Singapores Energy Diplomacy - Essay Example

Singapore’s Energy Diplomacy: An outline I. Introduction: As Singapore is a country which is devoid of any natural energy resources, the County’s energy policy is an interesting subject matter to be studied. The project discusses the steps that the government has adapted in the different energy sectors to combat the energy crisis thereby simultaneously managing the economy of the nation. Research question: How have the energy diplomacy policies adopted by the Singapore government in the different energy sectors, been implemented successfully? II. Energy Diplomacy in Electrical energy Industry: A. The electrical energy industry was liberalized in the year 1995 to encourage competition. B. Liberalization was done to make the market more efficient. C. This policy was adapted with a deliberate intention as the government realized that the only way of securing the energy sources was to encourage more producers to enter the market. III. Energy Diplomacy in Oil Industry: A. Singapore is the leading oil trading center in Asia thus enjoys dominance in this sector of energy industry. B. The strategic location of the country also helped a lot in its way of becoming the number one oil trader in Asia. C. If the country makes improvement in the refining segment of the petroleum oil industry its control over the overall energy resource will increase so that it can push the price parameter down for the well being of the economy. D. The country is partially efficient as far as this energy industry is concerned. IV. Energy Diplomacy in Gas Industry: A. The Singapore government also liberalized the gas industry like the electricity industry. B. The government is seeking for an importation of LNG, which would give some support as alternative gas resource. C. This move is also very efficient, as it would pull down the current market price of natural gas. D. Singapore will also enjoy trading opportunities after installing the LNG, which will make them match their energy policy with countries like United Kingdom and Japan. V. Energy Diplomacy in the Coal Industry: A. The actual price of coal in the market is measured by the relative prices of oil and natural gas. B. The market demand of Coal in the country only rises when the price of oil and natural gas goes up drastically. C. A level of efficiency is maintained as coal has a constant demand in the industries like iron and steel. D. But when compared to electricity and gas energy industries, the coal industry is not fully efficient and liberalized. VI. Energy Diplomacy in Nuclear Power and other alternative energy Industries: A. Singapore examined the possibility of using nuclear power as early as 1970, which was three years before the actual fuel crisis that threatened the global economy. B. The solar power energy market is not efficient enough but estimations are given that by 2010 the price of solar power will become half. C. As far as wind energy is concerned the possibility of production is also negligible as the average wind speed is below the required figure in Singapore. D. Energy Market Authority of Singapore adapted certain policies so that the market is accessible for any new technology especially related to renewable energy resources. VII. Conclusion: A. The study of the energy diplomacy policies of the country shows that the market is well diversified and liberalized. B. The government has made necessary adjustments so that the price of energy does not affect the economy in a huge way. C. This ensures constant growth of the energy market and also the marker remains efficient. Singapore’s Energy Diplomacy [Name] [Course] [Professor’s name] [Date] Contents Topic page no. I. Introduction ……………………………………………………………….6 II. Energy Diplomacy in Electrical energy Industry………………………..7 II. Energy Diplomacy in Oil Industry………………………………………..9 III. Energy Diplomacy in Gas Industry……………………………………….10 V. Energy Diplomacy in the Coal Industry…………………………………..11 VI. Energy Diplomacy in Nuclear Power and other alternative energy Industries………………………………………..12 VII.Conclusion………………………………………………………………………14 Introduction Being an economy with almost no natural resources, the country Singapore is more exposed to the threat of rising energy cost1. This threat actually affects the national economy in a huge way. For that reason it is very crucial for the country to take necessary steps so that the energy efficiency is increased. In the month of October, 2002, at the Energy Forum, the Deputy Minister of Trade, Industry and Foreign Affairs of Singapore, Mr. Raymond Lim mentioned that the country would be projecting a three-phase response to combat the energy challenges2. The first step, which was proposed by the deputy minister, stated that the industry base of the country should be strengthened by the up gradation and improvement of the oil-refining sector of the country3. The first statement also focused on the development of the supporting functions for these oil refineries. The supporting components include promotion of e-business, proper supply-chain and logistic management, a development in the field of information science and promotion of international oil trading.4 In his second recommendation the deputy minister stressed on the fact that for a country like Singapore, fighting against the energy crisis is important to develop a hub for alternative energy sources5. The high-end alternative energy plans, which Mr. Lim proposed, were fuel cell technology and hydrogen economy. These technologies include test-bedding, manufacturing of the system for producing fuel cells and eventually marketing these products6. The third and the final proposition focused on the liberalization and the improvement of energy efficiency of the country and also optimizing the usage of the un-renewable energy sources7. Since these propositions were made in 2002, Singapore has taken active steps and various measures of liberalization in the energy market. These steps taken by the government has improved the energy efficiency of Singapore in the recent year. The basic research question addressed in this report may be stated as - How have the energy diplomacy policies adopted by the Singapore government in the different energy sectors, been implemented successfully? The report will investigate the necessary steps and actions adapted by the country in order to attain maximum energy security. Energy Diplomacy in Electrical energy Industry: The first step, which was taken towards active liberalization, was way back in the year 19958. At that point of time Singapore Power was the vertically integrated monopoly, which incorporated all the activities like electricity generation, the transport of electricity and gas and also retailing of the final product9. The Public Utility Board of Singapore acted as the regulatory body of the energy resources like electricity and natural gas. Now, to break down this monopoly of Singapore Power another power generation firm was set up10. At that time the government opened the market for some independent power producers and some co-electricity generators. There were no restrictions on the number of entrants. Till then the competition was not even, which means that the electricity industry of the country achieved liberalization, but the new entrants were no matches due to the range of services provided by Singapore Power11. As already mentioned the vertically integrated company (Singapore Power) provided all the kind of services in electrical and gas industry, starting from electric generation and retailing. In the year 2000 the Singapore government took further initiative to make the electrical energy market more competitive12. The most important step that the government took was to separate the monopolistic business operations from the core competitive businesses13. This means that the components like electricity and gas transport were retained with Singapore Power, while the other parts of the industry like generation of electricity and retailing, were made more competitive14. This was done deliberately, as the Singapore government realized that the only way of securing the energy sources was to encourage more producers to enter the market. In this way the government tried to maintain the security and stability of the electrical energy source. In 2001 further progress was made in the path of liberalization of the electrical energy as the Energy Market Authority of Singapore was formed to regulate the electricity and the gas industry15 .The complete restructuring of the electrical industry was done in the year 2003, but the gas sector was still on progress at that time. But at that time there was another significant change in the industry as the natural gas entered the market16 .The entry of natural gas had pulled the cost down for electricity as the generation of natural gas involves more efficient technology called the Combined Cycle Gas Turbines (CCGT). When this natural gas became available the market became more efficient as the competition grew. The efficiency of the Singapore electrical market was tested when in 2005 the global price got approximately doubled, but the electricity price in the country remained same as 200117. This proved the level of efficiency the government has achieved through its process of liberalization and presently almost about eighty percent of the electricity demand of Singapore is produced from natural gas. Since the restructuring of the electrical energy market there are new electricity generation and retailing companies while Singapore Power showed its presence in the segments like electrical transmission and gas transportation18. Energy Diplomacy in Oil Industry: As far the energy resource of petroleum oil is concerned Singapore is the leading oil trading center in Asia19 Though the country has eventually lost is dominance as the leading refining center when China, India, Malaysia, Thailand and South Korea eventually entered the market during the 1990s and the early part of 2000, its dominance in the trading department grew year after year. The strategic location of the country also helped a lot in its way of becoming the number one oil trader in Asia. The history of oil trading in Singapore traces back to more than hundred years. Previously logistics of supplying the petroleum oil was the type of trading that Singapore engaged in20. The activities at that time were confined to just banking of fuel on the ships and storing oils. Singapore till now enjoys dominance both in the export and the import department21. But the threat of losing the throne always remained as Hong Kong tried to capture the oil trading market. Singapore eventually though came out to be the winner as, unlike Hong Kong, the former was more Asia-centric and showed a tendency of integrating with the global economy at a faster pace 22 .The county’s connection with the western part of the globe made it the market leader in the trading segment of petroleum. Singapore’s currently focuses on improving its status of the oil refiner to attain maximum efficiency level, as far as the oil industry is concerned. If the country makes improvement in the refining segment its control over the overall energy resource will increase so that it can push the price parameter down for the well being of the economy.23 Thus it can be said that the petroleum oil industry of the country is partially efficient though the government is taking some serious steps, regaining back the dominance it enjoyed in the oil-refining segment. This can be regarded as a great achievement for a country that has no energy resources at their disposal. Energy Diplomacy in Gas Industry: After the electricity industry we will now focus on the efficiency achieved by the country as far as the gas industry is concerned. The Singapore government also liberalized the gas industry like the electricity industry. PowerGas enjoyed a monopoly in the natural gas market for a long time, but it was separated from the competitive part so that fair competition in the market remained24 Though PowerGas enjoys its monopoly in the natural gas transportation network, the Energy Market Authority regulates the price to maintain the efficiency in the market. The market structure is not complete like the electricity industry, but is well designed so that balance of power is maintained. SembCorp Gas is given the responsibility of imports, transports and final retailing of natural gas.25 This company then transfers its onshore natural gas pipeline to the other company PowerGas and exits from the gas transportation business. By this process the government of Singapore tried to establish an efficient industry and to check the price of the energy. Apart from the natural gas, City Gas produced and supplied gas for domestic consumers and they also faced competition from the liquid petroleum gas (LPG) segment of the industry26. But the problem still remains with the natural gas market. The demand for electricity is increasing and Singapore needs to import more natural gas27. The present contract would expire in 2020 and for that reason the government is seeking for an importation of LNG, which would give some support as alternative gas resource28. This move is also very efficient, as it would pull down the current market price of natural gas. With the installation of LNG, Singapore will also enjoy trading opportunities, which will make them match their energy policy with countries like United Kingdom and Japan who also are focusing on diversifying energy sources to attain maximum efficiency.29 Energy Diplomacy in the Coal Industry: The next energy industry that we will be discussing is the coal industry. Unlike oil and gas as discussed above, coal is much cheaper but it has varied number of usages, which actually creates the demand for this energy source. In the year 2005 Singapore’s total energy supply were about 27,314 ktoe among which oil constituted eighty one percent while the rest nineteen percent was occupied by natural gas30.The actual price of coal in the market is measured by the relative prices of oil and natural gas31 The demand for coal only rises when the price of oil and natural gas goes up drastically. In the market of Singapore a level of efficiency is maintained as coal has a constant demand in the industries like iron and steel32. With increase in China’s recent demand the price of coal has been on its upward side and also relating technologies for the exploitation of clean coal are far advanced. For that matter as Singapore has concentrated mainly in the oil and the gas economy, its efficiency in the coal industry is yet to arrive. Over and above, from the figures published by the ASEM Ministerial conference, it is clear that the country is not focusing on making the coal market more efficient and bringing down the costs. Energy Diplomacy in Nuclear Power and other alternative energy Industries: As far as the nuclear power is concerned there are certain issues relating to the safety and security of the energy resource of the country33 As already mentioned earlier, Singapore, being a nation without any natural resources, the country always were among the first to seek alternative energy sources. Singapore examined the possibility of using nuclear power as early as 1970, which was three years before the actual fuel crisis the world faced34. There are other aspects hindering the growth of nuclear power generation of the country. The high cost of water disposal along with the high price of uranium is restraining the government from full-fledged production.35 Also for other alternative energy source like solar power the current cost is much higher when compared to electricity. This market is also yet not efficient enough but estimations are given that by 2010 the price of solar power will become half36. When the wind energy is concerned, the possibility of production is also negligible as the average wind speed is below the required figure in Singapore37. But there is a constant effort on the part of Energy Market Authority so that the market is accessible for any new technology especially related to renewable energy resources. The policy by Energy Market Authority is very unique in the sense that it has made the market competitive for any kind of energy sources and simultaneously has the left the decision in the hand of the market. That means it will be the consumers of energy in Singapore who will decide the most efficient energy sources among all the possible options 38. The authority has tried to make most of the energy industry competitive in nature and simultaneous liberalization from the government has made it possible to attain the efficiency level which Singapore’s energy market is now enjoying. The Energy Market authority does not allow entrance of any new technology in the energy market39 .The new entrants must show some economic ground and viability for generating energy at a lesser cost than the existing facilities. Their production range might not be huge, but the new entrants should be competitive enough in they market they want to operate. This attempt actually ensures that the market remains at an equilibrium and no single energy producer dominates the market individually. In this way the government of Singapore aims to attain complete market efficiency in the energy sector and also invites regular investments in this competitive market. This attempt from the government is evident from the entrance of new generation companies like Keppel Merlimau Cogen Pre Ltd and Island Power Company Pre Ltd40. Conclusion: From the entire report we can see that the market driven energy industry of Singapore has definitely shown its strengths as it successfully injected the right kind of behavior among the market participants. The country also successfully sourced cost effective technologies thereby attaining a great deal of market efficiency. The study also reveals how Singapore has intelligently shifted its energy base from petroleum fuel to natural gas by acquiring access to the gas fields in the neighboring countries. Thus it may be safely said that the issue about successful implementation of efficient energy market by Singapore government, holds true. The country has progressed to a massive extent and currently is operating in a more cost efficient manner than many countries that have an abundance of energy resources at its disposal. References 1. “ASEM Ministerial Conference on Energy Security”. 18th June 2009. website: < http://ec.europa.eu/external_relations/energy/events/asem_energy_2009/docs/singapore_en.pdf> (accessed on October 2nd, 2009). 2. “Asian Regional Forum Seminar On Energy Security”. October 2006. website:< http://www.aseanregionalforum.org/LinkClick.aspx?fileticket=7xkQsxYQzUI%3D&tabid=66&mid=940> (accessed on October 2nd, 2009). 3. “Energy Efficiency in Singapore”. 2009. E2 Singapore.com. website :< http://www.e2singapore.gov.sg/> (accessed on October 2nd, 2009). 4. “Singapore Energy Conference 2006: Summery report. 2006. Institute of Southeast Asian Studies, Singapore 5. Barton B. 2004. Energy security: managing risk in a dynamic legal and regulatory environment: Oxford University Press, UK 6. Hean KC. 2007. 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