Measures to Manage Price Volatility of Liquefied Natural Gas
Ministry of ManpowerSpeakers
Summary
This question concerns Mr Abdul Muhaimin Abdul Malik’s inquiries regarding Singapore GasCo’s strategies to manage liquefied natural gas price volatility, avoid supply overreliance, and ensure compliance with international sanctions. Minister for Manpower Dr Tan See Leng replied that GasCo centralises procurement to build a resilient portfolio, with its board providing oversight on hedging strategies and risk management. He highlighted that the existing standby LNG facility buffers extreme volatility, while a second terminal under construction will increase storage and throughput by 50% by 2030. The Minister confirmed that systems are in place to avoid sanctioned entities and that a diversified supply portfolio starting in 2026 will help manage future pricing. Detailed procurement approaches and specific trading mechanisms were not disclosed due to commercial sensitivities.
Transcript
14 Mr Abdul Muhaimin Abdul Malik asked the Deputy Prime Minister and Minister for Trade and Industry whether the Ministry has any information on (i) whether Singapore GasCo will be building spot trading capabilities to manage price volatility of liquefied natural gas, or any other alternative mechanisms to buffer against short-term price volatility and (ii) whether Singapore GasCo will collaborate with financial institutions or commodity exchanges to develop such capabilities.
15 Mr Abdul Muhaimin Abdul Malik asked the Deputy Prime Minister and Minister for Trade and Industry (a) whether the Ministry will ensure that Singapore GasCo places safeguards during procurement to prevent an overreliance on any single liquefied natural gas (LNG) source; and (b) how will the Ministry ensure that Singapore GasCo's procurement of LNG does not expose Singapore to reputational, financial or legal risks arising from sanctioned entities or jurisdictions.
The Minister for Manpower (Dr Tan See Leng) (for the Deputy Prime Minister and Minister for Trade and Industry): Mr Speaker, may I have your permission to answer Question Nos 14 and 15 in today's Order Paper together?
Mr Speaker: Please proceed.
Dr Tan See Leng: The Singapore GasCo is a Government-owned entity that was established in April this year to centralise the procurement of natural gas for the power sector in Singapore. GasCo will construct and maintain a diversified and resilient gas supply portfolio to enhance gas security and mitigate gas price volatility. In addition, GasCo will put in place systems and processes to ensure that it does not procure natural gas from sanctioned entities or sanctioned jurisdictions.
We are unable to go into details on GasCo's procurement approach owing to commercial sensitivities.
Mr Speaker: Mr Muhaimin.
Mr Abdul Muhaimin Abdul Malik (Sengkang): Mr Speaker, I have two supplementary questions for the Minister. First, whether the Ministry is aware, whether Singapore GasCo will maintain a strategic liquefied natural gas (LNG) reserve to buffer against supply disruptions and whether this will require an expansion of the current Singapore LNG Corporation (SLNG) terminal? Second question, whether Singapore GasCo will be subject to the same SLNG tariffs and charges as other terminal users?
Dr Tan See Leng: I thank the Member for his two supplementary questions. Actually, I think, there are three.
GasCo's core business activity is to build a secure, reliable and diverse portfolio of natural gas contracts at stable and competitive prices. GasCo's Board will enable, because they are experienced members who have come from a very diverse range of companies, with many of them having many years of experience in gas procurement companies. So, it would provide oversight of GasCo's hedging strategies through its risk management committee.
As I have said earlier on, the GasCo portfolio is diversified and it is resilient in terms of price index, tenure and source. As to further details, because of the commercial sensitivities, please understand that and I beg for the Member's indulgence that I would not go into it any further.
As far as the buffer for extreme price volatilities, in 2022, we set up a standby LNG facility. I think that two months before that, in November 2021, this House actually approved an amendment to the Bill for us to set up that standby LNG facility.
When the standby LNG facility was set up at the end of January, and we made that storage of supplies, about a month later, hostilities broke out in Ukraine between Ukraine and Russia. And I think that helped to tide us over a period of extreme volatility. Till now, that standby LNG facility has served us well.
To the Member's point about the whether we are increasing our SLNG terminal. We have, indeed, gone on, we have committed to constructing a second LNG terminal. Just about a week and a half ago, the steel-cutting ceremony has started. We are on track to complete the terminal between 2028 and 2030. So, once that is done, we would have another 50% increase; not just in throughput, but also in storage, building up our SLNG capabilities.
As far as tariffs is concerned, it is spread across all the different sectors and the prices, like I said, because of our very diversified portfolio that we will be starting from 2026 onwards, we believe that we will be able to manage the volatility in terms of pricing. I hope that gives you the reassurance.