Speech by Dr Vivian Balakrishnan
Minister of State for Trade & Industy and National Development

At GASEX 2004 Conference and Exhibition
31 MAY 2004 at 9.00 AM AT SUNTEC SINGAPORE

Ministerial Opening Address

Distinguished Participants

Ladies and Gentlemen

It is a privilege for me to deliver the opening address for this event. For first time in its 14-year history, GASEX is being held in Singapore. It is a signal that Singapore is seen as a major player not only in oil and petrochemicals, but also in gas.

Exciting Times for Natural Gas

These are exciting times for the gas industry. While in the past natural gas was seen merely as a by-product of crude oil production and was flared off, natural gas is today one of the most important sources of energy. There is no need to reiterate the well-known advantages natural gas have over fuel oil as a source of clean, efficient energy.

Need for Energy Efficiency

Singapore has no indigenous sources of fuel. However, we are an energy intensive country. It is vital for us to extract maximum cost efficiency from our energy infrastructure. Towards this end, government policies are designed to allow our energy sector to adapt, and to adopt the most efficient technologies.

Today, an average of 60% of electricity in Singapore is generated using natural gas. This proportion will grow over time as fuel oil-based generation capacity is retired and is replaced by new gas-based capacity.

Other Uses of Natural Gas

Use of natural gas is however not limited to only electricity generation. Natural gas is being used in cogeneration plants to produce heat and power for industries on Jurong Island. Companies outside Jurong Island could also consider exploiting natural gas in environmentally friendly embedded cogeneration facilities to produce heat and power more efficiently.

Natural Gas could also become a competitive source of feedstock for our petrochemicals industry to complement the feedstock from our oil refineries. Currently, some chemical companies already use natural gas to produce syn gas as feedstock for production of petrochemicals such as oxo-alcohols and polycarbonate.

Natural gas could touch the lives of Singaporeans in a very direct way as well. Households in Singapore are today supplied with piped town gas for heating and cooking purposes. Town gas could be replaced with natural gas within the next few years and plans for this are being studied. If this happens, Singaporeans will find natural gas flowing directly into their homes.

Test-Bedding of Natural Gas Technologies in Singapore

Singapore is involved in test-bedding new technologies and uses for natural gas. For instance, pilot trials of Compressed Natural Gas ("CNG") buses and taxies have been ongoing for the past two years. These trials have shown that CNG vehicles are technically feasible. CNG vehicles emit significantly less pollutants including fine particulate matter as well as carbon dioxide. In recognition of its potential to improve our air quality, the government (ENV) announced in March this year an enhanced tax incentive offering higher ARF rebates to encourage the adoption of more CNG taxis and buses.

The government is also promoting demonstration and test-bedding projects in fuel cell technology. Fuel cells can offer clean energy solutions in stationary and automotive applications. A test-bedding project is currently underway in Pasir Ris where the lights in a multi-storey car-park are powered by fuel cells using hydrogen produced by the on-board reforming of natural gas as the fuel source.

Another example - Singapore is one of only four countries in the world where DaimlerChrsyler is test trialing 6 of their Mercedes A-Class fuel cell vehicles from May this year. BP is partnering to provide two refueling stations for these cars. We welcome companies to conduct more of such trials in Singapore.

LNG, Security of Supply, and Potential for Gas Hub

Another exciting development in natural gas has been the emergence of LNG as a popular means of gas transportation.

Moving from pipelines to LNG tankers has opened up the market dramatically for both gas sellers and buyers. With LNG, buyers can take gas not only from sources within a 2000km range, but potentially from any producer anywhere in the world. The eventual emergence of a spot market for LNG would allow for a good balance between long and short term contracts for sellers and buyers, thus allowing for optimal trade-offs between energy security and price.

To a country like Singapore, the implications of LNG import are enormous. The ability to source from different gas producers would allow for a more competitive gas sector. Our energy infrastructure would be more robust and we would be more resilient against supply disruptions. Also, as recent LNG contracts have shown, the link between oil prices and LNG prices are loosening. LNG is increasingly being priced according to its own demand and supply conditions, rather than being pegged to oil. With LNG, the cost of energy generation in Singapore will no longer be so closely tied to the price of oil.

The increasing flexibility in recent LNG contracts also points towards its emergence as a globally traded commodity. Singapore, as Asia’s Oil Trading Centre, would be well positioned to become a hub for LNG trade.

The government is embarking on a study to explore our entry into the LNG market. The results of this study should be ready by next year. The involvement of the private sector in this project would be a critical success factor.

Singapore’s Oil & Gas Equipment and Services Industry

Singapore also has a leading position in the oil & gas equipment and services industry with a S$ 1.8 billion output in 2003. Singapore is a world leader in Exploration & Production platforms, having 70% market share for FPSO ("Floating Production, Storage and Offloading") vessel conversions, and 60% market share for jack-up rig new builds. In oil & gas equipment, Singapore accounts for more than 60% of the total production volume in Asia for 7 of the top 10 players. The growth of the gas industry offers great opportunity for companies in these equipment and services.

Future Developments

Singapore has to keep a watchful eye on developments in natural gas activities. Government policies will allow the country to position itself to take advantage of any suitable opportunities that may come our way – be they development of R&D and test-bedding, adoption of innovative uses of natural gas to power the nation, downstream processing of gas, or even gas and energy related services. We will give a warm welcome to innovative companies in all their fields.

Closing

With today’s good turnout, I am certain GASEX 2004 would provide participants a good platform to exchange ideas and discover new business opportunities both in Singapore and around the region. I wish all participants a fruitful conference. Thank you.