Singapore to centralise gas procurement to ensure stable supply

A new entity, Gasco, will lead the procurement of gas supply.

Singapore’s Ministry of Trade and Industry and the Energy Market Authority has revised the country’s procurement framework for the power sector and will implement a centralised procurement system by 2024 to ensure the stability and reliability of the gas supply.

The current framework relies on the individual power generation companies' (gencos) procurement strategies wherein they decide the volume and tenure of gas to procure based on their own needs.

The government said the current framework does not assure that the country will have sufficient gas supply to meet its needs.

“Having a secure and reliable supply of natural gas is existential for us as 95% of our electricity is generated by natural gas,” Minister Gan Kim Yong said at the Singapore International Energy Week.

“As the global gas market conditions are expected to be more volatile in the energy transition, we need to rethink our approach to gas procurement,” he added.

The government will establish Gasco which will oversee the centralisation of the procurement and supply of gas for the power sector.

The entity will collate demand from the gencos. Gasco can also secure additional gas volumes if it sees the demand exceeding the indicated supply needed by gencos.

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“When implemented, this centralised procurement approach will apply to all future gas demand from the power sector, including gas contract renewals. Gencos will be allowed to continue with the existing gas supply contracts they have with their respective gas suppliers,” the MTI and EMA said. 

“Other industrial gas customers can continue to procure gas through licensed gas importers and will not be subject to this central procurement framework,” they added.

The government added that Gasco will have a “stronger negotiating lever” and will be in a better position to negotiate more favourable contracts to optimise needs.

Gasco can also lead in procuring gas from diversified sources to reduce concentration risks and can enter into longer-term gas contracts which can help ensure a more stable supply and price.