APPEC: Singapore says energy resilience needs supply optionality beyond strategic reserves

Asian refiners and governments need to build commercially viable alternatives into their oil supply chains rather than rely primarily on strategic inventories, said Singapore Minister of State for Foreign Affairs and Trade & Industry Gan Siow Huang at APPEC 2026, citing the shipping disruption through the Strait of Hormuz as a warning for the region.

Oil flows through the strait fell from about 20 million barrels/day before the conflict to just 2.7 million b/d between March and May while LNG exports effectively halted, said Gan Sept. 8 in her opening address of the conference, hosted by S&P Global Energy in Singapore.

"Resilience is no longer a nice-to-have; it is a strategic necessity," Gan said.

Strategic reserves are an important first line of defense because they can absorb the initial supply shock and buy time, but inventories are finite, she said.

"Once the buffer starts burning down, the question is: Can you actually bring an alternative supply?" Gan said.

Resilience, therefore, required alternative suppliers, routes, infrastructure and demand-side responses that could be activated quickly, rather than simply holding more stocks, she said.

The issue is particularly significant for Southeast Asia, given its dependence on Middle Eastern crude.

The Association of Southeast Asian Nations sources about 55% of its crude imports from the Middle East. The ASEAN Centre for Energy estimates that a closure of Hormuz could directly disrupt 28% of the region's final oil consumption, Gan said. She called for stronger regional cooperation through improved market information, coordinated emergency arrangements and the ability to approach alternative suppliers quickly.

Refiners face cost-flexibility trade-off

For refiners, however, diversification needs to be commercially viable.

About 60% of Southeast Asia's crude imports have traditionally come from the Middle East, reflecting the region's proximity to Gulf producers and refinery configurations designed around medium and heavy Middle Eastern grades, Gan said.

"Diversification does not mean abandoning established supply relationships. Instead, it means creating more options around them," said Gan, adding that the goal should be maintaining a practical set of alternatives that refiners have already tested and can activate quickly when normal supplies are disrupted.

That flexibility comes at a cost. Alternative crude supplies may require longer voyages, different yields, or additional storage, blending and refinery adjustments, Gan noted.

"The commercial question is therefore not simply: can we diversify? It is: where is additional resilience worth paying for?" Gan said, adding that companies would need to make that decision based on their assets, markets and risk exposure.

Singapore's trading, logistics role

Supply diversification also depended on capabilities across the wider value chain, including shipping, insurance, storage, financing, liquidity and risk management, Gan said.

"An alternative source is valuable only if you can deliver it when you need it," she said.

Singapore could play a role by bringing together physical infrastructure with traders, refiners, shipowners, financiers and insurers, Gan said.

Jurong Island houses more than 100 global energy and chemicals companies, while the Jurong Rock Caverns provide about 9 million barrels of commercial hydrocarbon storage, she said.

Governments, meanwhile, would need to provide stable policy and investment frameworks while companies determine how much resilience to build into their operations before the next disruption occurs.

"We cannot predict every shock. We can prepare for them," Gan said, adding that future disruptions could come from geopolitics, extreme weather, infrastructure failures, cyberattacks or sudden demand shifts.

"Resilience has to be built before the crisis and not during the crisis," she said.