Indonesia’s gas supply cuts unlikely to affect electricity prices that much: Tan See Leng

Indonesia began reducing natural gas exports to Singapore on October 24, a move driven by the need to prioritize domestic electricity consumption, according to Indonesia’s upstream oil and gas regulator, SKK Migas. The diversion involves 31 million standard cubic feet of gas per day, sourced from the Natuna and Sumatra regions. Singapore’s Energy Market Authority stated that this reduction equates to 17 billion British thermal units per day over an 18-day period, representing less than 2 percent of the city-state’s total daily gas demand, which exceeds 1,000 billion British thermal units. Minister for Energy, Trade and Industry Tan See Leng addressed the issue on October 25 following the People’s Action Party biennial conference. He assured the public that short-term electricity prices are unlikely to see significant changes because the volume of the cut is minimal relative to overall needs. Tan noted that gas unit prices are typically pegged to major global indices, meaning local supply adjustments have limited impact compared to broader market fluctuations. He urged citizens to remain calm, stating that Singapore has handled similar supply reductions in the past without incident and that the government will continue to ensure the reliability and resilience of the energy supply. The physical infrastructure involved in the cut consists of two pipelines connected directly to Singapore. Natural gas from Sumatra is exported to Gas Supply, while gas from the Natuna Sea travels through a subsea pipeline to a receiving facility operated by Sembcorp Gas. SKK Migas detailed that the 15 million standard cubic feet per day from Natuna is being diverted to PLN Batam via the WNTS-Pulau Pemping-Batam pipeline. The 16 million standard cubic feet per day from Sumatra is being redirected through the TGI pipeline to meet electricity needs in Batam, Bintan, and mainland Sumatra. The regulator cited Article 8, Paragraph 1 of Indonesia’s Oil and Gas Law as the legal basis for prioritizing domestic usage and stated it would monitor developments daily. Gas Supply, a Temasek-owned entity and one of Singapore’s largest gas importers, confirmed on October 24 that customer deliveries had been affected by temporary reductions from its upstream supplier in Indonesia. The company said it was in direct communication with impacted customers and engaging closely with its supplier to manage the situation. However, the statement did not specify the number of affected customers or the exact duration of the supply interruptions beyond the general timeframe mentioned by authorities. Background data indicates that Singapore relies on natural gas for approximately 95 percent of its electricity generation. In 2025, piped natural gas from Malaysia and Indonesia accounted for 40 percent of the supply, with the remainder arriving by sea as liquefied natural gas from global markets. Other figures suggest piped gas represented 43 percent of total imports in 2025, while LNG comprised 57 percent. The Energy Market Authority highlighted that Singapore has maintained contingency plans for such scenarios. Recent months saw supply reductions ranging from 20 to 100 billion British thermal units per day due to planned or urgent maintenance, all of which were offset by other gas sources without service disruption. To bolster energy security, Singapore employs multiple defensive layers. These include diversifying natural gas sources, maintaining a standby liquefied natural gas facility, and ensuring that the central procurer, Singapore GasCo, is operationally ready to import additional liquefied natural gas at any time. Power generation companies are also mandated to hold sufficient diesel reserves to guard against larger gas supply disruptions. In the medium term, the republic is constructing a second liquefied natural gas terminal, expected to be operational by the end of the decade. Additionally, the government is exploring alternative energy sources such as biomethane, geothermal, and solar, while studying the potential use of nuclear energy, though no final decision has been made regarding nuclear adoption. The export curbs occur against a backdrop of diplomatic tension. On October 22, Indonesian Coordinating Minister for Downstreaming and Energy Transition Bahlil Lahadalia warned that Jakarta could halt energy exports to nations that fail to show mutual respect. He stated he would evaluate export relationships and was prepared to stop shipments to disrespectful partners, without naming specific countries. These remarks followed President Prabowo Subianto’s calls to safeguard natural resources and prioritize national interests. SKK Migas did not explicitly link the current diversion to these diplomatic warnings in its official statements. Historical context shows that Indonesia has planned to reduce exports to Singapore for several years to address growing domestic demand. In 2022, Jakarta agreed to extend gas supplies to Singapore until 2028, albeit at lower volumes than previous contracts. Current agreements for piped gas from the West Natuna gas fields and the Jambi Merang gas field in Sumatra are set to expire in 2028. A sales agreement between Sembcorp and Indonesian entities for West Natuna gas was valued at approximately 1.9 billion dollars. Prime Minister Lawrence Wong stated at the party conference that Singapore expects all parties to honor commitments under commercial contracts. He affirmed that the country’s gas importer will take necessary steps to protect its rights and interests. Deputy Prime Minister Gan Kim Yong had previously warned in September that Indonesia’s rising domestic consumption could constrain its ability to export gas. He emphasized that no single country accounted for more than 30 percent of Singapore’s gas imports in 2024, underscoring the strategy of diversification. Approximately 30 percent of Indonesia’s natural gas production is currently exported, while the remaining 70 percent serves domestic needs. Queries sent to the Indonesian presidential palace regarding the export cuts had not received a response as of the latest reporting.