Australia, Singapore increase energy ties

Australia and Singapore have agreed to reinforce energy co-operation, pledging to maintain flows of refined fuel and LNG as both nations work to navigate international and regional energy issues on the back of the conflict in the Middle East.

According to AFP, the understanding, reached during a recent visit by Australian Prime Minister Anthony Albanese to Singapore, demonstrates the interdependence between the two economies at a time the Strait of Hormuz remains largely closed. For now, however, the agreement is non-binding but commits both sides to at least making maximum efforts to aid each other’s energy security needs.

Australia is perhaps the more vulnerable of the two and is heavily reliant on imported refined fuel, with a reported 90% of its fuel sourced from overseas. Of this, an estimated 25% is supplied by the city state, which despite its limited size is a major Asian refining and trading hub. In turn, Singapore depends significantly on Australian LNG imports, with Canberra shipping roughly 32% of the city-state’s needs to Singaporean depots – its largest single supplier.

The arrangement put in place by the two leaders reflects a mutual reliance that has become substantially more pronounced amid the ongoing geopolitical instability. As a result Singapore has indicated that it will continue supplying refined fuel to Australia, but that this depends upon the future availability of upstream supplies. At the same time, Australia’s role in the LNG supply chain for Singapore will help to underpin the island’s position within regional energy markets.

The agreement was signed following talks between Albanese and Singaporean Prime Minister Lawrence Wong at the Istana offices of Singapore's PM after his Australian counterpart had visited key energy infrastructure sites on Jurong Island just south of Singapore’s main island. These included a refinery and an LNG terminal into which Australian shipments are deposited.

For Australia, strengthening ties with Asian counterparts is viewed as essential in managing the risks posed by disruptions to key maritime routes and volatility in global energy prices. The backdrop to the agreement is an ongoing but fragile ceasefire between the US and Iran, which has done little to restore stability to energy markets.

Similarly the continued constraints on shipping through the Strait of Hormuz have reinforced concerns in government departments across Asia and elsewhere over fuel availability and pricing.

Because of this, signs of strain have already begun to emerge within Australia with a number of reports indicating that a small but supposedly notable proportion of service stations have experienced diesel shortages. Over 200 outlets are understood to have run out of diesel, making up roughly 2.7% of the national network.

Despite these pressures, Australia retains a limited buffer. The country is understood to hold gasoline reserves equivalent to 39 days of consumption, and while this provides a degree of short-term reassurance, it highlights the vulnerability of supply chains both globally and much closer to home.