Mr S Iswaran at the Power-Gen Asia Conference for the Singapore International Energy Week 2010, 2 Nov 2010

KEYNOTE SPEECH BY MR S ISWARAN, SENIOR MINISTER OF STATE FOR TRADE & INDUSTRY AND EDUCATION, AT THE POWER-GEN ASIA CONFERENCE FOR THE SINGAPORE INTERNATIONAL ENERGY WEEK 2010 ON TUESDAY, 2 NOV 2010, 0900 HRS AT THE MARINA BAY SANDS

Distinguished guests

Ladies and Gentlemen

Good morning

Introduction

I am pleased to be here this morning to join you at the Power-Gen Asia conference which is being held during the Singapore International Energy Week.

Now into its third year, the Singapore International Energy Week (SIEW)is Singapore’s principal platform to bring together energy professionals, academia and policy makers to discuss the challenges within the energy sector and exchange views on policies and strategies to deal with them. And, this year, we are pleased to have Power-Gen Asia as a key SIEW event.

Promoting Competitive Energy Markets

Electricity is a key factor of production for the Singapore economy, as indeed it is for any modern economy.Our energy policy objective is to ensure that households and industries have access to reliable and competitively priced electricity.As a small economy, we are a price-taker in the global energy market and import almost all our energy needs. It is therefore crucial that we foster effective competition in our energy markets. Competitive markets can help reap efficiency gains in the way we generate and use energy, and mitigate, to some extent, the impact of volatility in global energy markets and prices. Indeed, promoting competitive energy markets is a key plank in Singapore’s strategy to build a Smart Energy Economy – one that is innovative, resilient and sustainable.

Towards this end of enhanced competition, we have progressively restructured and liberalised our electricity and gas markets. Our regulator, the Energy Market Authority (EMA), has put in place a transparent and equitable licensing framework, together with market rules and codes of practice.This is with a view to maintaining a level and competitive playing field among market players, and realising the attendant benefits of innovation, efficiencies, as well as cost savings that eventually cascade to end-users.

These developments have yielded tangible benefits. Our power generation companies have switched to newer and more efficient technologies in order to compete for greater market share. For example, before liberalisation, most of our electricity was generated by steam plants powered by fuel oil. Only about 25 per cent of electricity was generated using natural gas. Today, 80 per cent of our electricity is fuelled by natural gas through the use of Combined Cycle Gas Turbines (CCGT). Natural gas is among the most cost-competitive fuels for power generation and also the cleanest fossil fuel. Switching to natural gas has, therefore, resulted in more competitive electricity prices, reduced air pollution and lower carbon intensity.

Looking ahead, the challenge for our power generation sector is to continue to meet demand that is rising in tandem with economic growth with competitive, secure and sustainable electricity supply. This year, along with Singapore’s strong recovery from the global financial crisis, electricity demand has increased sharply.Average demand in the first half of 2010 increased by approximately 11 per cent compared to the same period a year ago. With electricity demand forecasted to rise by up to 3 per cent annually till 2018, the demand for natural gas will similarly increase.

Tapping on New Opportunities with the LNG Terminal

As part of our energy diversification strategy, we are building a Liquefied Natural Gas (LNG) terminal. The LNG terminal will enable Singapore to import LNG from global markets to meet our growing needs. It will also ensure greater energy security by diversifying our sources. The development of the LNG terminal is on track and commercial operations will begin in 2013, as planned.

With the impending entry of LNG, current and new players have announced plans to leverage on the additional supply to bring in new generation capacity, or repower existing fuel oil-fired generation capacity.Specifically,

1. Senoko Power and Tuas Power will be repowering their existing steam turbines into 1,200 MW of CCGT;

2. Island Power Company will join the market as a new entrant in the power generation sector, providing up to 800 MW of new CCGT capacity; and

3. Keppel and SembCorp have each made plans to increase their CCGT capacities by 800 MW. 

In total, we expect up to 3,600 MW of new capacity to come on stream to cater to the growing demand for energy in Singapore.

The demand for LNG has proven to be stronger than we had initially expected. The power generation companies have committed to purchase around 2 million tonnes per annum (Mtpa) of LNG from BG Group, our LNG supplier and gas demand aggregator, when the terminal begins operations in 2013.This is a significant increase from an earlier indication of 1.5 Mtpa, which I announced earlier in March this year during the groundbreaking ceremony for the LNG terminal. This represents a sizeable initial base-load of LNG throughput for the terminal.

The LNG terminal that is being built on Jurong Island is designed with an initial capacity of 3.5 Mtpa, which would require two storage tanks.I am happy to announce that given the stronger-than-expected uptake of LNG, we will accelerate the expansion of the LNG terminal by building a third storage tank which will increase the terminal’s capacity to 6 Mtpa.The third tank will be built in tandem with the overall terminal development.

Expanding the terminal’s throughput capacity now will put Singapore in a position to better meet future LNG demand. The additional capacity will also enhance our energy security by allowing industry players to enter into commercial contracts for back-up supplies of LNG.

The increased capacity could also catalyse new business opportunities. International LNG traders have expressed their interest to leverage off the terminal to trade in LNG spot cargoes. Already, we have a growing number of companies like BP, ConocoPhillips, Gazprom and Shell establishing their LNG trading offices in Singapore. With the third tank, there will be more of such LNG trading opportunities. It will allow us to tap on the growing market for spot and short-term LNG contracts. Just as Singapore has achieved a competitive advantage as one of the world’s leading commodity hubs and Asia’s top oil trading centre, we similarly aim to establish ourselves as a centre for LNG trading in Asia.

Conclusion

The next few decades promise to be an exciting time for energy players in Asia. While the world economic outlook remains subdued, Asia’s economies are primed for growth.This means greater demand for power to fuel growing industries and expanding populations.Robust growth means new opportunities could be created across the various segments of the energy sector, be it in clean energy, new technologies or spinoffs in other related services. Industry players must, therefore, be well-positioned to seize these opportunities.

Likewise, Singapore’s energy sector will offer many new opportunities. Aside from enhancing our energy security, the entry of LNG will bring about new business opportunities, and promote a more competitive and efficient power generation sector through the entry of new generation capacity.

To remain a leading global city, Singapore must continue to be nimble to meet global energy challenges and seize emerging opportunities.As the global energy landscape evolves, so too will Singapore’s strategies. Building a Smart Energy Economy will better prepare us to meet future challenges and achieve the energy policy imperatives of energy security, economic competitiveness and environmental sustainability. This will further consolidate Singapore’s position as an energy hub for Asia.

On this note, I would like to wish you all fruitful discussions at the Power-Gen Asia conference and a productive experience at this year’s Singapore International Energy Week.

Thank you.