SINGAPORE: Given the stabilisation in global oil prices and oil production capacity in Saudi Arabia returning to normal, the drone attacks on two Saudi oil facilities last month will likely have “limited” impact on the Singapore economy, said Senior Minister of State for Trade and Industry Koh Poh Koon on Monday (Oct 7).
Singapore’s oil supply remained sufficient throughout the period of outage and the impact on consumer prices is likely to be small, he told Parliament.
Dr Koh was responding to parliamentary questions about the surprise drone strikes on two major oil installations within Saudi Arabia on Sep 14 and the potential impact on Singapore’s economy, as well as electricity and pump prices here.
The drone strikes last month had hit Abqaiq, the world's largest oil processing facility, and the Khurais oil field in Saudi Arabia’s eastern province. This knocked out 5.7 million barrels per day off production, equivalent to more than half of the OPEC kingpin’s output and 5 per cent of the world’s production.
Amid anxiety over supply shortages and the possibility of a new threat to the global economy, global oil prices spiked immediately after the attacks.
Prices retreated only after Saudi Arabia and the United States pledged to maintain a steady supply of oil, and the benchmark Brent crude has since stabilised at around US$59 per barrel as of Oct 2, said Dr Koh.
For 2019 as a whole, Brent is projected to average at US$63 per barrel, lower than the US$71 per barrel in 2018, he added.
Still, Dr Koh said the incident is a “useful reminder” about the importance of energy security, especially given ongoing tensions in the Middle East.
“This is particularly pertinent to Singapore as we import almost all our energy,” he said, while noting that the Government adopts several strategies to secure the country’s energy supply and keep energy prices competitive.
First, the country’s sources of crude oil and gas are diversified to ensure continuous supply even in face of disruptions.
Bishan-Toa Payoh GRC Member of Parliament (MP) Saktiandi Supaat asked about plans for alternative energy sources, given that such incidences could intensify due to the possibility of more drone attacks in Saudi Arabia and geopolitical tensions in the Middle East.
To that, Dr Koh stressed that Singapore’s oil trading ecosystem is well-diversified.
“Our traders have sourced from not just in the Middle East but places in the United States as well. The diversification itself is a robust strategy to make sure that we are not threatened by a single source.”
Second, while electricity prices here cannot be insulated from global energy price movements, the promotion of competition will ensure that Singaporeans enjoy competitive electricity prices.
Dr Koh cited the Open Electricity Market (OEM) as one such initiative.
“Since we launched the OEM in May this year, households and small businesses have reported savings of about 20 to 30 per cent on their electricity bills,” he said.