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SINGAPORE — To do more to limit global warming, Singapore can reduce the use of natural gas for its energy needs, boost the efficiency of buildings and transportation, and share environmental solutions with counterparts in South-east Asia, experts in the field said.

Their comments came in the wake of a new report by a United Nations body that said there would have to be  “unprecedented” changes to the way people generate and consume energy, use land and live, in order to limit global warming to 1.5°C above pre-industrial levels.

Responding to the same report published on Monday (Oct 8), Singapore’s Ministry of the Environment and Water Resources (MEWR) said that it would update the country’s climate projections no earlier than 2021.

The Special Report on Global Warming of 1.5°C was issued by the Intergovernmental Panel on Climate Change (IPCC) from South Korea — where scientists and government representatives were, for the past week, considering what could happen to the planet and its population when temperatures warm by 1.5°C.

Scientists agreed that, more than ever, every bit of warming mattered. Current pledges by governments would at best yield warming of 3°C by the end of the century.

Asked if Singapore would relook its pledge as part of the 2015 Paris Agreement, MEWR said that the special report does not change Singapore’s assessment from its Second National Climate Change Study developed in 2015.

The 2015 study was based on the IPCC’s fifth assessment report, which accounted for future scenarios including warming of 1.5°C to 2°C and more, a ministry spokesperson said.

Based on this study, there is an elevated risk that Singapore will experience more extreme temperatures in a 2°C world, compared to a 1.5°C world.

“The special report does not change this assessment,” the spokesperson said.

“As part of our Paris Agreement pledge, Singapore has committed to put in place a holistic range of mitigation measures across various sectors to reduce our emissions. This includes improving our industrial energy efficiency and greening our buildings. We also announced the implementation of a carbon tax from 2019,” he added.

“The IPCC’s sixth assessment report is due to be published in 2021. We will update Singapore’s climate projections after (it) is released.”

RENEWABLE ENERGY BETTER WAY TO GO

In the past week, officials from the ministry and the National Climate Change Secretariat were in South Korea for the IPCC meeting.

The delegation was supported by Assistant Professor Winston Chow from the National University of Singapore’s geography department. Asst Prof Chow is a lead author for the IPCC’s sixth assessment report.

For mitigation, the biggest impact for Singapore would be to move away from using natural gas for power generation, towards the greater use of renewable energy such as solar or wind, Asst Prof Chow said.

About 95 per cent of Singapore’s electricity is produced from natural gas.

He told TODAY that natural gas is “the cleanest fossil fuel, but a fossil fuel no less”.

Singapore does not have the luxury of other mitigation efforts such as afforestation or carbon capture and storage, which require large-scale areas to be effective, Asst Prof Chow said.

Apart from tapping renewable energy, there is still potential for buildings and transportation in Singapore to reduce energy demand by becoming more energy-efficient or by using low-emission fuels, he added.

PROVIDING EDUCATION, SHARING EXPERIENCE

Agreeing on the need to de-carbonise, Professor Benjamin Horton from Nanyang Technological University’s Asian School of the Environment said that “urban planning is much needed”.

Much of existing climate research is oriented around technologies — air quality, water, fuel cells and biofuels, for instance. “A focus on technology, though common, is too narrow for South-east Asia,” he said.

Prof Horton, who is a review editor of the IPCC’s sixth assessment report, noted that Asia is rapidly catching up in understanding the causes of environmental problems and solutions. South-east Asian policymakers may be aware of the challenges facing the fragile ecosystems, but there are few places they can turn to for insight and advice.

“Of the 28 planning schools in South-east Asia, apparently none has a teaching programme on climate change. Education on planning for climate change is urgently required,” he added.

Singapore has experience in innovative urban planning and technological and urban governance models, Prof Horton said.

The Asian School of the Environment, which he chairs, aims to provide broad-based guidance on environmental policies in the region.

On the need to take action, Prof Horton said that the Paris Agreement must be upheld and strengthened. “Failure to radically cut global carbon emissions will mean disasters, such as the ones we have seen this summer, will become the new normal.”

Last month, Typhoon Mangkhut hit the Philippines, causing flooding and destruction. It is the world’s strongest storm by far since Typhoon Haiyan in 2013. Such superstorms have led to more discussions among researchers on how climate change plays a role in their formation.

Prof Horton said: “No nation, whether it’s large or small, rich or poor, will be immune from the impacts of climate and environmental change. We are already experiencing it in Singapore, where we are seeing floods on sunny days, extreme rainfall, winds and temperatures.”

TIME TO WAKE UP

International environmental organisations called on nations to respond to the IPCC’s special report.

Dr Andrew Steer, president and chief executive of the World Resources Institute, said: “The IPCC report is a wake-up call for slumbering world leaders.”

The devastation that would come with today’s 3 to 4°C trajectory would be vastly greater, and it is the poor who will be most affected, he said.

Dr Peter Frumhoff, director of science and policy at the Union of Concerned Scientists and former lead author of the IPCC, said that at the annual UN climate talks in Poland this December, countries should “commit to strengthen policies that cut global warming emissions, invest in measures to limit future climate risks, and do more to help communities cope with the climate impacts that are now unavoidable”.

“In addition, wealthier nations that bear greater responsibility for the global warming problem need to ramp up financial and technology support for actions by developing nations, to help create a better world for all of us.”

SINGAPORE’S PARIS AGREEMENT PLEDGE

• Under the global Paris climate agreement, Singapore has committed to cut its greenhouse gas emissions per dollar of gross domestic product by 36 per cent come 2030 — down from 2005 levels.
• It is looking to stabilise emissions with the aim of peaking around the target year of 2030.
• Last year, Deputy Prime Minister Teo Chee Hean said that by 2020, 5,500 public housing blocks will have solar panels, tripling the deployment of solar energy to 350 megawatt-peak, up from 126 megawatt-peak.
• The plan is to have more than 1 gigawatt-peak after 2020, which will represent about 15 per cent of electrical power demand at peak during the day, Mr Teo said.
• The Paris agreement, which will take effect after 2020, aims to hold the increase in global average temperature to well below 2°C, and pursue efforts to limit the temperature increase to 1.5°C.

BRENT crude oil prices are up more than 30 per cent this year and holding – but it won’t be a case of a rising tide lifting all boats.

While the rally stirs hope for investors tracking the oil and gas sector, high oil prices are a concern for consuming companies in the aviation and transport sector.

OCBC Investment Research senior investment analyst Low Pei Han believes winners in a high oil price environment would include Keppel Corporation, Sembcorp Marine and by extension Sembcorp Industries.

She said: “Companies in the O&G industry should benefit…, though oil price is not the only determining factor in the near term.”

What counts is which part of the value chain the company operates in, as individual demand and supply dynamics within the sub-sector may have a greater impact over the near to medium term.

According to SGX Research, the share prices of five O&G plays in 3Q18 have rebounded substantially from their 12-month troughs – averaging a 69.3 per cent increase from their respective 52-week lows – tracking crude gains. Crude has risen about 17 per cent since mid-August, and hit a four-year high at US$86 a barrel last week.

These five players are Rex International, KrisEnergy, Falcon Energy, AusGroup and China Aviation Oil (CAO).

For example, Rex International saw its shares spike to a 52-week high at 11.7 Singapore cents on Oct 5 from its trough of 4 Singapore cents less than two months ago.

Both Rex International and KrisEnergy are oil and gas exploration and production companies while Falcon Energy provides services to worldwide clients in exploration to post-production.

AusGroup provides asset maintenance, construction, access, fabrication and marine services to the energy, mining, and industrial sectors in Asia Pacific. CAO engages in trading jet fuel and other petroleum products to airline companies worldwide.

CGS-CIMB’s head of equity research Lim Siew Khee told The Business Times that rig builders would rightfully benefit from higher oil prices and see orders coming in. But it may be a while before higher crude prices translate to new rig orders.

Ms Low said: “A supply glut and competition have stalled the momentum in orders. Sustained high oil prices rather than spikes in oil prices are more relevant to orders. ”

On the global oil stage, the imminent US sanctions on Iran and political and social strife in Venezuela have led to lower oil production. While big producing nations say supply is ample, hedge funds and speculators are increasingly sceptical of that argument, betting that oil prices could rally further as the embargo on Iranian exports comes into force in November.

However, industry observers here are more measured about the commodity’s price.

DBS Equity Research’s Suvro Sarkar expects a pullback in oil prices caused by greater output from the US, Russia and Saudi Arabia, and he recommends buying key O&G proxies in the region on pullback.

O&G stocks have had a good run alongside oil price, with key proxies like Sembcorp Marine rising about 30 per cent since mid-August, he noted.

But Mr Sarkar prefers Sembcorp Industries as its current valuation remains undemanding, and he sees a target price of S$3.90, a hefty 30 per cent above its last traded price of S$2.96.

In contrast, firms whose earnings may be pressured by higher oil prices include those in the transport sector such as Singapore Airlines (SIA) and ComfortDelGro, OCBC Investment Research’s Ms Low said.

However, amid sustained higher oil prices, these companies have the option of passing on some of the higher costs to consumers, and/or hedge some of their requirements to soften the blow, she added.

DBS analyst Paul Yong shares this view: “The sharp increase in oil price is negative for airlines generally, as jet fuel costs account for 25 to 45 per cent of operating costs; more so for low-cost carriers, though the impact on individual airlines would depend on how much and how well they have hedged their exposures.

“In our coverage, SIA is the best hedged with up to 46 per cent of its fuel requirements for the next four years hedged at a relatively low jet fuel price of US$65 to US$70 per barrel. ”

Corrine Png, founder of transport equities research firm Crucial Perspective, was recently reported as saying that though SIA has the best fuel hedging strategy among all the Asian airlines, its substantial fuel hedging gains cannot completely offset the negative fuel cost impact.

DBS’ Mr Yong also said that the Chinese carriers do not hedge any of their fuel requirements, but they do have significant pricing power on their domestic routes to offset some of the higher fuel costs.

“Garuda Indonesia would be the most affected carrier among names we cover as they have a relatively low fuel hedging position, less than 30 per cent at a relative high cost – more than US$70 a barrel for brent, and they are also impacted by a weak rupiah versus the US$,” Mr Yong noted.

There is less consensus on transport giant ComfortDelGro.

Colin Tan, analyst at CGS-CIMB, pointed out that ComfortDelGro would likely be impacted by higher fuel cost but this “can be mitigated by the use of hedging instruments” as it has done in the past.

In its FY17 annual report, ComfortDelGro stated that it is “exposed to fluctuations in fuel price in its bus and rail operations and diesel sales business”.

And it “seeks to hedge the price risk associated with its fuel needs after considering fuel indexation in its contracts with various local authorities and uses hedging instruments, where necessary, to achieve the desired hedge outcome”.

However, it added that at the end of FY17, the company did not have outstanding fuel hedges.

Phillip Securities investment analyst Richard Leow thinks that the impact of rising oil prices on ComfortDelGro is limited.

He explained that fuel & electricity is just the third-largest cost component for both SBS Transit and ComfortDelGro, amounting to 13 per cent and 9 per cent of their operating expenses respectively.

The largest cost component for both is labour cost, followed by repairs & maintenance.

Mr Leow added that for the bus contracting model, “there is fuel price indexation, so SBS Transit is insulated from fluctuation in fuel price though there is a time lag in the indexation,” he said.

“In short, there is almost no impact from rising diesel price for the bus business segment. Only the rail business has exposure to electricity price.”

And he highlighted that diesel for taxis is not an expense item for ComfortDelGro. Instead, taxi hirers are the ones who bear the cost of diesel, though ComfortDelGro sells it at a subsidised rate to them.

In addition, ComfortDelGro’s taxi fleet has been contracting, Mr Leow said.