CNA Points out: How the Russia-Ukraine war drove up LNG price ranges and what this suggests for Singapore

How will Singapore be influenced?

In accordance to EMA, Singapore presently relies on organic gas to make 95 per cent of its electricity.

Traditionally, most of Singapore’s organic gasoline source has been piped in from Indonesia and Malaysia. Having said that, LNG started to play a greater position in power era from 2013 when Singapore’s LNG terminal commenced functions.

The charge of LNG can consequently have an affect on the value of energy here.

“By natural means, power pricing trickles down. As this kind of, nations will have to contend with soaring price ranges to assist the expense of generation fuels,” stated Mr Copson.

On the other hand, electrical energy rates in Singapore ought to be considerably shielded from volatility in LNG costs for the reason that of the nature of the country’s contracts for gas, mentioned Mr Siow.

“Usually, Singapore gasoline demand is fulfilled via extensive-expression contracts, whether it really is pipe gasoline or LNG,” he stated.

“If we examine this to Europe, I would say Singapore electric power price ranges ought to be relatively insulated from the risky spikes in place LNG selling price.”

Various electricity producers may have various LNG or fuel obtaining tactics, on the other hand, which may well open them up to much more spot exposure.

“Place LNG publicity is quite costly at the instant,” Mr Siow observed.

“Even if the energy producer is not uncovered to spot LNG, there is a normal rise in contracted LNG (and) gasoline prices due to the in general climbing commodity charges, For illustration, Brent oil has risen previously mentioned US$100 (per barrel) this yr,” he additional.

“This would translate to larger gasoline (and) LNG charges as perfectly, as very long-time period deal charges (are) usually oil-joined. When fuel selling prices (are) better, Singapore’s electric power price tag will go up as it is almost fully produced by fuel (and) LNG.”

Ms Asti shared the very same see and highlighted other circumstances beneath which turning to the place sector could be essential.

“The majority of (the) gasoline source to Singapore is underneath long-time period deal, either by way of pipeline imports or LNG. This should aid shelter the Singapore marketplace from superior spot LNG charges,” she reported.

“Even so, there may possibly be a need to have to purchase the better-priced place LNG if fuel demand from customers raises further than contracted provide or if there are disruptions in pipeline supply from possibly Indonesia or Malaysia. We saw this come about previously in Q4 2021.”

Outside of electric power charges, the industrial sector will also be strike by soaring LNG costs, as will any enterprise that uses gas or LNG, Mr Siow claimed.

“Petchems as nicely, though its percentage in Singapore’s gas sectoral intake is very very low,” he additional.

Impacted businesses may perhaps check out to go the additional prices to their end people, which will insert to inflationary pressure, Ms Asti said.

She included that, going forward, Singapore will have to regulate its exposure to prices as LNG demand will increase. 

“Commodity value shocks have took place in the previous, but Singapore’s LNG demand … only commenced in 2013 with its first LNG imports,” she said.

“By 2030, we expect 90 for each cent of Singapore’s gas demand will be achieved by LNG, so it will will need to take care of that expanding publicity to LNG charges.”