Special Report
Q&A – Singapore Energy Trading Hub.

8 July, 2015

 

The newly formed Asian Infrastructure Investment Bank (AIIB) has called for infrastructure development in the region, including the development of oil and gas pipelines.  The International Energy Agency has also has recognised the Trans-ASEAN Gas Pipeline project as an opportunity for Singapore to combine the project with its efforts to establish an LNG trading hub. We spoke with Probin Dass, Partner at Shook Lin & Bok, on what these developments mean for Singapore, and here is what he had to say.

 

Can you highlight some of the key advantages for Singapore as an LNG hub?

 

Singapore is already an established oil trading hub. Therefore, energy traders and the people and companies who support these traders such as banks and price reporting agencies are already based here. Given its geographical location Singapore is a natural hub for the region and, in fact, is central to most of the existing LNG trade routes. The government’s strong backing for Singapore to become an energy hub is another key advantage. Singapore already has a well developed transport and port infrastructure including LNG-specific facilities.

 

Singapore has indicated it is working with the Singapore Exchange (SGX) and other stakeholders to develop an LNG price marker. What are some of the significant challenges that need to be overcome before the vision can be achieved?

 

Developing an LNG price marker is not particularly difficult. The real challenge to making it successful lies in getting widespread acceptance of the reference. In particular, the Chinese must be on board before the price marker can take off as an internationally recognised reference.

 

Clean Energy Industry

 

China’s “One Belt, One Road” initiative has gained significant momentum with the unveiling of the “Vision and Actions Outlined on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”. This has placed a strong emphasis on orienting the Maritime Silk Road towards ASEAN. It is recommended that ASEAN countries work together “in the exploration and development of hydropower, nuclear power, wind power, solar power and other clean, renewable energy sources”.  Given its distinct competitive advantage as the premier clean energy hub for the region, Singapore is strategically positioned to play a strong role in helping the clean energy industry capitalize on this continued growth in the Asia Pacific region under the Initiative.

 

What advantages does Singapore have over its neighbours as the clean energy hub for the region?

 

Singapore has a clear policy to encourage the development of clean energy. As early as 2007, clean technology was identified as a key economic growth area and it is expected that the sector will contribute over SGD 3bn to GDP this year. In addition, the sector provides approximately 18,000 jobs. Singapore is now home to major solar and wind technology companies. Such companies are driving innovation and are supported by Singapore’s traditional strengths in the manufacturing sector such as electronics, precision engineering and chemicals. Additionally, with a well developed telecoms and transport infrastructure, and well-developed laws to protect intellectual property, clean energy enterprises and research ventures can flourish in Singapore.

 

What challenges does Singapore face if it wants to remain the clean energy hub in the region?

 

The economic benefits of being the clean energy hub are clear and there will always be competition for Singapore. To maintain its lead, Singapore must embrace on a much larger scale the utilisation of clean energy technology. Apart from the obvious environmental benefits, this will burnish Singapore’s reputation as a clean energy hub. Perhaps the greatest challenge is that Singapore’s economy is heavily reliant on industries based on more traditional energy sources and this is not likely to change in the near future.

 

 

For further information, please contact:

 

Probin Dass, Partner, Shook Lin & Bok

[email protected]