DPM Lawrence Wong at the Singapore LNG Corporation 10th Anniversary Gala Dinner

DPM Lawrence Wong | 24 October 2023

Speech by Deputy Prime Minister and Minister for Finance Lawrence Wong at the Singapore LNG Corporation 10th Anniversary Gala Dinner on 24 October 2023.

My Cabinet Colleague Dr Tan See Leng,
Chairman and CEO of SLNG, Mr Tang Kin Fei and Mr Tan Soo Koong,
Distinguished Guests,
Ladies and Gentlemen,

I am happy to join all of you for tonight’s gala dinner.

It feels like a home-coming for me to see so many familiar faces and old friends.

Brings back many fond memories of my time at EMA.

Tonight’s event is part of SIEW.

I was involved in setting up SIEW when it started in 2008, and I am glad to see how it has developed and grown into a premier energy event for the region.

Another project I was deeply involved in at that time was LNG, and I take great pride in seeing how far we have come in our LNG journey over the years.

This year marks the 10th anniversary of the LNG Terminal – it was commissioned and received its first cargo in 2013.

But the journey for LNG in Singapore started earlier.

As a tiny island state that imports almost everything we consume, Singapore takes nothing for granted, and we are always paranoid about worst case scenarios.   After all, we believe that only the paranoid survive; and we want to not just survive but thrive for a very long time.

So back in the mid-2000s, we already saw the need to complement our piped gas supply with LNG – which we could then import from countries all over the world.

We awarded the contract for the first tranche of LNG imports to BG – It is very good to see my good friend Mr Martin Houston there; In his former incarnation, he was a key person from BG, negotiating the gas contracts with us, and it was good he continued to keep his links with Singapore all these years. We awarded the contract to build the LNG terminal to Singapore Power.  And we thought that with all these in place, everything would run smoothly.

But then came the 2008 Global Financial Crisis – financing costs went up globally, and it was not viable for SP to proceed with the project on a commercial basis, so we had to make a decision.

The Government could have waited for market conditions to improve.  But we assessed that LNG was vital for Singapore’s energy security, and we could not afford to delay.

That was how EMA stepped in and took over the terminal project, and that was how I got involved in LNG.

Still remember having to scramble and get up to speed quickly on the subject matter –  I was quite new in EMA; I had no background in energy market. For weeks and months, all I could do was to eat, live and breathe LNG.

We incorporated SLNG as a subsidiary company of EMA.  We found office space right on top of EMA office premises.

Recruited people to run the company and oversee the terminal building and operations.

Not easy to do all this from scratch, and without any prior expertise.  But I was lucky we had an excellent team from EMA and we had strong support from many partners and stakeholders – SP, gencos, our workers, unions, friends, brothers and sisters from UPAGE, our gas supplier BG, our EPC contractor Samsung, so many different people.

One of my first tasks at that time, I remember, was to find a Chairman for the company. I asked around who might be a good steady pair of hands, I was given a name.  I did a cold call – I called him up and said, let’s meet, let’s discuss, I have a proposition for you. I was very glad Mr Bob Tan was ready to listen to my call, ready to give time to a young punk at that time, and willing to accept the challenge serving as Chairman.  Then I had Neil McGregor come and join the Board with me, and I remember both of us interviewing candidates for CEO. We met many people, and after interviewing for quite some time, I said, I think you are still the best person for the job. He gladly took on the challenge as a CEO too. So with Bob and Neil as Chairman and CEO of the company, I knew I could sleep better at night. Thank you, both of you.

And a big thank you to everyone, all of you in the industry too – as I mentioned, so many partners and stakeholders – thank you for your strong support during the critical period when we had to get the project up and running. Really appreciate all of your support.

Since then, SLNG has made tremendous progress.

Today, almost half of our total natural gas used for power generation flows through its terminal.

We have a more diverse gas mix, so we are better able to respond to supply shocks, and we have a more resilient and secure energy system.

Look what happened when global gas markets tightened recently due to the pandemic and the Ukraine war.

EMA and SLNG put in place a standby LNG facility to ensure continued gas supply to all our power generation companies. This, together with other measures, moderated the impact of the energy crisis on consumers in Singapore.

SLNG has also been a key enabler for LNG trading in Singapore.

After all, despite having no oil of our own, Singapore has developed as a major centre for global oil trading.

We saw the same opportunity in LNG.  That was why from the outset, we designed the LNG Terminal as an open-access, multi-user terminal, so that LNG cargoes can be brought in and re-exported from Singapore.

Today, Singapore has plugged into the global gas market. LNG trading has continued to grow steadily, creating many opportunities and jobs for Singaporeans – not just in LNG trading, but also in complementary services such as ship brokerage and other professional services.

All of these achievements are made possible because of the steadfast pursuit of excellence by the committed and dedicated team at SLNG.

You have maintained a strong safety record over the past 10 years.

You have established yourself as a reliable, trusted partner for suppliers and buyers from all over the world, and fulfilled your mandate to ensure uninterrupted gas supply for our own needs. You have done all these and more.

So tonight, let me congratulate everyone at SLNG on 10 years of successful operations!

Future Role for SLNG in Singapore’s Energy Sector
Looking ahead, SLNG will continue to play a critical role in Singapore’s energy sector.

In the short term, we must brace ourselves for continued disruptions in the global energy market. The standby LNG facility operated by SLNG is now a key feature of our energy system. So SLNG will continue to play an important role in guarding against sudden disruptions to our energy supplies.

In the longer-term, we expect natural gas to continue to remain an important part of our energy mix, even as we work to decarbonise our power sector.

We know that the energy transition will not be easy for Singapore.

Unlike many other countries, we do not have scalable options when it comes to renewable energy.

We are looking to import renewable energy from the region. But we clearly cannot import all of our electricity needs.

We are investing in hydrogen. I announced our National Hydrogen Strategy last year, and there is promise in this area.

But hydrogen technology is still nascent. Deploying it on a large scale in Singapore
will require advancements in transportation and hydrogen carrier technologies, which
some have estimated will take more than a decade to mature.

So hydrogen will only be introduced progressively into Singapore’s energy mix, likely
blended with natural gas in gas turbines.

Even after hydrogen technology is mature, there will still be a role for natural gas.  For example, with the right advances in carbon capture technology, natural gas can act as a feedstock for other processes in the energy and chemicals sector, and also provide an energy source for power generation.

Beyond power generation, the use of LNG in the maritime sector is also expected to increase. In particular, as the world’s top bunkering hub, Singapore is well positioned to help the shipping industry meet these needs.  We have already seen more LNG bunkering vessels being delivered to the sector, which will increase demand for SLNG’s ancillary services.

Securing LNG Supplies for the Future
What all this means is that SLNG will continue to be busy for many more years to come. LNG will remain important to Singapore for the foreseeable future. In fact, we will likely need more, not less, natural gas in the medium term, as our economy continues to grow.

We expect demand for LNG to continue to increase in Asia too.

The region is growing, and will need energy that is affordable, reliable and sustainable.

Regional countries are looking to cleaner energy sources so natural gas will be an important transition fuel for the region.

In fact, demand for natural gas is expected to outstrip supply in Asia.

Asia became a net importer of LNG in 2021, and that trend is likely to continue over time.

All of which means the regional and global LNG market will remain tight over the foreseeable future.

Singapore must start planning ahead to secure our own supply of LNG.

One way is to change the way we procure gas as a country.

MTI announced this yesterday, so I will just explain briefly our rationale. All of you in the sector knows that currently, EMA licenses the LNG importers, and leaves each of the power generation companies to procure their own natural gas supplies with these importers commercially.

We have learnt over time that there are several downsides with this arrangement.

Power generation companies may not want to commit to long-term contracts, because they are worried that they will be stuck with costly take-or-pay obligations. Some may say, let’s rely more on spot or short-term gas. This is fine under normal circumstances.  But when gas markets become tight, these companies will face shortages. Indeed that was the situation that many in Europe and other places found themselves in, soon after Russia invaded Ukraine.

On the other hand, some companies may say, I want to do the right thing and commit to long-term contracts.  But global gas prices move up and down.  When prices come down, other companies may undercut the competition by using cheaper, spot gas.  This would not be fair to the companies that were trying to do the responsible thing in the first place.  More importantly, with such dynamics at play, the market left on its own would tend to under-invest in long-term gas contracts.

That’s why, after considering the matter carefully, the Government has decided, as announced by MTI yesterday, that we will centralise the procurement and supply of gas to the power sector.

In other words, rather than leave it to individual companies to decide, we will aggregate the gas demand across all power generation companies, and procure gas at the national level as Singapore Inc.

This will enable us to balance the different considerations for price competitiveness and security of supply.  We will have economies of scale to negotiate more favourable contracting terms; to procure gas from diverse sources and also with different contract durations; and to optimize our natural gas portfolio at the national level.

At the same time, we must also ensure that we have sufficient capacity to meet our growing LNG needs.

Our current LNG terminal has throughput capacity of about 10 million tonnes per annum (mtpa). Our peak utilisation this year was 60%, so we currently still have some headroom.

But this will eventually not be enough as our demand for LNG continues to grow.

Rather than wait for us to run out of capacity, it is better to plan ahead and invest now. This evening, I am pleased to announce that SLNG will develop and build a second LNG terminal for Singapore. It will have up to 5 mtpa to meet Singapore’s energy needs and enhance our energy security.

This is a significant increase in throughput capacity.

With a second terminal, Singapore will be able to meet our power generation needs entirely with LNG, if necessary.

Unlikely we will have to do so anytime soon, since we will continue to have access to piped natural gas.

But having the additional capacity will be helpful; it will give SLNG the flexibility to better meet the growing LNG needs of the shipping industry and the wider region, and advance our position as an LNG bunkering and trading hub.

We are still studying the exact size and the best way to build this terminal.  All of you know that waterfront land comes at a premium in Singapore.  So one possibility is to start with an offshore terminal at Jurong Port. Further studies are being conducted, and more details will be announced in due course.

This second terminal will be another milestone for SLNG and for Singapore. It will bolster Singapore’s energy security, support our economic competitiveness, and help us serve Asia’s energy needs for many more years to come. With this and many other projects, there will be many things to keep SLNG occupied for the next 10 years and beyond.

I wish the team at SLNG all the very best for the next phase.  SLNG and the power and gas sectors are a key part of Singapore’s economy, especially as we accelerate our green energy transition and explore new possibilities together. Let’s continue to strengthen our partnership, and build a better and more secure energy future for Singapore. Happy 10th Anniversary, SLNG! Thank you very much.