Transcript of Speech by Prime Minister Lee Hsien Loong at the Official Opening of the Liquefied Natural Gas Terminal, 25 Feb 2014

Mr Bob Tan

Chairman, Singapore LNG Corporation (SLNG)

Mr John Ng

CEO of SLNG

Distinguished guests, ladies and gentlemen

1.             I am delighted to be here this evening to open our first liquefied natural gas (LNG) terminal.  And I would like to congratulate the Singapore LNG Corporation and Samsung C&T for delivering the Terminal on time, safely and within budget.

Energy Security in Singapore

2.             As a small country without any natural or energy resources, Singapore imports almost all our fuel.  So we are vulnerable – vulnerable to supply risks and fluctuations in prices.  We have worked hard to protect ourselves from these risks, and to strengthen our energy resilience, for example, by managing the demand for energy and also by diversifying our imports.

3.             We have also structured our energy market properly to foster competition and provide better services to businesses and to Singaporeans.  We used to have a vertically integrated electricity supply industry, government-run, within the PUB.  We operated it as efficiently as we could.  But when we corporatised the industry, the power sector, we realised that we needed to do much better.  So we progressively liberalised and restructured the sector – opened up generation and retail markets to commercial players, split off the power grid into a separate company, introduced a wholesale electricity market with spot bidding every 30 minutes, pool and settlement.  The economy and consumers have benefitted from this.  Oil prices today are more than four times what they were in 1995, and yet if you compare electricity prices in Singapore, they are only 40% higher than it used to be.  Without market liberalisation, the tendency would have been just to pass on the extra costs, and consumers and firms would be paying today much higher electricity bills.

4.             This is a good example of how private operators, working in competitive markets, can outperform state-owned, nationalised industries.  “Non-profit” departments or agencies theoretically can deliver cheaper, because they don’t have to collect the profit.  But in practice, they find it very hard to know what their costs are, and where they can be more efficient.  The Government has a role in all these: to structure the industry correctly; to regulate it properly; to make strategic investments beyond the capabilities of the private sector.  Then we can depend on competition and the pursuit of profit by the operators to raise service standards, promote innovation, improve efficiency and benefit consumers.  And this is true not just for the power sector or for the supply of gas, but also for other types of infrastructure and utilities like telecoms and public transport too.

LNG Terminal

5.             One consequence of our liberalising the power sector is that gencos switched from fuel-oil fired steam plants to combined-cycle gas turbine (CCGT) plants, which use natural gas and are more efficient.  So today, more than 90% of our electricity is generated using natural gas.  And besides the gencos, many other industries use natural gas as feedstock.  For example, the petrochemical industries use it to produce hydrogen.  And so the total demand for natural gas has gone up.

6.             Previously, all our natural gas came from Malaysia or Indonesia in the form of piped natural gas.  This source of supply faces some constraints, for example, the uncertainty of supply, especially over the longer term, because demand in Malaysia and Indonesia itself will go up, and they had limited natural gas to sell to us.  So we needed to diversify our sources, to overcome these constraints. 

7.             Hence, we decided to build this LNG terminal.  We can import, with this LNG terminal, much more natural gas from global markets, including from anywhere in the world.  Some of our gas is coming from Trinidad & Tobago, and it is hard to imagine a source further away than that.  And because there are more suppliers vying for our business, we can obtain more competitive prices.  And with more gas available, and new generation capacity entering the market, electricity generation becomes more competitive, which will benefit consumers. 

8.             This LNG Terminal was a strategic move.  We awarded the contract to build, own and operate the Terminal as a commercial project in 2007.  Our timing was fortuitous.  One year later, the global financial crisis struck and it changed the outlook and the projections completely.  The project became too risky for any private operator to carry.  But we believed that it was in Singapore’s strategic interests to proceed, and we decided that the Government would take over, and carry on despite the economic uncertainties.  Fortunately, the economy recovered, and BG – the aggregator – was able to contract almost all of its three million tonnes per annum franchise.  But even if things had not turned out so well, we would still have been satisfied from a strategic perspective with this LNG terminal, because it greatly increases our options and enhances our energy security. 

9.             Even since the project began, we have expanded the Terminal to give ourselves more capacity, more buffer.  We have just completed the third LNG tank, doubling the Terminal’s throughput capacity to six million tonnes a year.  And we will be launching a competitive RFP for the next tranche of LNG imports by June.  This will assure us of competitive supplies of gas from around the world as our demand grows. 

Future of Energy Market

10.        But we are continuing beyond that, to make our energy market and our energy sector more resilient and more flexible.  We are investing in infrastructure; we are exploring new energy options; we are developing manpower to support the growth of the sector. 

Invest in energy infrastructure 

11.        First of all, we are investing in energy infrastructure.  We are preparing for the possibility that our demand for natural gas may one day be met entirely by liquefied natural gas.  Therefore, we are going to build infrastructure ahead of demand.  And by doing so, it will give us a strategic buffer.  It will support the development of ancillary services, like LNG trading, bunkering and vessel cool-down services. 

12.        Therefore, as the Chairman told you just now, we will add a fourth LNG tank to this Terminal.  It will raise the capacity to at least nine million tonnes per year by 2017.  In fact, on this site, the Terminal can accommodate seven storage tanks with the capacity of 15 million tonnes per year.  But that is the limit, because of land constraints. 

13.        Therefore, we will build a second LNG Terminal.  We are studying a few potential sites in eastern Singapore.  This will enhance our energy security, because it will geographically diversify our LNG import infrastructure.  And by having the second terminal in the east, it will also support new industrial sites and power plantings.  MTI will work out and announce the details in due course. 

Explore new energy options

14.        Secondly, we will continue to explore new energy options, for example, solar energy, which is renewable, clean, and reduces our reliance on imported fuels.  We don’t import sunshine; it arrives for free.  The solar technology has seen significant progress in recent years.  We want to learn more about solar, so that when it becomes cheaper and more competitive, we will be ready to deploy it on a large scale.  Therefore, we are supporting pilot projects, including in HDB estates such as Treelodge@Punggol, which are experimenting with solar panels on the rooftops, generating useful amounts of electricity.  We are investing in R&D in solar cell technology to lower costs and improve yield, performance.  We are reviewing our regulations and upgrading our infrastructure to cope with the intermittent nature of solar energy.  And besides solar energy, we remain open to all other energy options as they become commercially and technically viable for Singapore. 

Develop manpower to support growth of energy sector 

15.        Thirdly, we will develop manpower resources and create good jobs in the energy sector.  We need capable workers to support the growth of the energy sector.  This sector is going to offer many exciting opportunities for jobs, for example, the power sector, clean and smart energy technologies, energy trading and financing. 

16.        Singapore LNG is a good example of the jobs and employment opportunities in this industry.  Eighty percent of its workers are Singaporeans.  It sponsors its employees for further studies to develop their skills and qualifications.  And starting this year, SLNG will also sponsor scholarships for ITE and Polytechnic students to increase the pool of talent in Singapore. 

Conclusion 

17.        So it is with some I think, justified satisfaction that we are marking the completion of our LNG terminal today.  It is a milestone in Singapore’s energy journey.  It enables us to access diverse and competitive sources worldwide.  It enhances our energy security and resilience.  It supports our economy and our daily lives, and therefore will help us to create a brighter future for all Singaporeans.

Thank you and congratulations once again.