S'pore Opts For LNG To Diversify Power Sources

choongyong.koh — Tue, 05 Sep 2006 02:08:43 -0000

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Straits Times (8 August 2006) - Singapore Opts For LNG To Diversify Power Sources

Aug 8, 2006
S'pore Opts For LNG To Diversify Power Sources
It will reduce over-reliance on piped natural gas from Indonesia and Malaysia
By Economics Correspondent, Erica Tay
Straits Times

POWER plants here will be plugged into a new, potentially cheaper source of fuel after a government decision announced yesterday to import liquefied natural gas (LNG) from 2012.

This will cut the nation's over-reliance on piped natural gas from Malaysia and Indonesia and will also help meet rising demand for electricity.

An overwhelming 80 per cent of Singapore's electricity is currently powered by piped gas from the two countries, and the rest by oil.

But in about six years' time, Singapore will have a three-million-tonne-a-year terminal costing an expected $800 million to receive shipments of LNG to be processed and sold to power plants.

This terminal will be able to process around one-third of the current level of piped gas imported into Singapore.

LNG is natural gas cooled to liquid form and delivered by tankers from source countries all over the world, including Australia and Qatar.

The new facility will turn LNG back into gaseous form for the power plants.

Two years ago, a disruption in the piped gas supply from Indonesia's West Natuna to Singapore caused a blackout affecting 300,000 homes here, prompting calls to consider LNG imports.

The decision to import LNG was announced by Trade and Industry Minister Lim Hng Kiang at an energy forum organised by industry watchdog, the Energy Market Authority (EMA). 'We need to diversify our energy sources to ensure that we are not over-reliant on a single source for our energy needs,' he said. 'As such, the Government has decided to import LNG to meet future rising demand for energy as our economy expands and our population increases.'

This decision follows a feasibility study by Tokyo Gas Engineering, lasting about a year, which found that LNG is significantly cheaper than piped gas when the price of crude oil is above US$40 a barrel - since the price of piped gas is more closely linked to crude prices.

Crude prices are nearly US$80 a barrel now, but whether LNG will be cheaper than piped gas will depend on factors such as LNG supplies at the time.

The Government said importing LNG is desirable firstly because it reduces Singapore's dependence on oil and piped gas. Secondly, many more countries produce LNG, including Russia, Yemen and Oman, which means Singapore would be less vulnerable to supply disruptions from any one source.

Third, LNG has a more stable price than piped gas as LNG contracts are locked in for very long periods. Piped gas prices tend to be mostly linked to fuel oil prices and are therefore more volatile.

Some time in the second half of next year, the EMA will invite prospective investors to bid to build and operate the LNG terminal.

The $800 million is the sum required to build a typical three-million-tonne facility, and may vary according to investors' plans, Mr Lim said.

'The intention is not for the Government to build the facility, but for the private sector to build, own and operate the facility.'

However, he does not rule out the possibility of the Government co-investing in the project, if needed. 'If the market feels a co-investment is needed from the Government, we will seriously look at it.'

To reassure potential investors, Mr Lim announced a moratorium on new gas import contracts until the LNG terminal's capacity is reached. 'What we are saying is that future demand for energy needs will come from LNG.'

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S'pore Opts For LNG To Diversify Power Sources