SINGAPORE, Oct 23 — Singapore will be introducing changes to the gas procurement framework for its power sector, according to the republic’s Ministry of Trade and Industry (MTI) and the Energy Market Authority (EMA) today.
MTI and EMA said they have also reviewed the current gas procurement framework to ensure that Singapore has sufficient gas from diverse sources for its power generation needs and create a more stable and secure power system.
“Having secure and reliable national gas supplies is essential for Singapore as 95 per cent of Singapore’s electricity is currently generated using natural gas,” said MTI and EMA in a joint statement today.
Currently, power generation companies individually decide on the volume and tenure of gas to procure based on their own commercial considerations.
Developments in recent years have shown that the current gas procurement framework does not provide assurance that the republic will always have enough gas to meet its needs, especially during a crisis when market conditions are volatile.
“When each genco seeks to optimise for itself, it can inadvertently lead to suboptimal system-level outcomes,” they said.
Citing an example, MTI and EMA said during the 2021/2022 global energy crisis, the power generation companies reduced the volume of their gas contracts when gas prices were high, which led to large swings in wholesale electricity prices.
“Power generation companies have also been reluctant to enter into long-term gas contracts which typically offer a greater certainty of delivery and price stability.
“This is because power generation companies do not want to be exposed to gas market volatility and uncertainties in the long term,” they said.
In addition, global developments and the energy transition are likely to lead to more volatile oil and gas markets, which may further reduce the risk appetites of generation companies.
Given the global gas market conditions and Singapore’s relatively small demand, MTI and EMA have therefore assessed that a more deliberate and coordinated approach to gas procurement is needed.
As such, MTI and EMA will establish an entity (Gasco) that will centralise the procurement and supply of gas for the power sector by aggregating gas demand from the power generation companies.
“Should the overall electricity demand exceeds those indicated by the power generation companies, the Gasco will procure the additional gas volumes that are needed.
“When implemented, this centralised procurement approach will apply to all future gas demand from the power sector, including gas contract renewals,” the statement said.
According to them, power generation companies will be allowed to continue with the existing gas supply contracts they have with their respective gas suppliers.
Other industrial gas customers can continue to procure gas through licensed gas importers and will not be subject to this central procurement framework, they said.
EMA intends to set up Gasco in 2024 and will consult the industry on the details of the centralised gas procurement framework in the coming months.
— Bernama
