What happens to Singapore’s gas supplies in times of war?

Key Concepts

• Liquefied Natural Gas (LNG): Natural gas cooled to liquid form for easier transport and storage.
• Energy Security: Ensuring a reliable and affordable energy supply.
• Energy Transition: Shifting from fossil fuels to cleaner energy sources.
• Decarbonization: Reducing carbon emissions from energy production and consumption.
• Intermittency: The inconsistent availability of renewable energy sources like solar and wind.
• Base Load: The minimum amount of power needed to meet demand, typically provided by reliable sources.
• Carbon Capture and Storage (CCS): Technologies to capture CO2 emissions and store them underground.
• Bio LNG: Liquefied natural gas produced from biomass sources, reducing carbon intensity.
• ESG Report: A report detailing a company's environmental, social, and governance performance.
• Methane Slip: The release of methane, a potent greenhouse gas, during natural gas production and transportation.

Middle East Tensions and Impact on Energy Markets

• The conflict in the Middle East, particularly tensions between Israel, the United States, and Iran, has caused volatility in oil and gas prices.
• Gas fields have been targeted during Israeli strikes, and Iran has asserted control over the Hormuz Strait, a critical checkpoint for about 20% of global oil and LNG shipments.
• This situation triggered an 11% jump in Asian spot LNG prices, making coal cheaper than LNG for Asian markets.
• Continued disruptions could lead to further price increases for major LNG buyers in Asia, including Singapore.

Singapore's LNG Dependence and Security

• Singapore relies heavily on natural gas for electricity generation, with around 95% of its electricity coming from this source.
• Historically, Singapore imported natural gas via pipelines from Malaysia and Indonesia.
• The Singapore LNG (SLNG) terminal, which began commercial operations in May 2013 on Jurong Island, allows Singapore to import LNG from anywhere in the world.
• SLNG supplies about half of Singapore's total demand for power generation.
• Singapore's energy supply is considered resilient due to its standby LNG facility and diversified LNG sources from around the world.
• The vulnerability lies in the logistics and supply chain, as disruptions in one location can impact the entire system.
• The government recently announced the creation of GESCO, a government LNG procurement arm, to manage price fluctuations.

LNG as a Transitional Fuel

• LNG is viewed as a transitional fuel between fossil fuels and cleaner power sources.
• The ultimate goal is to transition to zero-carbon fuels like ammonia or nuclear, along with other sources like hydroelectric, solar, and wind power.
• Carbon capture and storage (CCS) is also being explored to abate emissions.
• However, these options are currently nascent and expensive compared to existing energy sources.
• LNG and bioenergy remain the most feasible solutions, especially when coupled with biomethane and bio LNG.
• SLNG is involved in the development of CCS capabilities for Singapore, as well as the storage and distribution of cleaner ammonia for power generation and ship bunkering.
• They are also enabling their terminal to be certified to handle bio LNG.

Southeast Asia's LNG Demand

• Asia is the fastest-growing region for LNG, representing more than 30% growth through 2035.
• Excluding China and India, ASEAN's growth in LNG demand is expected to be stable.
• Countries like Vietnam, Thailand, Philippines, Indonesia, and Malaysia are developing LNG receiving facilities.
• This is driven by the diversification of energy sources and the depletion of natural gas reserves in the region.
• Efforts are underway to develop an inter-regional gas network and cross-boundary power grids to enhance ASEAN's energy resilience and security.

Renewables vs. LNG

• While renewables offer the advantage of full control over power generation, they also have limitations, such as intermittency.
• Battery storage is needed to capture excess renewable energy, but this raises concerns about material sourcing and battery disposal.
• A combination of energy sources, including renewables and LNG, is being pursued to decarbonize the energy sector while ensuring reliable energy supply.

SLNG's Role in Climate Solutions

• SLNG aims to be part of the climate solution by focusing on sustainable operations and helping others decarbonize.
• They are expanding their road truck facilities to help smaller businesses transition from diesel and fuel oil to LNG.
• They are also working towards bio LNG to further reduce the carbon intensity of LNG.
• SLNG closely monitors methane slip and takes action to minimize emissions.
• The company's ESG report details its commitment to environmental, social, and governance performance.

Impact of Geopolitical Events on SLNG Operations

• When news of conflicts in the Middle East breaks, SLNG's immediate concern is the potential impact on the Gulf of Hormuz, a major logistics hub.
• The world is not short of LNG, but the supply chain is vulnerable.
• SLNG is prepared for potential disruptions and monitors the situation closely.

Impact on Electricity Bills

• The price of electricity depends on various factors, including infrastructure costs, distribution costs, and taxes, in addition to the price of LNG.
• The price of LNG has a significant impact on the overall cost structure, affecting labor, distribution, and other operational expenses.
• The government will do its best to temper the pain of price increases, but there is a limit to how much they can absorb.
• Supply chain disruptions can lead to inflation.

The Pace of Energy Transition

• A faster transition to alternative clean energy may not be feasible in the short term.
• Alternatives like ammonia and methanol are currently more expensive than LNG.
• Nuclear energy is a realistic option for the future, but it requires public acceptance and time for deployment.
• LNG remains the lowest-carbon and most affordable energy source for the time being.

Notable Quotes

• Wayihong (CEO of Singapore LNG Corporation): "Events like this really impact everyone in the region."
• Wayihong: "The vulnerability in is not in how much we can get but how we get it. So the logistics and the supply chain remains the weak point."
• Wayihong: "For as long as I'm alive, I think LG is still going to be required at least."
• Wayihong: "We want to be part of the solution both in terms of how we operate our business but also how we help others operate their business."

Synthesis/Conclusion

The podcast episode explores the complex interplay between geopolitical tensions, energy markets, and the ongoing energy transition. While conflicts in the Middle East can significantly impact LNG prices and supply chains, Singapore has taken steps to enhance its energy security through diversified sourcing and infrastructure investments like the SLNG terminal. LNG is positioned as a crucial transitional fuel, bridging the gap between fossil fuels and cleaner energy sources. However, the transition to renewables faces challenges related to intermittency and storage. Ultimately, a diversified energy mix, including LNG, renewables, and emerging technologies like CCS and bio LNG, is necessary to ensure a reliable, affordable, and sustainable energy future. SLNG plays a vital role in this transition, not only by providing LNG but also by actively participating in the development of cleaner energy solutions and promoting sustainable practices.