GAS BILL

Order for Second Reading read. 4.25 pm

The Acting Minister for Trade and Industry (Mr Peter Chen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the Gas Bill is the second industry-specific legislation, which I propose to move before the House this afternoon. As I mentioned earlier, natural gas will increasingly become an important source of fuel for power generation. Currently, a small amount of natural gas is imported from Malaysia for power generation only. In January this year, SembGas took delivery of natural gas from the West Natuna gas fields in the South China Sea under a 22-year agreement with Pertamina, for the purchase of up to 325 million standard cubic feet per day (mmscfd) of natural gas. Last month, Singapore Power signed a gas sales agreement with Pertamina, to import up to 350 mmscfd of natural gas over 20 years from the Asamera gas fields in Sumatra. The Asamera gas is scheduled for delivery in 2003.

While natural gas can be used for different purposes, its main use will be for power generation. The natural gas industry has to be structured such that no company can commercially advantage or disadvantage other competing companies. If this happens, it will be detrimental to competition in the electricity industry.

Gas importing is a competitive business. Natural gas can only be transported from importers to end-consumers through on-shore gas pipelines. The company that owns this transport network connecting the gas importers to the end-customers is a monopoly, and can potentially wield considerable advantage over competitors, if it has competing interests elsewhere. To avoid this, we are setting up a market structure where the monopoly transporter of gas does not engage in the competitive sectors of the industry.

Singapore Power will remain in the monopoly business of transporting gas within Singapore. To do this it will, through PowerGas, own, maintain and develop the on-shore pipelines that form the gas grid. Singapore Power will exit from importing and retailing of natural gas to industrial customers and power plants.

We also have a pipe network which supplies town gas to domestic and industry consumers. Town gas, which is supplied by PowerGas, will not be competitive, compared to natural gas. PowerGas plans to convert the town gas network over the next five years to convey natural gas, so that domestic and small consumers will also benefit from it. Other consumers not using piped gas will still have the option of using commercially available LPG. After converting the town gas network to natural gas, PowerGas will also exit from retailing gas to domestic and small customers.

There is currently a natural gas pipe network in Jurong, which was developed and owned by SembGas. As SembGas is an importer and retailer of natural gas, it would have to exit from the business of transporting natural gas and transfer its pipeline assets to PowerGas. When these various measures are implemented, there will then be competition in natural gas import and retailing. Diversifying Sources of Gas Supply

We will have three sources of fuel for power generation. The primary fuels will be oil and natural gas. All the generation plants using natural gas are required to be able to be operated with diesel. Diesel will serve as a back up fuel in case of disruption to the gas supply.

Looking ahead, we plan to further diversify our sources of fuel. Land has been set aside in Tuas for a Liquefied Natural Gas (LNG) terminal to allow import of LNG by LNG tankers to Singapore. With this terminal, we would be able to tap natural gas supplies from further sources such as Australia and the Middle East. A joint study by PUB, MTI and EDB is currently underway.

Key Features of the Bill

Mr Speaker, Sir, I shall now deal with the main provisions of the Gas Bill. The Bill is to create a competitive market framework for the gas industry, make provisions for the safety, technical and economic regulation of the transportation and retail of gas and for other matters connected therewith.

Like the Electricity Bill, the Gas Bill designates the Energy Market Authority of Singapore (EMA) as the regulator of the gas industry.

The functions and duties of the EMA under the Bill includes protecting the interests of the consumers, promoting competition in the supply of natural gas, regulating prices, as well as establishing and monitoring technical, performance and safety standards.

Control Mechanism and Protection of Consumers' Interests

Clauses 6 to 19 of the Gas Bill allow the EMA to issue licences and administer the controls related to the licensing. The conveying of gas through a gas pipeline and the retailing of gas will be licensed.

A person who carries out any work on any gas installation or gas appliance will also need to be licensed as a gas service worker.

If a gas licensee contravenes any conditions of its licence, any provisions of the relevant legislation, or any directions issued by the EMA, the EMA is empowered to require the licensee to provide a performance bond; and impose a financial penalty not exceeding 10% of the annual turnover of the licensee's licensed business, or an amount not exceeding $1 million, whichever is higher.

The EMA may also revoke or suspend the licence if the licensee fails to comply with its direction to rectify any contravention.

Clauses 62 to 68 empower the regulator to issue or approve codes of practice and performance standards for the regulation of activities and conduct in the piped gas industry. They also deal with safety requirements in relation to gas.

Duties of Gas Licensees

The Bill lays out the duties of licensees. Licensees are required to carry out their licensed business in such a manner so as not to prevent, restrict or hinder the development of competition in any gas market in Singapore.

Special Power

As with the Electricity Bill, the Gas Bill also provides for situations in which public interests are put at risk. Clauses 33 to 35 empower the Minister to make a special administration order, upon application by the EMA, directing that the affairs, business and property of an electricity licensee be managed directly or indirectly by the EMA.

Anti-competition Provisions

Like the Electricity Bill, the Gas Bill has similar provisions to control anti-competitive behaviour. These are listed in Part IX of the Bill. Appeal Process

The Bill also provides for appeals. Appeals relating to market regulation will be heard by an Appeal Panel appointed by the Minister. These will include matters on modification of licence conditions and application of the anti-competition provisions as stipulated under clause 17 and Part IX of the Bill. The decision of the Panel shall be final.

Other types of appeals, eg, refusal to grant a licence and matters relating to technical regulation, will go to the Minister whose decision is final.

Transitional Provisions

The natural gas pipelines in Jurong which are owned by SembGas will have to be transferred to PowerGas on commercial terms. If the parties cannot achieve a satisfactory commercial settlement, clause 98 of the Bill empowers the Minister to intervene and ensure that the transfer takes place. This provision will not be invoked unless absolutely necessary.

Conclusion

Sir, the Gas Bill is to give effect to the restructured piped gas industry. With this, we hope that big and small consumers will benefit from higher efficiency, more choice and better service of piped gas supply. As the regulator, the EMA will be responsible to safeguard the interests of the consumers and ensure a level playing field for the players in the industry.

Sir, I beg to move.

Question proposed.

Mr Inderjit Singh: Sir, I have two specific issues to raise. The first issue is whether there is a real need to separate the generating and retailing portions of the industry. From the way I look at, all we need is one type of licence for both generation and supply of gas, making use of a transport system managed by an independent authority.

The second issue is one of continuity of supply. My fear is that we may have a situation of over-reliance on one or two sources of gas, especially the gas we are purchasing from Indonesia, as the Minister mentioned earlier. Are we doing enough to diversify our risk?

Sir, with these two issues, I support the Bill.

Mr Peter Chen: Mr Inderjit Singh has raised the concern and question of separating generation and retail. Both generation and retail can indeed be performed by the same company, as Mr Inderjit Singh has quite rightly said. But there is nothing to stop a company from doing both. And the fact is that there will be companies that will choose to do generation without retailing or vice-versa. The transporter is the owner of the gas pipelines and can potentially influence the competition in the generation and retail sectors. Hence, the transporter would not be allowed to take part in the generation or retail. The transporter has to be licensed, as it is a monopoly.

There is also concern expressed by Mr Inderjit Singh concerning the security of supply. Sir, I would like to thank Mr Inderjit Singh for speaking in support of the Bill and also raising this concern. The key is to diversify our sources. Not all electricity will be generated by natural gas. Oil will continue to be a significant source for power generation. In any case, our natural gas agreements are commercial agreements and international companies and organisations like the World Bank are involved. They will help to ensure that they are able to discharge their contractual obligations. In the longer term, we will eventually go to LNG as I have said. Land has already been set aside in Tuas for the LNG terminal. There is a global market for LNG and this will allow us to tap natural gas supply from global sources much further afield, as I have mentioned, Australia and the Middle East.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Peter Chen].

Bill considered in Committee; reported without amendment; read a Third time and passed.