SINGAPORE (The Straits Times/ANN): The reduction in the gas supply from Indonesia will make up less than 2% of Singapore’s total daily gas demand, said the Energy Market Authority (EMA) in the evening of Oct 24.
EMA was responding to queries from The Straits Times following announcements from an Indonesian official that it will be cutting gas exports to Singapore via two pipelines directly linked to the city-state.
The chief of Indonesia’s upstream oil and gas regulator SKK Migas Djoko Siswanto had been quoted in Indonesian media outlets on Oct 23 saying that the country will be cutting natural gas exports to Singapore by 31 billion British thermal units per day (BBTUD) from Oct 24.
The EMA spokesperson said that based on the information from Singapore’s natural gas importers, the total reduction amounts to 17BBTUD over a period of 18 days.
Singapore’s total daily gas demand amounts to more than 1,000 BBTUD, he added.
“EMA understands that our importers will pursue all relevant recourse in their contracts for the gas supply disruption,” the spokesman added.
He said the authority has contingency plans in place to deal with such reductions.
Singapore relies on natural gas for 95% of its electricity needs. This gas can come in piped form from Malaysia and Indonesia, or in liquefied form (LNG) from all over the world.
The Republic has also been stepping up efforts to diversify its energy sources further, by investing in solar panel deployment domestically, and doing research on emerging technologies such as nuclear and geothermal energy.
The EMA spokesman said the Singapore GasCo – the Republic’s central procurer and supplier of natural gas – is operationally ready to import more at any time.
Said EMA: “Besides Indonesia, Singapore imports natural gas from other sources around the world.”
“Power generation companies are further required to maintain sufficient fuel reserves for power generation, including diesel reserves.”
Meanwhile, one of Singapore’s largest gas suppliers said that its delivery of gas to customers here has been affected by “temporary reductions” in supply from its supplier in Indonesia.
The firm Gas Supply said it has been in direct communication with customers who are impacted and appreciate their patience and understanding during this period.
“(The company) continues to engage closely with our upstream supplier to manage the situation,” said the importer wholly owned by Temasek.
The gas cuts come after remarks made on Oct 22 by the country’s Energy and Mineral Resources Minister Bahlil Lahadalia.
Bahlil, who is also Coordinating Minister for Downstreaming and Energy Transition, said that Indonesia could stop exporting energy to countries that failed to show it mutual respect.
According to media reports, the cuts affected only Singapore because the pipelines from Natuna and Sumatra were connected directly to the city-state.
Exports from Natuna would be reduced by 15 BBTUD, while another 16 BBTUD would be cut from the Jambi Merang gas in Sumatra.
This had been framed in Indonesian media reports as part of the President Prabowo Subianto’s government’s moves to prioritise domestic energy needs amid growing concerns over energy security.
Checks by ST found that natural gas from Sumatra is exported to Gas Supply.
Meanwhile, gas from Indonesia’s Natuna Sea is transported through a direct subsea pipeline to a receiving facility operated by Sembcorp Gas.
According to Sembcorp Industries’ 2023 annual report, the company entered into a sales agreement valued at about $1.9 billion to import piped natural gas from the West Natuna gas fields.
Both agreements were expected to last until 2028.
ST has contacted Sembcorp with queries.
Indonesia has been planning to reduce gas exports to Singapore for several years to meet growing domestic demand. In 2022, Jakarta agreed to extend gas supplies to Singapore until 2028, but at lower volumes than under the previous contract.
Unlikely to have big impact on costs
Energy analysts said the cuts are unlikely to have a significant impact on costs here.
Chief executive of the Solar Energy Research Institute of Singapore, Subodh Mhaisalkar, said Singapore’s LNG infrastructure is a critical safeguard that allows it to procure gas from multiple international suppliers.
Replacing piped gas with LNG, however, could increase procurement costs and increase exposure to global price volatility, he added.
Still, the reduction represents a “small portion” of daily electricity demand, which means the overall cost impact will not be substantial, said the National University of Singapore (NUS) academic.
David Broadstock, an economist who monitors the energy sector, said the Republic called the abrupt cut a “surprising event” for Singapore’s energy supply chain.
The economist who monitors the energy sector highlighted the timing of the cuts, which occur just before the Singapore International Energy Week starting on Oct 26, and during a period of increased complexity between the two nations over transboundary haze enforcement.
Said Broadstock: “There is a question mark over whether there is a political element tied to this action, potentially making it a reaction to the haze issue.
“I wouldn’t say for sure that it is a definitive driving factor, but it certainly cannot be ruled out.”
He noted that a major price surge is not expected, characterising the situation as a preferred supplier taking a step back.
NUS’ Energy Studies Institute research fellow Sung Jinseok said the cut reinforces the Singapore GasCo’s role to keep the city-state adequately contracted and well supplied with natural gas at all times.
He said that the cuts suggest that full reliance on LNG can be one of the main scenarios that Singapore is being prepared for.
Currently, LNG accounts for about 60% of Singapore’s total gas supply, according to Sung.
Mhaisalkar said the sudden decrease in piped gas strengthens the case for Singapore to accelerate its rollout of solar panels. It should also increase momentum for a regional power grid and accelerate the deployment of other low-carbon energy sources to boost energy security.
Singapore has aggressively scaled its capacity to harvest power from the sun over the past few years, meeting its solar deployment target of 2 gigawatt-peak ahead of schedule.
Its new target of 3 GWp could meet around 4 per cent of the country’s total electricity demand in 2030. -- The Straits Times/ANN
