DPM Prof S Jayakumar at the Singapore Energy Conference

SPEECH BY PROF S JAYAKUMAR, DEPUTY PRIME MINISTER, CO-ORDINATING MINISTER FOR NATIONAL SECURITY AND MINISTER FOR LAW AT THE SINGAPORE ENERGY CONFERENCE ON WEDNESDAY, 8 NOVEMBER 2006 AT 8.40 AM AT THE ISLAND BALLROOM,SHANGRI-LA HOTEL, SINGAPORE

DEVELOPING A HOLISTIC ENERGY POLICY

Distinguished Guests,

Delegates,

Ladies and Gentlemen,

Introduction

I am pleased to be here today to launch the inaugural Singapore Energy Conference. This conference is a timely initiative as energy plays a key role in enabling global economic growth and development.It is useful to bring together experts from around the world to share insights into the challenges posed in the areas of energy security, sustainable development and energy efficiency.

Today’s Energy Challenges – Growing Interdependence

For over two decades since the 1970s, we have been accustomed to cheap energy. Even as our consumption of energy has risen steadily with our rapidly growing economies, we have concurrently taken for granted that the supply of energy will continue to be cheap and sustainable. Recently, however, this idyllic state of affairs has been disrupted. Between January 2004 and August 2006, the price of oil increased by almost 300% to more than US$75 per barrel. Strong demand growth by the surging economies of China and India; the lack of spare capacities in oil production and refining; concerns over “peak oil” [1]; geo-political uncertainties; as well as natural disasters, were all contributing factors. Arguably, the continued growth of the global economy will depend on a sustainable supply of oil and gas to the energy-hungry emerging economies like China and India.

At the same time, the energy supply-demand relationship has grown in complexity over the years. First, the scale of global oil trade has doubled in the past 2 decades. Instead of declining, US dependency on oil imports has climbed from 32% in 1985, to 65% in 2005. A fast developing Asia now accounts for a much bigger share of Middle-East oil and gas exports, and it is looking into new supplies from Africa, Latin America and Central Asia. As such, energy security cannot be divorced from the strategic interests of the major powers. With greater inter-dependency due to globalization, the need for stable oil markets and reduced price volatilities will expand the scope for co-operation over time.

The emergence of climate change as a major societal and political concern, particularly in Europe and increasingly in the US, is the second major factor that has started to impact energy use in a significant way. According to the United Nations Framework Convention on Climate Change, by 2050 Asia will contribute up to 37 billion tons of emissions, or 43% of the global emissions. This will be twice that of OECD countries. The focus in future will be on Asia‘s efforts to reduce greenhouse gas emissions while meeting the energy demands of growing economies. Striking an appropriate balance will be a major challenge for Asian policy-makers.

An alternative would be to diversify away from fossil fuels to renewable sources like hydro-electric and wind power as well as nuclear power. However nuclear power brings with it the spectre of nuclear arms proliferation.

Singapore’s Approach to Energy Policy

As an energy importer, Singapore is acutely aware of the challenges posed by energy supply and security. For the government, energy issues cut across different ministries and agencies. An inter-ministry Energy Policy Group (EPG) has been established to consult, formulate and co-ordinate new energy-related initiatives. Consisting of several key Ministries and agencies led by the Ministry of Trade and Industry, this “whole-of-government” approach will look at energy issues from the four perspectives of Economic Competitiveness, Energy Security, Environmental Sustainability and Energy Industry Development. Five key action areas have been identified.

Five Key Action Areas

First is the diversification of energy sources. Today, about 80% of Singapore’s electricity is generated by gas imported from Indonesia and Malaysia. To ensure that we are not over-reliant on piped natural gas for our energy needs, we will pursue the import of Liquefied Natural Gas (or LNG) to meet future demand for energy. The establishment of an LNG terminal will allow us to obtain gas supplies from more sources in the region and beyond.

Second is the long term development of new energy sources. Due to geography and our physical limitations, geothermal, hydro, wind and tidal sources are not viable at present. Solar energy is feasible but not cost-effective as compared to conventional fuels even at today’s oil prices. Nevertheless, cheaper and more efficient ways of harnessing solar, wind and other renewable sources are shortening the lead time for new products to become commercially viable. Environmental-conscious consumers also appear willing to pay a slight premium for “green electricity.” We will continue to keep a close eye on developments and encourage the testing and trials of new technologies in these areas.

The third action area is in energy efficiency. Improving the efficiency in how we use energy will translate into tangible cost-savings and contribute to environmental sustainability. Programmes like the Energy Efficiency Improvement Assistance Scheme to help support the cost of energy audits and Green Vehicle Rebates for hybrid vehicles are already in place. Going forward, areas to further improve energy efficiency include key sectors such as buildings, industry and transport.

The fourth area is industry development as there are tremendous opportunities in the energy sector. Singapore is already the third largest oil trading and refining hub. There is private sector interest in alternative energy as well. EDB has secured commitments from world-leading companies such as Solar World, Conergy and Vestas to set up operations in Singapore. Several Singapore-based companies have also formed the Greenhouse Gas Emissions Reduction Group under IE Singapore’s International Partners programme to look into emission-reduction technologies. Drawing on our strengths in R&D, there will be opportunities to develop exportable solutions in the energy sector.

Finally, international co-operation on energy issues is also important. Greater global interdependence is a permanent feature of international relations. Given our open economy and high dependence on energy imports, Singapore will need to engage different players and organizations to secure our energy supply. To be effective, we will have to develop a good understanding of geopolitical trends in energy, the dynamics of the global energy market, national energy policies, and their implications for Singapore. Understanding how the competition for energy sources is influencing the policies and strategies of major energy suppliers and consumers will be useful. To better understand developments in the energy field, a new Energy Studies Centre will be established next year.

Concluding Remarks

For better or worse, the energy sector will be an exciting and active one in the years ahead. It is incumbent upon us as analysts, advisers and policy-makers to keep abreast and adopt a holistic approach to the challenges posed by energy security, sustainable development and energy efficiency.

On this note, I wish all the participants fruitful discussions over the next two days, and our friends from abroad a pleasant stay in Singapore.

Thank you.

[1] Also known as “Hubbert’s peak”, where the rate of oil production globally will decline due to resource depletion after passing a peak. [Hubbert, M K, Techniques of Prediction as Applied to Production of Oil and Gas, 1982]