Minister for Trade and Industry Gan Kim Yong announced a fundamental shift in the national gas procurement strategy at the Singapore International Energy Week on Monday, when he said that the Government would be centralising the procurement and supply of gas for the power sector, under a central gas company, by aggregating demand from generation companies, or gencos. The objective is to create a more stable and secure power system in a situation where, since Singapore is expected to rely on natural gas for more than half of its power generation needs by 2035, further steps need to be taken to ensure that supply remains sufficient, reliable and competitively priced, according to the Energy Market Authority (EMA).

The problem is that, currently, gencos decide individually on the volume and tenure of gas to procure based on commercial considerations, a position that does not provide the overall assurance that Singapore will have enough gas to meet its needs, especially during a crisis marked by volatile market conditions. It is easy to understand, from a purely economic point of view, the reluctance of many gencos to enter into long-term contracts, which typically offer greater certainty of delivery and price stability, because they do not want to be exposed to market volatility and uncertainties in the long term. However, because nations and consumers exist in the long term, a central gas company would help to mitigate the effects of short-term commercial decisions on Singapore’s energy security, which is a national good.