.
17. First, let us all work together to ensure the continued functioning of international LNG markets, and open and connected supply chains. This will help to mitigate the effects of unforeseen shocks which could destabilise energy markets or disrupt infrastructure, as seen from the impact of the Russia-Ukraine conflict. Singapore is working closely with like-minded countries to explore potential areas of collaboration on LNG, and we have signed various MOUs (Memoranda of Understanding) on energy cooperation.
18. Second, governments must set clear policy directions on their energy transition targets and timelines, and communicate these clearly. This will guide investment decisions to support the natural gas value chain and chart decarbonisation pathways for LNG, helping the global energy industry position towards a low-carbon future.
19. Last but not least, governments and financial institutions can do more to clarify and recognise the role that LNG plays in the clean energy transition and reflect this accordingly in financing taxonomies. As part of development of the green financing ecosystem, Singapore is working with partners to include natural gas in green financing taxonomies so that relevant projects can qualify for green bonds. This will in turn facilitate investments into the LNG supply chain.
20. LNG remains vital to global energy markets today and tomorrow. The time is now for industry to transform and seize opportunities amidst the global energy transition. Singapore will do our part to strengthen our offerings as an LNG hub and work with industry partners to unlock growth opportunities.
21. I wish everyone a fruitful and productive conference. Thank you.