Gas (Amendment) Bill

Order for Second Reading read.

3.19 pm

The Senior Parliamentary Secretary to the Minister for Trade and Industry (Dr Tan Wu Meng) (for the Minister for Trade and Industry): Mr Speaker, on behalf of the Minister for Trade and Industry, I beg to move, "That the Bill be now read a Second time."

The Gas Act was passed in 2001 to establish a regulatory regime to ensure a competitive, secure and reliable gas supply to the industry and the public. The Gas Act was last amended in 2007 to enhance market access and strengthen safeguards for critical infrastructure.

Singapore's energy markets have evolved significantly since. Our reliance on imported natural gas has grown, with over 95% of our electricity generated from natural gas, up from 77% in 2010. To meet this demand in a secure and competitive manner, we have built a liquefied natural gas (LNG) terminal to supplement our piped natural gas (PNG) supply. The LNG terminal has also enabled new business opportunities in a variety of ancillary services such as trading, bunkering, and break-bulking, which has enhanced the dynamism of our gas market.

Against the backdrop of these developments in our energy markets, it is necessary to update the Gas Act to ensure that it remains effective and relevant. MTI and EMA are therefore proposing to update the Gas Act in four key areas: first, to enhance gas supply security and the regulation of safety of gas-related activities; second, to enhance protection of critical gas infrastructure and deterrence for serious offences; third, to facilitate competition in the gas market; and fourth, to clarify and improve procedural and technical provisions in the Gas Act.

In finalising these amendments, MTI and EMA sought feedback from industry stakeholders and members of the public through a public consultation in June earlier this year. MTI and EMA have carefully considered all feedback received and incorporated them where relevant.

Mr Speaker, let me now elaborate on the key amendments in this Bill, starting with the first area, which is to enhance gas supply security and the regulation of safety of gas-related activities.

Singapore relies heavily on imported natural gas as fuel for power generation and as industrial feedstock, and any gas supply emergency can adversely affect our economy. The first amendment, in clause 14 of the Bill, introduces a new part VIIIA to the Gas Act, where in the event of an imminent or actual severe gas shortage, EMA, with the Minister's approval, is empowered to issue directions to require any person to take measures specified by EMA to address or alleviate the severe gas shortage, or prevent it from occurring or continuing. These directions may include empowering EMA to reallocate gas from users who can use alternative fuels to those who have no alternative fuel supplies. These directions may also include requiring relevant parties to enter into, modify or terminate contractual agreements. Persons who comply with the direction will be protected from legal liability, if doing so results in breach of an existing contractual obligation.

The Bill further defines that a "severe gas shortage situation" occurs when there is a shortage of natural gas imported into Singapore that results in gas importers being unable to fulfil their contractual obligations to end-users and where the extent, and likely duration or uncertainty of the period, of the gas shortage is likely to threaten the security or stability of gas or electricity supply in Singapore or result in a severe loss of industrial or economic output.

Mr Speaker, in moving this amendment, I am mindful that the power to issue any direction is broad and can affect the commercial arrangements of the parties concerned. The amendment is worded as such to provide EMA with the flexibility to react to the wide range of potential threats that may emerge. I would like to assure this House that before exercising this power, EMA would have explored alternative solutions to prevent, address or alleviate the severe gas shortage, such as procuring gas from alternative sources and leveraging on existing market mechanisms and other regulatory levers. In addition, parties can seek compensation for losses or damage suffered as a result of complying with EMA's directions. The compensation will be determined by an independent panel set up under the Gas Act.

The second amendment, in clause 3 of the Bill, amends section 3 of the Gas Act to enhance EMA's regulation of gas-related activities. Presently, EMA's regulatory functions under the Gas Act include "protecting the public from dangers arising from the production, processing, storage, conveyance, shipping, supply or use of gas". To cover the broader value chain of gas-related activities, clause 3 of the Bill expands these regulatory functions to include protecting the public from dangers to health arising from such gas-related activities, including the import of gas, which is presently not included. This strengthens regulation over a broader spectrum of gas-related activities and expands EMA's regulatory control over technical requirements for gas imports to include thresholds for harmful substances such as sulphur compounds and heavy metals.

The third amendment, in clause 8 of the Bill, expands the scope of "designated gas licensees" under Part VIIB of the Gas Act. These are licensees who require EMA's approval for changes in ownership, and board and chief executive officer appointments, in view of their strategic importance to our gas system. Presently, the only designated gas licensees are the gas transporter licensee, that is PowerGas Ltd, which is responsible for the operation of the gas transmission system, and its agent licensee, that is SP PowerGrid Ltd. We are including the LNG terminal operator, that is Singapore LNG Corporation Pte Ltd, as a "designated gas licensee", in view of its critical role in ensuring energy security. To allow flexibility to designate gas licensees as the gas industry evolves, the amendment will also empower the Minister to specify other gas licensees as "designated gas licensees", going forward if the need arises.

The fourth amendment, in clause 22 of the Bill, amends sections 33 and 34 of the Gas Act to expand the scope of the Special Administration Order (SAO), to provide EMA with greater flexibility to deal with unforeseen emergency scenarios.

Presently, an SAO can only be issued in relation to the gas transporter and LNG terminal operator licensees. The amendment will expand the scope of the SAO to cover any gas licensee. This will bring the SAO provisions in the Gas Act in line with those in the Electricity Act.

MTI and EMA have also incorporated feedback from the industry to make it clear that the SAO can be issued in relation to some, and not necessarily all, of the affairs, business and property of licensees. This will enable the SAO to be tailored to the gas-related business of licensees whose business include non-gas related parts, as may be appropriate in the circumstances.

The fifth amendment, also in clause 22 of the Bill, amends section 34(6)(b) of the Gas Act to allow licensees to apply for a Judicial Management (JM) order under Part VIIIA of the Companies Act once EMA's consent is obtained. The Gas Act currently prohibits a gas licensee from applying for a JM. The intent is to ensure that critical licensees are not unilaterally placed under JM and dissolved. However, this restricts non-critical licensees from applying for a JM even though their restructuring or exit would not adversely impact our energy security and system stability. Hence, the amendment allows JM of a licensee if EMA's consent is obtained.

Mr Speaker, let me now elaborate on the second key area of update – enhancing protection of critical gas infrastructure and deterrence of serious gas related offences.

The sixth amendment, in clause 6 of the Bill, introduces a new section 32B to the Gas Act that makes it an offence to damage any submarine gas pipeline. Submarine gas pipelines within Singapore's territorial waters convey imported natural gas to our gas network. Damage to these pipelines can disrupt Singapore's gas and electricity supply and result in high economic losses. Presently, damage to any submarine gas pipeline is an offence under the Merchant Shipping Act that carries a maximum fine of only $50,000 and/or imprisonment of up to two years upon conviction. This is too low to effectively deter damage to submarine gas pipelines. In view of the higher costs of repairing submarine gas pipelines vis-à-vis land-based gas pipelines, a higher maximum fine of $2 million and/or imprisonment of up to five years upon conviction will be imposed. This is a calibrated increase compared to the $1 million fine and/or imprisonment of up to five years for damage to land-based gas pipelines.

The seventh amendment, in clause 5 of the Bill, amends section 32A of the Gas Act to rationalise the different offences currently provided in the section, which include offences relating to damage to land-based gas transmission infrastructure. Such infrastructure is critical in ensuring the flow of gas to businesses and households. The amendment also seeks to extend the reach of the section by making a person who causes or permits another person to damage land-based gas transmission infrastructure guilty of an offence. There is no need for the former to have any particular relationship with the latter.

Finally, the distinction between damage in earthworks and non-earthworks related situations is removed as it is strictly not relevant to assessing culpability. The penalty for offences under this section remain unchanged as a maximum fine of $1 million and/or imprisonment of up to five years upon conviction.

Beyond enhancing protection of critical gas infrastructure, there is a need to effectively deter the dishonest consumption of gas and tampering of gas meters. The dishonest consumption of gas presently carries a maximum fine of $50,000 and/or imprisonment for a term of up to five years upon conviction. However, in cases where the dishonest consumption of gas is carried out on a large scale and the value of gas dishonestly consumed is substantial, the existing penalty can be disproportionately low compared to the value of gas consumed and ineffective as deterrence.

Hence, the eighth amendment, also in clause 7 of the Bill, amends section 47 of the Gas Act to mandate that the court imposes an additional fine equivalent to three times the value of gas dishonestly consumed, on conviction for dishonest consumption of gas and meter tampering offences. This amendment takes into consideration that the cost of the gas that is dishonestly consumed is borne by all paying consumers. This enhances deterrence by ensuring proportionality between the penalty imposed and the value of gas dishonestly consumed.

The ninth amendment, also in clause 7 of the Bill, expands section 47 of the Gas Act to specify that it is an offence to do anything that compromises or affects the ability of a meter in registering the quantity of gas supplied to any person or premises. This amendment will enable EMA to prosecute persons who use novel or unconventional methods to tamper with meters, with a view to dishonestly consume gas.

Mr Speaker, let me move on to the third key area of update to the Gas Act that aims to facilitate competition in the gas market.

Part IX of the Gas Act presently empowers EMA to regulate anti-competitive practices and conduct in the Singapore gas market. To facilitate competition in the gas market, the tenth amendment, in clause 15 of the Bill, introduces a new section 72A to the Gas Act that enables EMA to issue guidelines to inform the gas market regarding practices and conduct that are anti-competitive. This amendment is consistent with the Competition Act, which similarly allows the Competition and Consumer Commission of Singapore (CCCS) to publish guidelines to guide market behaviour. To ensure that the industry’s views are incorporated, EMA will consult the industry when formulating these guidelines.

Mr Speaker, the final key area of update seeks to clarify and improve technical provisions in the Gas Act.

First, clause 20 of the Bill amends section 93 of the Gas Act to enable regulations to be made to specify the procedures for submission of appeals to and consideration of appeals by the Minister regarding EMA’s regulatory decisions. This will enable regulations requiring the facts, issues and grounds of appeal to be set out clearly when appeals are made and enable the Minister to reject appeals that do not meet these requirements. Confidential and sensitive information submitted in appeals will also be safeguarded. This will facilitate consideration of appeals by the Minister, and bring the Gas Act in line with existing appeal provisions in other Acts, such as the Telecommunications Act.

Second, to better reflect EMA’s functions in ensuring the security and reliability of our gas supply, clause 3 of the Bill amends section 3 of the Gas Act to clarify that EMA’s regulatory functions include arranging for the secure operation of the gas transmission system, which EMA already performs.

Third, clause 21 of the Bill amends section 96 of the Gas Act to broaden regulations that may be made under section 96(2)(o) relating to the conversion of a gas pipeline network to convey natural gas. The broadened regulations will enable EMA to require relevant parties, such as building owners or managers, to submit updated plans and other information to the licensees carrying out the conversion works. It will also allow regulations to be made to provide for termination of supply of gas to any premises if the conversion is not carried out successfully, on safety or other grounds. Clause 21 also amends section 96 to enable EMA to recover costs for services provided in connection with its regulatory functions, without having to prescribe the costs as fees.

Last, clause 19 of the Bill inserts a new section 92A to provide for various moneys collected by EMA under the Gas Act to be paid into the Consolidated Fund.

Mr Speaker, in summary, the proposed amendments to the Gas Act that I have elaborated on in my speech are necessary to ensure that the Gas Act remains effective and relevant against the backdrop of changing energy markets and business models. Sir, I beg to move.

Question proposed.

3.37 pm

Mr Mohamed Irshad (Nominated Member): Hon Speaker, Mr Tan Chuan-Jin and hon Members of Parliament, I support this Bill as it strengthens and tightens the Gas act to safeguard our future.

Today, I wish to speak on three areas, mainly, energy security, energy sustainability and energy resilience. On energy security, almost every Singaporean knows that we are a vulnerable and small nation with almost zero natural resources. But not as many may realise the extent to which we rely on imported fuel to meet our energy demands. Imported natural gases account for 95% of our energy generation. For our security, I feel it is important that we should not be beholden to any country to meet our energy needs.

So, we have to take this Bill very seriously for now and our future generations as without the natural gas, our power generation will be disrupted and Singapore will be in total darkness.

All this while, Singapore has been buying gas and pipping it from Malaysia and Indonesia, through strong bilateral relationship, we have enjoyed this facility for a very long time. That dependence has been reduced over the years from 100% to 77%. And with the opening of the Singapore natural gas terminal in 2014, I am glad to see Singapore diversify our sources of supply to include Liquefied Natural Gas (LNG). This is an important step in reducing our reliance on Piped Natural Gases (PNG) and I would like to congratulate the executives for their far-sightedness to build the terminal to strengthen our energy security.

And, from what I understand, the existing six contracts for PNG from our neighbours will expire between this year and 2029. In this regard, could the Senior Parliamentary Secretary share with us if these contracts will be renewed or will we make the switch to LNG upon expiry of these contracts?

Also, with the expected increase in worldwide demand for LNG, how are we looking to stabilise the market price fluctuations and deliver a reliable and stable service and more importantly keep an affordable price point for Singaporeans?

On a related point, I commend the Singapore LNG Corporation on expanding its capacity over the years. I understand that there will be a second terminal that will strengthen Singapore’s position. I would like to ask the Senior Parliamentary Secretary when will this second terminal be ready?

Singapore is in a unique situation, located in the Straits of Malacca, with important shipping access that serves all major shipping lines. Singapore’s strategic geographical location allows for easier access to ASEAN and South East Asian countries. Globally, Singapore is also well known as the financial and commodity trading hub of Asia.

I would like to make a proposal that our Government considers making Singapore an important LNG hub of Asia to attract gas producing countries to utilise Singapore as their storage farms for Asia and to establish an LNG hub for Asia in Singapore as how Rotterdam is for Europe.

On energy sustainability, in my work with Singaporean youths, I have met many who feel strongly in preserving the environment. As part of this, many support switching from fossil fuel to renewable energy. Towards this, I commend good initiatives such as the JTC's SolarRoof project, Treelodge@Punggol, deployment of Solar Photovoltaics in reservoirs across Singapore and building Singapore’s first micro-grid living lab in Pulau Ubin. I believe we should make a stronger push about going into solar energy. I would like to seek further understanding on the timeline to go into large scale implementation for solar PV.

We should also encourage more green practices. For example, in Japan, Toyota has come up with a green coating to coat buildings to keep them cool by as much as 30%. Such green innovation ensures the efficiency of cooling down our buildings which will translate to great cost saving in electricity bills for the consumers.

I would like to laud the proposal to expand EMA’s functions under the Gas Act to deal with dangers to health arising from the import of gas, health concerns arising from the import of gas.

On energy resilience, our world is unpredictable. Our founding Prime Minister Mr Lee Kuan Yew reminded us repeatedly that we have to take the world as it is, and not as we wish it to be. We are not immune to cyber security attacks or major energy disruptions. About two weeks ago on 18 September, we faced a major blackout that affected over 146,000 residential and commercial customers. The incident emphasised the need for Singapore to be energy resilient. Although the disruption was due to a partial loss of electricity supply from two power generation companies, we cannot take it lightly.

In that light, I think it is important that all Singaporeans are equipped with the skills and knowledge to remain calm and resilient in any such emergencies. Perhaps carrying out an awareness campaign or public education drive is something that can be considered. It is a strength to know what to do if the lights are out.

At the core of that resilient spirit, Singaporeans must not take our energy supply for granted and must give credit where it is due and to commend the Government, MTI and EMA for ensuring the energy supplies of Singapore and for taking all possible steps to mitigate any shortage or disruptions over the years.

Mr Speaker, I stand in support of this Bill and the wider efforts to strengthen our energy security and resilience.

3.43 pm

Mr Speaker: Senior Parliamentary Secretary Tan Wu Meng.

Dr Tan Wu Meng: Mr Speaker, I thank the Member for the queries and support for the Bill. Let me address Nominated Member of Parliament Mr Irshad's questions on our energy supply, sustainability and resilience.

As a small country without any natural resources, Singapore imports nearly all of our energy needs. This makes us vulnerable to supply risks. Prior to 2013, we were completely reliant on Malaysia and Indonesia for our natural gas supply, which is transported to us via pipes.

As the Member has noted, our piped gas contracts are set to expire over the next decade or so. As all of our gas supply is handled commercially, whether our piped gas contracts are renewed will depend on commercial negotiations. And we welcome renewals or new contracts for piped gas. In October 2017, EMA lifted its moratorium on new piped gas contracts to facilitate this.

To enhance our energy security and competitiveness, the Government has pursued diversification of our gas sources as a strategy. To that end, the Government has built a Liquefied Natural Gas (LNG) terminal, which has enabled us to procure natural gas in the form of LNG from a wider range of sources such as Australia, the US as well as Trinidad and Tobago. We have also adopted a Competitive Licensing Framework to procure LNG on a tranche by tranche basis. This will provide Singapore with the flexibility to take advantage of opportunities in the global gas market, including more competitive price indexation and contract terms, while diversifying our gas sources to reinforce our supply security.

To further strengthen our energy security, we have also added capacity to the LNG terminal ahead of demand, providing us with spare capacity to cater for any potential disruption in our piped natural gas supply. The terminal today has a peak throughput capacity of 11 million tonnes per annum, sufficient to meet demand for the near future. The Government will continue to plan ahead for our next phase of LNG infrastructure development. We are currently exploring several options to see which best meets our long-term LNG needs and further improves our energy security.

As I have highlighted earlier, the proposed amendment in clause 14 of the Bill will further enhance EMA's ability to deal with a wide range of potential risks that may emerge. It empowers EMA to issue directions to require any person to take measures to address or alleviate the severe gas shortage, or prevent it from occurring or continuing.

Beyond meeting our domestic energy requirements, we have been taking steps to capitalise on our strategic location to develop Singapore as a regional gas hub. Our LNG terminal can conduct storage, and reloads and we have spare capacity available for trading. We have also been working with the industry to build a strong supporting ecosystem, with players such as consulting firms, law firms, ship brokers, Price Reporting Agencies, and other services providers. All these and more have established their presence in Singapore, adding to the depth of the ecosystem. Thanks to the efforts of Enterprise Singapore in building the LNG trading community, there are now more than 45 companies with an LNG trading or business development presence here. And to further increase dynamism in our gas market, EMA has also formalised the spot LNG import framework in October 2017. So, interested parties can now import spot LNG, subject to a market wide cap of 10% of our long-term contracted gas sales agreements. In summary there is actually a whole of eco-system approach to looking at our energy resilience.

Let me now address the Member's queries on our energy sustainability. Singapore is exploring other ways to broaden our energy options. Among the renewable energy options, solar photovoltaics (solar PV) has the greatest potential for wider deployment in Singapore. But even then, there are challenges to adopting solar energy at scale, for example, competing uses for limited land, and the intermittency of the electricity generated by solar PV due to high cloud cover and urban shading.

Despite these challenges, we have grown the amount of solar PV deployed from 10 megawatt peak in 2012 to more than 160 megawatt peak today. This is just a start. We are planning to raise our solar generation capacity to 350 megawatt peak by 2020 and to 1 gigawatt peak beyond 2020.

We are also investing in Research and Development (R&D) to increase the efficiency of solar PV and the accuracy of forecasting solar power output in our tropical climate. This includes test-beds on utility-scale energy storage systems that could facilitate greater deployment of solar PV in Singapore while ensuring that our power system's security, reliability and stability are not compromised.

Let me now address the Member's queries on our energy resilience, including his question on the safeguards we have for critical services. My colleague, Senior Minister of State Koh Poh Koon had spoken about this during question time, but if I may just share again.

In the design of any electricity grid system, we have to balance redundancy and assurance with cost imposed on consumers. The higher the degree of redundancy, the smaller the probability of disruption, the higher the cost at the system level. So we have to find the balance, and we have adopted a calibrated approach in our system planning, certain level of redundancy at national grid level, together with a higher level of redundancy for critical systems at the local level. Critical services and infrastructure, such as lifts and traffic signalling systems, have contingency plans for power outages that might happen on the national grid. For example, passenger lifts must be installed with an Automatic Rescue Device, so that if there is a power failure, the lift will be parked at the nearest floor and open its doors. For lifts in very high-rise residential buildings or those serving both residential and non-residential uses, a standby generator is required to provide emergency power to resume at least one lift's operations.

As for our public hospitals, these are provided with dual supply sources, so if one of the supply sources fails, each is able to provide backup to the hospital. In addition, if there is any disruption from the main power source, there are backup power systems, such as diesel generators and Uninterrupted Power Supplies (UPS) systems, and these will automatically kick in, to support critical equipment and critical facilities. And our public hospitals also carry out preventive maintenance, regular maintenance, to ensure that both their electrical installations and power system backups are in good working condition. During the power outage on 18 September, hospitals in the affected areas activated their back-up power supply immediately, and this prevented disruptions to their operations and patient care.

The Member also spoke on the importance of having a well-equipped public to respond to emergencies; and this is well-noted. EMA is working with the industry to review processes for handling events such as the recent power outage to ensure they remain satisfactory. During the blackout, SP Group officers were immediately activated and deployed at key substations and control centres. SP Group also provided the public with progressive updates on its social media channels and concurrently informed the media of updates as well. But as with every incident, we will review carefully to see how we can further improve our responses.

Mr Speaker, I would like to thank the Member who spoke on this Bill, and the valuable comments he provided. In summary, this Bill will ensure that the Gas Act continues to remain effective and relevant in enhancing gas supply security and strengthening safeguards for such critical infrastructure. Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Dr Tan Wu Meng].

Bill considered in Committee; reported without amendment; read a Third time and passed.