Luke Pachymuthu, Singapore – Indonesia will continue supplying natural gas to Singapore from South Sumatra when an existing sales agreement expires in 2023, the country's energy minister told The Straits Times on Tuesday.
Mr Arifin Tasrif, who helms Indonesia's Ministry of Energy and Mineral Resources, said a decision had been concluded and that the new supply agreement will be for a period of "five years".
When asked when the decision, along with other details, will be announced, he said: "Well, they are going to sign for the formality, so you are going to have to wait... within this week."
Singapore depends on imported gas for about 95 per cent of its electricity needs and is vulnerable to any shifts globally in supply-demand fundamentals.
ST understands from industry sources and analysts that the gas supply agreement that is due to expire in 2023 involves Singapore firm Gas Supply Pte Ltd (GSPL). According to its website, GSPL was set up in 2000 as a subsidiary of PowerGas to import natural gas into Singapore.
The GSPL website said the company had signed a gas sales agreement with Indonesian state oil firm Pertamina in February 2001 for the supply of 2.27 trillion standard cubic ft (TCF) of natural gas from South Sumatra. It also noted that the supply agreement, which was valued at US$9 billion (S$12.8 billion), took effect in 2003 and was contracted to run for 20 years.
When contacted by ST in September, the Energy Market Authority (EMA) said: "We are not able to comment on the specifics of gas supply agreements as these are commercially sensitive."
The GSPL website lists Mr Alan Heng as its chief executive officer, a position he has held since 2011. Mr Heng, an energy market veteran who was previously with US energy giant ExxonMobil, was recently appointed by Temasek-backed Pavilion Energy as its group CEO.
Pavilion Energy declined to comment on the deal, but noted in an e-mail response to ST in September: "Pavilion Energy collaborates with GSPL in the Singapore market to provide gas buyers with access to both piped natural gas and liquefied natural gas (LNG) for supply and optimisation of their gas portfolios. Alan, our group CEO, is also the CEO of GSPL, a position he has held since April 2011."
Analysts said being able to secure long-term supplies provides the Republic with much-needed medium-term runway of stability at a time of heightened volatility and swelling geopolitical tensions as a result of the Russia-Ukraine war that has hit global energy markets severely.
Mr Prateek Pandey, Rystad Energy's vice-president of exploration and production research for South-east Asia, said: "The extension of piped gas imports not only reduces the burden of expensive spot LNG in the near term, but it also gives Singapore some breathing room to accelerate development plans to increase the share of renewables in the power mix."
He added that LNG's market share as part of the country's primary power generation feedstock fuel will inevitably expand over the longer term, particularly since the Indonesian gas fields supplying Singapore have been in decline.
Mr Pandey said natural gas imports from South Sumatra make up around 40 per cent of total pipeline supply flowing from Indonesia to Singapore.
Singapore's Sembcorp Industries also buys gas from Indonesia. The listed entity has a purchase agreement to import natural gas from West Natuna. The contract expires in 2028, the company had said earlier in 2022. EMA notes on its website that Singapore also imports gas from Malaysia.