SIEW 2014: Regional Integration will Increase Asian Energy Security

An exclusive interview in China Energy News with Liu Qiang, Secretary-General of the 2014 Global Forum on Energy Security, and Jonathan Goh, Director of External Relations for the Singapore Energy Market Authority

■ Reported by Tong Xiaobo and Yu Huan

REGIONAL INTEGRATION WILL BE A MAJOR TREND IN THE FUTURE

China Energy News: Both the Global Forum on Energy Security held in Beijing and the seventh Singapore International Energy Week (SIEW) to be held in Singapore in October focus on discussing energy security and connectivity. Does it seem that regional integration has become a major trend in the global energy industry development?

Liu Qiang: The Global Forum on Energy Security is currently conducted in a closed-door fashion, but we hope to contribute more to the energy security of China and the world in the future. Currently, the forum enables us to have in-depth discussions on various issues without representing the viewpoints of the government, then we communicate what has been discussed to the relevant departments in our countries before implementing policy. Three years on, the Global Forum on Energy Security has gained more and more influence and is playing an increasingly significant role, beyond just issuing reports.

Regional integration will be a major trend in the future, so Asia should also move in this direction. In the main report of the last forum, a proposal was raised to build four common markets for regional energy – for Southeast Asia, Northeast Asia, Central Asia and North Pacific.

Jonathan: I just attended the ASEAN Senior Officials Meeting on Energy in Laos. In the meeting, we discussed how to create more opportunities amongst Southeast Asian nations to establish an interlinked network of electricity and natural gas pipelines. At the Global Forum on Energy Security, we discussed how Asian nations can work together to address energy challenges. What resonated with me most was the spirit of cooperation, which is also the topic of the Singapore International Energy Week (SIEW) of this year – Building Energy Connections. At present, shale gas, shale oil, renewable energy and nuclear energy are all facing a number of challenges, so we shall work together in sharing experiences and continually building and strengthening relationships.

China Energy News: Compared with Europe and other regional markets, it seems that there are more historical obstacles, as well as conflicts of interest, which would get in the way of building a regional market within Asia. Can we handle these difficulties?

Liu Qiang: In Europe, market integration was not the original state of affairs; but only evolved after several wars, which were mainly triggered by energy security. The situation is also the same in Asia. Currently, there is some tension arising amongst Asian countries, especially around the South China Sea territorial disputes. But the focus here is energy security, and conflict will probably not develop around this issue. Once common interests are established, nothing is irreconcilable.

THE PRICING RIGHT MUST COME FROM AN ACTIVE MARKET

China Energy News: As the centre of global energy consumption shifts eastward, and with Asia Pacific energy demand rising; the Asian energy consumption premium has also come to the forefront. So what solutions do Asia-Pacific countries have?

Liu Qiang: The Asian premium arose because of conditions in Asia itself. The ability to set prices comes from having a very active market. Although the region has an exchange in Singapore, and refers to the price set by Dubai; there are still insufficient transactions, participation, purchases and information exchange. Take China for example; there are only three major state-owned oil companies participating in the international market, and they typically act like a conglomerate in making joint purchases. Moreover, they always place single large orders which do not take into account market conditions, so they are very likely to pay high prices.

As and when the markets in Hong Kong, Shenzhen or Singapore become sufficiently active and open to all buyers and sellers with sufficient information and interaction, the price will reach a natural equilibrium.

SINGAPORE’S STATUS AS AN ENERGY TRADING CENTRE IS MARKET-DRIVEN

China Energy News: Singapore is currently one of the top three oil trading centres in the world and the most important oil trading centre in Asia. What has made Singapore become so successful?

Jonathan: Singapore has become an oil trading centre due to industry conditions. Although Singapore produces neither oil nor gas, there are many favourable factors encouraging energy trade in Singapore. The Singapore Government does its best to facilitate trade for both buyers and sellers, while leaving sufficient freedom to the market. Therefore, many energy companies have chosen Singapore to set up their offices. For example, Shell has recently relocated (the headquarters of its integrated gas business) to Singapore from London; and British Gas Group (BG) has also moved key personnel to Singapore, as they believe that Singapore offers them more opportunities.

China Energy News: Singapore is committed to being a liquefied natural gas (LNG) trading centre. How is progress?

Jonathan: Last year, Singapore’s first domestic LNG-receiving terminal commenced operation. It is an open-access LNG terminal. It currently has an annual output of 3.5 million tons. The LNG terminal’s maximum capacity is 15 million tons per annum, and a second terminal will probably be built elsewhere in Singapore. Singapore’s primary objective in building LNG terminals is to satisfy its own needs. And only when their capacity exceeds Singapore’s own energy needs, will we then provide some ancillary services. The process is still market-driven. Singapore has a strong futures market as well as a commodity market, so we are now examining the appropriate trade policies and regulations for LNG trading in the future.

SINGAPORE DEVELOPS LONG-TERM ENERGY POLICIES

China Energy News: As you just said, since Singapore produces neither oil nor gas, how do you solve the problem of energy security?

Jonathan: 90% of Singapore’s power supply comes from natural gas, and 10% from coal, diesel and other fossil fuels. But 10 years ago, 90% came from oil, and only 5% from natural gas. As early as a decade ago, when Singapore just liberalised its electricity market, our power generation companies started seeking more economical ways to generate power, and turned to natural gas. If Singapore did not do so, electricity prices may have peaked by now as a result of high oil prices. Power generation with natural gas requires a long-term and stable supply. Currently, our natural gas is imported from Malaysia and Indonesia.

At present, the only renewable energy available for Singapore is solar energy. But the frequent rainfall in Singapore affects the stability of photovoltaic power generation and hence impact supply to the grid, so further study is needed on energy storage. Singapore has about 350 MW of PV installed capacity, which is expected to increase to 600 MW in the future.

Meanwhile, we have also conducted pre-feasibility studies on nuclear energy, but results show that now is not the best time to develop nuclear energy. Nuclear safety comes first for Singapore. When nuclear technology is safer to develop and use in the future, we may then consider nuclear power generation.

China Energy News: How does Singapore balance domestic economic development, energy conservation, environmental protection and public opinion?

Jonathan: Singapore takes several factors into consideration in developing energy policies. First, long-term planning. For example, in fact, the LNG terminal which commenced operation last year was first discussed some years ago. Second, Singapore has historically been a price-taker, so we will have to take into account the impact that changes in the global energy situation will have on Singapore. In the decision-making process, we will have open consultations with industry experts and all stakeholders. The LNG terminal is a good example; the Singapore Government communicated our plans to the public. Why is the project so important for Singapore? What role can the people of Singapore play in the process?

China Energy News: If one day, the Strait of Malacca is no longer as important as it is today due to the opening of the Northern Sea Route and other factors, how will Singapore maintain its economic vitality?

Jonathan: We cannot move Singapore to other places, so we will make full use of its existing external conditions. Since the British discovered Singapore in 1819, we have always depended on trade via the Strait of Malacca. If the Strait of Malacca is no longer as important as it is today, we can also utilise other strengths of Singapore. For example, Singapore continues to be a major aviation hub in the region; we can also develop industries that are more advanced than those of neighbouring countries.

THE REGIONAL “WIN-WIN” SITUATION SHOULD BE INCLUDED IN CHINA'S LONG-TERM ENERGY STRATEGIES

China Energy News: Now China is deepening its energy market reform. What expectations or suggestions do you have?

Jonathan: China has vast territory and abundant resources, and has seen rapid industrial development in recent years. I attend meetings in Beijing every year, but the topics vary in each discussion. The decisions currently made by China on energy will have regional or even global impact. Therefore, it would be in China’s interests to take into account the views of its neighbours and surrounding countries when making long-term strategic decisions. It is important for China to explain its policies to other countries, so as to seek common progress and prosperity of the region. In my opinion, it should not be a zero-sum game; but rather a “win-win” situation for all.

The third Global Forum on Energy Security was held in Beijing on June 16 and 17 with a view to promoting academic exchanges on energy security amongst global think tanks, and broadening awareness of sustainable development. It set out to serve as a communication platform to promote global energy cooperation and policy coordination, and to improve global energy security.

By : China Energy News