Competition in the electricity market has motivated generation companies to seek more efficient ways of generating electricity, such as using natural gas. Today, about 80% of Singapore's electricity demand is generated from natural gas. As gas becomes a competitive and major source of fuel for power generation, the gas industry is being positioned as a competitive industry to support competition in the electricity market.
The Piped Gas Industry
Currently, the gas system in Singapore consists of two wholly separate gas networks, the town gas network and the natural gas network. The town gas network, owned and operated by PowerGas Ltd, serves about 50% of the households in Singapore. Town gas is used mainly for cooking and water heating by domestic and commercial customers, and some industrial users. It is produced and retailed by City Gas Pte Ltd.
Three main pipelines serve the natural gas system in Singapore. A pipeline in the northern part of the main island provides 150 million standard cubic feet per day of natural gas from Malaysia. The gas from Malaysia is imported by Senoko Power Ltd for its own electricity generation. Another import pipeline supplies 325 million standard cubic feet per day of natural gas from Indonesia's West Natuna gas fields to other generation companies and industrial users on Jurong Island and in the Tuas and Jurong Industrial areas. SembCorp Gas Pte Ltd is the importer, transporter and retailer of West Natuna gas. A third source of natural gas, imported by Gas Supply Pte Ltd, started flowing into Singapore in September 2003. This pipeline would supply up to 350 million standard cubic feet per day of natural gas from South Sumatra to Singapore for electricity generation and industrial purposes. The South Sumatra gas is retailed by Gas Supply Pte Ltd and City Gas Pte Ltd. Both retailers engage the services of PowerGas Ltd for gas transportation.
Restructuring the Gas Industry
As a first step towards creating a competitive gas industry, the gas transportation business, which is a natural monopoly, is being separated from the competitive parts of the industry at ownership level so as to ensure fair competition and a level playing field. Today, PowerGas Ltd holds a licence to transport gas to consumers and is responsible for maintaining the reliability and safety of the gas transportation network in Singapore. As the gas transportation business is a natural monopoly, PowerGas Ltd will continue to be price regulated by the Energy Market Authority. PowerGas Ltd will be the gas transporter and will not be allowed to participate in gas import, trading and retailing. SembCorp Gas Pte Ltd, which currently imports, transports and retails natural gas, is required to transfer its onshore natural gas pipeline assets to PowerGas Ltd and exit the gas transportation business. The transfer of SembCorp Gas Pte Ltd's assets to PowerGas Ltd is in progress.
