OPENING MINISTERIAL ADDRESS BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY), LNG SUPPLIES FOR ASIAN MARKETS 2018, WEDNESDAY, 28 FEBRUARY 2018, 9.45 AM, ONE°15 MARINA CLUB
Distinguished Guests,
Ladies and Gentlemen
Introduction
1. Good morning. I am pleased to join you at the 13th edition of the LNG Supplies for Asian Markets (LNGA) conference.
Unprecedented Global LNG Market Developments
2. The conference theme this year, "Lower for Longer: Implications for Asia’s LNG Business", focuses on the impact of oil price volatility on the LNG industry, especially here in Asia.
3. We continue to see growth in global LNG demand, which increased by 10% in 2017 to 285 million tonnes (Mt). This year, a further 10% in growth is expected, much of this growth coming from Asia. In November last year, China became the world’s second largest LNG importer, as it targets to increase the share of natural gas in its generation fuel mix to 10% by the end of this decade. Here in Southeast Asia, LNG demand growth will also continue to be driven by power generation needs. Indonesia will become a net importer of LNG for the first time by 2020, while Thailand is targeting a seven-fold increase in LNG import volumes to 35 Mtpa by 2036.
4. In our discussions during the annual ASEAN Ministers for Energy, there has been significant emphasis on the LNG component and how we can facilitate greater cooperation amongst ASEAN countries to meet the growing energy demand in the region, for both large- and small-scale.
5. Policy decisions also affect LNG demand. A notable example is the decision by the International Maritime Organization to cap sulphur in marine fuel at 0.5%, which may spur demand from shippers for the use of LNG as an alternative to High Sulphur Fuel Oil (HSFO) for bunkering fuel.
6. This demand growth is taking place against the backdrop of volatile oil price movements. Oil prices fell precipitously in 2014, but have recovered to some extent since 2016. Whether oil prices recover quickly, or remain lower for longer, will determine how this demand is met, in several important ways.
7. The first is the source of LNG. New supplies are expected to come on-stream in the next few years from Qatar, Australia, and the US. Qatar has announced that it will increase its LNG production from 77 to 100 Mtpa in the next five years. The US Energy Information Administration (EIA) has also projected that US LNG export capacity will increase to 72 Mtpa by 2019, making the US the third largest exporter behind Qatar and Australia. However, these shifts could be blunted if oil prices remain lower for longer.
8. Oil price trends will also affect the way that LNG is contracted for. The trend towards shorter-term contracts with greater flexibility will accelerate if oil prices become more volatile, as buyers seek tools and mechanisms to better mitigate pricing risks. We are already starting to see structural shifts in the upstream segments of the industry as well. Major LNG producers have been focusing on streamlining costs in order to withstand the market downturn. Some suppliers, such as Trafigura, have sought to persify their supply portfolios in terms of source and indexation. We have also observed the advent of new modular-style LNG export terminals being built to cater for smaller volumes.
Singapore’s LNG developments
9. Singapore is certainly not immune to these global developments, and we have therefore taken several steps that help us stay nimble and better position ourselves for future developments.
10. Since the launch of our LNG terminal in 2013, we have expanded its capacity ahead of demand. This additional capacity for ancillary services has allowed for the development of LNG trading activities in Singapore. We now have a sizable LNG trading ecosystem, comprising around 45 international firms with LNG trading desks in Singapore today. In 2017, SLNG, the company that owns and operates our LNG terminal, handled 23 LNG vessel cool-downs and storage & reloads.
11. I am pleased that the construction of the 4th tank at our LNG terminal is on schedule to be completed by the first half of this year. With a capacity of 260,000 cubic metres, it is one of the largest in the world. Together with Singapore’s strategic location, we believe this will offer LNG traders more options, greater flexibility and better efficiency in transhipments. SLNG will soon call for proposals for the use of its spare terminal capacity to grow its ancillary services business.
12. We have also introduced several policies to give gas importers and end users in Singapore greater flexibility and options. As of January 2018, the Energy Market Authority (EMA) has allowed spot LNG imports, subject to a market-wide cap of 10% of our long-term contracted gas supplies. This will help gas importers to react quickly to meet market demand more effectively, and further encourage gas-on-gas competition in the domestic market.
13. Singapore is also keen to enable small-scale LNG solutions, both domestically and regionally. SLNG has conducted 19 LNG truck loadings in the past year. SLNG is also modifying its jetty to take vessels as small as 2,000 cubic metres. This will enhance SLNG’s ability to break-bulk to meet regional demand that requires smaller LNG cargoes, such as LNG-to-power barges.
Conclusion
14. The theme of this year's conference is a timely reminder that the LNG industry, notwithstanding its lumpy capital expenditure and long term economics, must continue to innovate and evolve in response to short and medium term challenges to stay relevant. To this end, the LNGA remains an important part of our ecosystem and platform for buyers, sellers, and policy makers to exchange views, strike partnerships, and unlock new opportunities.
15. I wish everyone a fruitful and productive conference. Thank you.