Oil and gas regulation in Singapore: overview

A Q&A guide to oil and gas regulation in Singapore.

The Q&A gives a high level overview of the domestic oil and gas sector, rights to oil and gas, health safety and the environment, sale and trade in oil and gas, tax and enforcement of regulation. It covers transfer of rights; transportation by pipeline; environmental impact assessments; decommissioning; waste regulations and proposals for reform.

To compare answers across multiple jurisdictions, visit the energy and natural resources Oil and gas regulation Country Q&A tool.

This Q&A is part of the global guide to energy and natural resources. For a full list of content visit www.practicallaw.com/energy-guide.

Kelvin Wong and Tan Wee Meng, Allen & Gledhill LLP
Contents

Domestic sector

1. What is the role of the domestic oil sector in your jurisdiction?

Singapore is one of Asia's major oil refining centres and trading hubs, with significant infrastructure for oil refining, storage, and distribution.

The oil industry is estimated to account for about 5% of Singapore's gross domestic product.

Domestic production

Singapore does not have any known oil reserves.

Oil imports/exports market

Based on statistics published by the Energy Market Authority of Singapore (EMA), the bulk of energy imports and exports are petroleum products. In 2015, these formed 65.3% of energy imports and 98.8% of energy exports while crude oil formed 28.5% and 1.2% of energy imports and exports respectively.

Government policy objectives

The government has not published any specific policy objectives.

Current market trends

According to the Singapore Economic Development Board (EDB), Singapore is actively exploring opportunities to promote sustainable growth of the energy industry. The focus has been on kick-starting bio-diesel production and to develop next-generation technological capabilities in harnessing renewables.

Singapore has also constructed a commercial underground storage facility, called the Jurong Rock Caverns, capable of holding 1.47 million cubic metres of liquid hydrocarbons. The caverns form part of an existing network of integrated infrastructure on Jurong Island, an artificial island that forms the heart of Singapore's energy and chemicals industry.

 
2. What is the role of the natural gas sector in your jurisdiction?

Natural gas plays a significant role in meeting Singapore's energy needs. Singapore's natural gas consumption increased from 230 billion cubic feet (bcf) in 2005 to 400 bcf in 2015. The share of natural gas in Singapore's electricity generation fuel mix has increased significantly from 19% in 2000 to 95% in 2015 as gas-fired generators have replaced the oil-fired generators previously in use.

The government has also shown interest in adding floating storage and regasification units by inviting tenders from consultants to carry out feasibility studies at potential sites.

Domestic production

Singapore does not have any known natural gas reserves.

Natural gas imports/exports

Singapore is a net importer of natural gas and does not produce or export natural gas. In 2015, natural gas made up 6% of energy imports.

Most of Singapore's natural gas has traditionally been imported from Indonesia and Malaysia through pipelines. Since May 2013, Singapore has started importing liquefied natural gas (LNG) to:

  • Reduce the dependence on piped natural gas.

  • Reduce the cost of gas.

  • Diversify and secure Singapore's energy resources.

Domestic market structure

The gas transportation business is separated from the businesses of gas import, shipping and retail, in order to encourage competition. The Gas Network Code (GNC), issued under the Gas Act (Cap. 116A), governs the transportation of gas onshore and is intended to facilitate open and non-discriminatory access to the onshore gas pipeline network.

The main players in the natural gas industry include:

  • PowerGas, the sole gas transporter, which owns and operates the onshore gas transportation network, and as gas transporter, is prohibited from participating in gas importing, trading or retailing.

  • Gas importers such as:

    • Senoko Energy and Keppel Gas Pte (which import gas from Malaysia);

    • Sembcorp Gas Pte (which imports gas from West Natuna, Indonesia); and

    • Gas Supply Pte (which imports gas from South Sumatra, Indonesia).

  • Gas retailers or shippers (including Sembcorp Gas Pte and City Gas Pte).

  • BG Singapore Gas Marketing Pte (BG), the LNG aggregator, which has an exclusive licence to aggregate demand for all end-users in Singapore and import LNG on their behalf.

The Energy Market Authority of Singapore (EMA) is responsible for supervising the Singapore gas industry. It was established in April 2001 under the Energy Market Authority of Singapore Act (Cap. 92B) as an independent regulator overseeing, among others, the gas and electricity industries. The EMA's functions and duties include:

  • Protecting the interests of consumers in prices and other terms for the supply of gas.

  • Ensuring the reliability of the supply of gas.

  • Promoting competition in the supply of natural gas.

Government policy objectives

The government has not published any specific policy objectives.

Current market trends

The government decided to import liquefied natural gas (LNG) in 2006 to enhance Singapore's energy security, protect the supply against disruptions and encourage competition in the energy market. Following this decision, BG was appointed as the LNG importer with the exclusive franchise to import LNG and sell regasified LNG in Singapore for up to three million tonnes per annum (Mtpa) or until 2023, whichever is earlier.

According to the Energy Market Authority of Singapore (EMA), by February 2014, BG had contracted around 2.7 Mtpa of LNG (which is about 90% of its franchise). The government has therefore announced its intention to implement a new LNG import framework to take effect after the first tranche of three Mtpa is reached. The EMA has determined that a competitive licensing framework will be used to meet Singapore's future LNG demand, with the following key features:

  • A tranche-by-tranche approach to keep Singapore's options open to take advantage of new opportunities that may arise from changing global market conditions and the emergence of new suppliers.

  • Flexibility to appoint one or more new importers or allowing incumbents to grow beyond their franchise.

The EMA also conducted a two-stage Request for Proposal to appoint up to two entities to import LNG into Singapore Submission for stage two of the Request for Proposal ended on 30 June 2016 and the proposals are currently being evaluated.

 
3. Are domestic energy requirements met by oil and gas production?

Singapore does not have any known natural oil or gas reserves.

 
4. Are there specific government policies to encourage the exploration and production of unconventional gas or oil?

There are currently no government policies to encourage the exploration and production of unconventional gas or oil.

 
5. Who regulates the extraction of oil and gas?

The extraction of oil and gas is not specifically regulated in Singapore.

The regulatory regime

 
6. What is the regulatory regime for onshore and offshore oil and gas exploration and production?

There is no specific regulatory regime for onshore and offshore oil and gas exploration and production.

 

Rights to oil and gas

Ownership

7. How are rights to oil and gas held?

Singapore does not have any known natural oil or gas reserves.

Nature of oil and gas rights

 
8. What are the key features of the leases, licences or concessions which are issued under the regulatory regime?

Singapore does not have any known natural oil or gas reserves.

 
9. How are such leases, licences or concessions awarded?

Singapore does not have any known natural oil or gas reserves.

Transfer of rights

10. How are oil and gas rights transferred?

Singapore does not have any known natural oil or gas reserves.

 

Tax

11. What payments are payable by oil and gas interest holders to the government?

This is not specifically required or prescribed in Singapore.

 
12. Does the government derive any other economic benefits from oil and gas exploration and production?

Singapore does not have any known natural oil or gas reserves.

 
13. What taxes and duties apply on import and export of oil and gas?

Save for certain customs and/or excise duties that are imposed on certain petroleum products (such as motor spirits and natural gas used as motor fuel), the main tax applicable on the import and export of oil and gas is the goods and services tax, levied at a rate of 7% under the Goods and Services Tax Act (Cap. 117A).

 

Transportation by pipeline

14. What regulatory requirements apply to the construction and operation of oil and gas pipelines?

Oil pipelines

The construction and operation of oil pipelines is not specifically regulated, apart from general environmental, health and safety requirements (see Question 16).

Gas pipelines

As the sole gas transporter, PowerGas is responsible under its licence for the planning, development, maintenance and operation of its onshore gas pipeline network. It must also carry out all refurbishments and replacements of new investments in the network in accordance with the relevant statutory, licensing and other requirements.

PowerGas has the right to install in, on, over or under any land, premises, street or waters any gas pipeline that is or will be part of its gas pipeline network, and to carry out any necessary or incidental activities (section 27, Gas Act).

In addition, the Gas Network Code (GNC) (see Question 2), which under section 61D of the Gas Act, operates as a binding contract between PowerGas and each relevant gas shipper, establishes and governs the operation of the gas pipeline network.

 
15. Is there a system of third party access to pipelines and other infrastructure?

The Gas Act requires a person who owns or has control of a gas pipeline, gas pipeline network or onshore receiving facility designated by the Energy Market Authority (EMA) to provide access to the pipeline, network or facility without undue preference or discrimination.

A prospective user who is unable to negotiate access to the infrastructure can apply to the EMA for directions to secure rights of access to it.

In addition, if any person is unable to conclude an arrangement for the allocation of gas in any offshore gas pipeline, they may apply to the EMA, who may give directions to the applicant and every person whose gas is being conveyed through the offshore gas pipeline for a gas allocation arrangement to be made in respect of that pipeline to enter into an agreement for the allocation of gas in the offshore gas pipeline.

 

Health, safety and the environment

Health and safety

16. What is the health and safety regime for oil and gas exploration and extraction, and transportation by pipeline?

Oil and gas exploration and extraction is not specifically regulated. Singapore does not have any known natural oil or gas reserves.

Transportation

Health and safety requirements relating to the safe operation of the gas network system generally are set out in the:

  • Gas Act.

  • Gas Supply Code.

  • Gas Safety Code.

The Fire Safety Act (Cap. 109A) sets out a health and safety regime specifically in respect of transportation by pipeline. A licence issued by the Commissioner of Civil Defence is required for pipeline owners to operate pipelines that convey petroleum or any flammable material. A pipeline licensee must, among other obligations, provide, implement and maintain any fire protection, detection and mitigation measures, materials and equipment in the vicinity of its licensed pipeline required by the Commissioner of Civil Defence for fire safety.

The Environmental Protection and Management Act also sets out laws relating to environmental pollution control, to provide for the protection and management of the environment and resource conservation, and for connected purposes.

Environmental impact assessments (EIAs)

17. Is an EIA required before extracting or processing onshore or offshore oil and gas?

Singapore law does not specifically require EIAs to be carried out in relation to the extraction or processing of oil and gas. Under the Environmental Protection and Management Act, however, the Director-General of Environment Pollution may require any person intending to carry out an activity likely to cause substantial pollution or to increase the level of such pollution to submit a proposal for implementing pollution control measures after carrying out an approved study.

 
18. What are the different stages of the EIA?

See Question 17.

Environmental permits

 
19. Is there a permit regime for environmental damage or emissions produced during the extraction or processing of oil and gas?

Environmental concerns

20. Are there any specific government policies and/or incentives aimed at meeting the environmental concerns associated with the exploration and production of oil and gas?

There are no specific government policies and/or incentives but under the Environmental Protection and Management Act (Cap. 94A) (EPMA), a person must obtain written permission from the Director-General before occupying or using "scheduled premises" (section 6, EPMA).

These are defined as, among other things, premises used for petroleum works in which crude or shale oil or crude petroleum or other mineral oil is refined or reconditioned (First Schedule, EPMA).

The Director-General can impose conditions on the grant of permission to ensure that pollution and/or hazardous substances are adequately managed and controlled (section 7, EPMA).

Waste

21. What are the regulations on the disposal of waste products resulting from oil or gas extraction or processing?

The Environmental Protection and Management Act (Cap. 94A) (EPMA) consolidates the laws relating to environmental pollution control for the protection and management of the environment. For example, the discharge of oil into any drain or land, or discharge of any toxic substance into any inland water is an offence under the EPMA (Parts V and VI, EMA).

The penalty for a first offence is a maximum fine of SG$50,000 or imprisonment for a maximum term of 12 months or both. For a second or subsequent conviction, the penalty is imprisonment for a term of between one to 12 months and a fine of up to SG$100,000.

A person carrying on a trade or business who has been convicted of a second or subsequent offence may be directed by the National Environment Agency to immediately cease carrying on that process indefinitely or for a specified duration.

Anyone who fails to comply with such a direction is guilty of an offence and liable to pay a fine of up to SG$100,000 or to imprisonment for a term of up to three months or to both. For every continuing offence, the offender is liable to a further fine of up to SG$2,000 for every day the offence continues after conviction.

Flares and vents

22. Are flare and vent regulations in place?

There are no specific flare and vent regulations in place.

Decommissioning

23. What are the decommissioning obligations and liabilities that arise?

The Gas Supply Code requires the gas transporter to ensure that all gas pipelines in its gas supply system are de-commissioned safely. The Gas Safety Code also sets out certain technical, safety and procedural requirements to be met by licensees with respect to the de-commissioning of infrastructure.

For instance, the Gas Safety Code requires the gas transporter to submit a gas safety case to the Energy Market Authority. Generally, the gas safety case must set out safety procedures and operating arrangements. The gas safety case must contain a formal risk assessment which should take into account the safety risks inherent in the de-commissioning of infrastructure. It must also set out measures taken, or to be taken, to reduce risks to a level that is as low as reasonably practicable.

 

Sale and trade

24. How is trade in oil and gas usually completed?

Trade in oil and gas is usually completed under bilateral sale or supply contracts. In relation to domestic gas contracts, a party would have to also apply for and obtain capacity rights from PowerGas to have the right to have gas transported through the gas pipeline network.

The Energy Market Authority of Singapore has recently proposed the development of a secondary gas trading market (SGTM) (see Question 28). In relation to liquefied natural gas (LNG), the Singapore exchange has recently launched the Singapore SGX LNG Index Group (also known as the Singapore SLInG) which is designed as a spot price index for Asian LNG, calculated on contributions from major physical market participants.

 
25. Are oil and gas prices regulated?

The Energy Market Authority of Singapore (EMA) regulates prices to be charged by a:

  • Gas transporter for the conveyance of gas through a gas pipeline or gas pipeline network.

  • Gas retailer for the retailing of gas.

However, the actual prices of oil and gas are not specifically regulated, and these prices will be determined under the relevant supply contract.

With respect to the liquefied natural gas (LNG) aggregator (BG), the EMA regulates the price margin that BG may impose to protect end-users from being subject to any potential abuse by the LNG aggregator of its monopolistic position.

 

Enforcement of regulation

26. What are the regulator's enforcement powers?

Orders

The Energy Market Authority of Singapore (EMA) has the power to issue directions to any gas licensee or person for or with respect to any code of practice, standard of performance or other procedures, to ensure the security or reliability of the conveyance of gas to consumers' premises, in the interests of public safety, or as may be necessary to enable the EMA to perform its functions and duties prescribed in section 3 of the Gas Act (section 63, Gas Act).

Any failure to comply with such directions is punishable on conviction by a maximum fine of SG$10,000 or to imprisonment for a maximum term of 12 months, or to both, and for a continuing offence, to a further fine not exceeding SG$250 for every day that the offence continues (section 91, Gas Act).

In addition, any person to whom loss or damage is caused by breach of a direction can take civil proceedings against the relevant person or licensee. Compliance with any direction is also enforceable in civil proceedings by the EMA for an injunction or for any other appropriate relief (section 87, Gas Act).

It is a defence for a licensee or other person to prove that they took all reasonable steps and exercised all due diligence to avoid contravening the relevant direction.

If the EMA is satisfied that a gas licensee is contravening, has contravened or is likely to contravene any condition of its gas licence, code of practice or other standard of performance provision of the Gas Act, direction issued by the EMA or otherwise applicable to it, the EMA can (section 19, Gas Act):

  • Issue directions.

  • Require the licensee to provide a performance bond, guarantee or other form of security on specified terms and conditions.

  • Fine the licensee the higher of 10% of the licensee's annual turnover or SG$1 million.

In addition, the EMA can revoke or suspend the licence for as long as it thinks fit without any compensation to the licensee where it is satisfied that (section 18, Gas Act):

  • A licensee has gone into liquidation (other than for the purpose of amalgamation or reconstruction).

  • A licensee has made any arrangement, compromise or composition with any of its creditors.

  • A circumstance specified in the licensee's gas licence which entitles the EMA to revoke or suspend its gas licence exists.

  • A licensee has not complied with any direction or requirement issued by the EMA under section 19 of the Gas Act.

  • The public interest or security of Singapore so requires.

In the case of breach of the revocation or suspension clause or non-compliance with a direction, the EMA can fine the licensee an amount not exceeding 10% of their annual turnover or an amount not exceeding SG$1 million, whichever is higher, in addition to the revocation or suspension of the licence, or any sanction which may have already been imposed on it under section 19 (section 18(2), Gas Act).

Competition issues

The EMA has various powers under Part IX of the Gas Act to investigate and enforce anti-competition measures.

Anti-competitive practices are listed in section 69 and include:

  • Price fixing.

  • Production limits or controls.

  • Sharing of markets or sources of gas supply.

  • Unfair transactions with third parties.

  • Unfair contractual conditions.

  • Allowing third parties to acquire shares in or the assets of a gas licensee.

Where the EMA decides that section 69 has been infringed, it can impose directions including (section 78):

  • Termination or variation of the agreement.

  • Ordering the disposal of relevant shares or assets.

Section 70 prohibits a gas licensee individually or jointly with others from abusing a dominant position in any gas market in Singapore if it may affect trade within Singapore.

In this case, a licensee can be directed to modify or cease such conduct.

In both cases, the EMA can fine the licensee up to 10% of its annual turnover or a maximum sum of SG$1 million, whichever is higher, as well as requiring a performance bond, guarantee or other form of security.

Controlling interests

No person (whether alone or with associates) is permitted to hold or be able to control 12% or more or 30% or more of the equity interest or voting power in a designated gas licensee, entity or business trust except with the prior written approval of the EMA (section 63B, Gas Act). Additionally, the EMA must be notified in writing when any person becomes a substantial equity interest holder (5% or more) of a designated gas licensee, entity or business trust.

Unauthorised appointments

Under section 63H, no person can be appointed a designated gas licensee's chief executive officer, director or chairman of the board of directors without the EMA's prior written approval. If approval has not been obtained, the EMA can order the removal of that person from their post.

Fines and penalties

Contravention of any of the above requirements constitutes an offence by an individual and is punishable by a fine of up to SG$500,000 or to imprisonment for a maximum term of three years, or to both, plus further fines of up to SG$50,000 per day for continuing offences. In any other case, offenders can be fined up to SG$1 million on conviction and, plus fines of up to SG$100,000 per day for continuing the offence (section 63G, Gas Act).

 
27. Is there a right of appeal against the regulator's decisions?

A gas licensee who is aggrieved by a direction or decision of the Energy Market Authority (EMA) under Part IX of the Gas Act (see Question 26) can, within 14 days of being told of the direction or decision, give notice containing adequate grounds for appeal that it wishes to make an appeal to the Minister of Trade and Industry of Singapore (section 83, Gas Act).

The Minister must establish an appeal panel to consider the appeal within 30 days of the request, unless the request is considered to be frivolous, trivial or vexatious.

The appeal panel may confirm, vary or reverse the direction or decision of the EMA or direct the EMA to reconsider it, and the appeal panel's decision is final.

More generally, a person aggrieved by any decision or direction of the EMA may appeal to the Minister providing adequate details of the grounds for the appeal, usually within 14 days of the receipt of the decision or direction (section 93, Gas Act).

The Minister may confirm, vary or reverse any decision or direction of the EMA, or directing the EMA to reconsider its decision or direction, and the decision of the Minister is final.

 

Reform

28. Are there plans for changes to the legal and regulatory framework?

In 2015, the EMA published a consultation paper on the development of a Secondary Gas Trading Market (SGTM) (where gas buyers and sellers can trade gas within Singapore). According to the consultation paper, the SGTM is proposed as a physical gas trading platform that allows market participants to anonymously post offers to buy or sell gas on a short-term basis (for example, on the same day or for the next day) without having to go through a negotiation process. This would allow the purchasing and selling of shortfall or excess gas quickly and anonymously.

According to the EMA, an SGTM will allow domestic gas price discovery that reflects Singapore's demand and supply conditions. Gas users will be able to complement their portfolio of long- and medium-term gas supplies, so that they can optimise their gas supply portfolios and mitigate price volatility. In the long run, the SGTM is intended to enhance Singapore's position as a hub for liquefied natural gas and gas trading activities, and pave the way for the potential establishment of a gas forward market to trade financial contracts for gas.

 

The regulatory authorities

Energy Market Authority of Singapore

Address. 991G Alexandra Road, #01-29
Singapore
119975
T +65 6835 8000
F +65 6835 8020
E ema_enquiry@ema.gov.sg
W

Main responsibilities. To operate as an independent regulator overseeing, among others, the gas and electricity industries.



Online resources

W http://statutes.agc.gov.sg/aol/home.w3p ( www.practicallaw.com/7-543-9365)

Description. This is the official Singapore Government website for online publication of legislation. This service is provided by the Legislation Division of the Attorney-General's Chambers.



Contributor profiles

Kelvin Wong, Partner

Allen & Gledhill LLP

T +65 6890 7644
F +65 6302 3048
E kelvin.wong@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Singapore Bar (1996), Advocate and Solicitor; Bar of England and Wales, Middle Temple (1995), Barrister-at-Law

Areas of practice. Construction and engineering; corporate and commercial; employment; energy; infrastructure and projects.

Languages. English

Professional associations/memberships. Associate Member, Chartered Institute of Arbitrators, England; Independent Director, AETOS Holdings Pte. Ltd; Independent Director, National Volunteer & Philanthropy Centre; Director, National Council of Social Service

Publications

  • Benchmarking Public-Private Partnerships Procurement 2017 Indicator, World Bank, author.

  • The International Comparative Legal Guide to Public Procurement 2016 (Singapore Chapter), Global Legal Group, author.

  • Water Law Committee Newsletter (2016, 2015), International Bar Association, editor.

  • Expert Guide: Energy & Natural Resources (2015), LNG in Singapore: The next stage, Corporate LiveWire.

Tan Wee Meng, Partner

Allen & Gledhill LLP

T +65 6890 7518
F +65 6302 3042
E tan.weemeng@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Singapore Bar (1997), Advocate and Solicitor

Areas of practice. Corporate and commercial; energy; infrastructure and projects; technology; media and telecommunications.

Languages. English

Publications

  • Benchmarking Public-Private Partnerships Procurement 2017 Indicator, World Bank, author.

  • The International Comparative Legal Guide to Public Procurement 2016 (Singapore Chapter), Global Legal Group, author.


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