SembCorp interested in LNG terminal project
SembCorp interested in LNG terminal project
Dow Jones, Singapore
Singapore's SembCorp Utilities is interested in the ownership and operation of the country's first liquefied natural gas receiving terminal, which the government is considering building, the company's chief executive office has said.
The proposed S$500-S$600 million (US$289-$347 million) LNG terminal terminal would secure a third source of supply and create price competition with piped gas Singapore imports from Indonesia and Malaysia, CEO Tang Kin Fei told Dow Jones Newswires recently.
Additionally, Singapore has the finance available and the infrastructure in place to build the terminal, he said.
The government plans to issue a tender for a feasibility study for the project within the next two months, signaling strong interest in the project.
SCU, which is a wholly owned utilities arm of diversified engineering group SembCorp Industries, supplies power, steam and gas, and is involved in integrated utilities and offshore engineering.
SCU will be interested in importing LNG for its customers even if it doesn't own or operate the terminal, Tang said.
"It doesn't matter who owns the terminal, as long as it has open access for LNG importers," he said.
SCU's sister company SembCorp Engineering and Construction could build the LNG terminal, Tang said.
"We're interested in owning the LNG terminal, but it is not a must for us....We're more interested in selling the gas molecules," he said.
On the demand side, Tang said that SembGas's customers would want to buy more gas if the price is competitive.
SembGas sells piped natural gas to power generation and petrochemical companies including Tuas Power, Power Seraya, SembCorp Cogen, ExxonMobil, Ellba Eastern and some 50 customers in the Jurong and Tuas industrial areas, western Singapore.
Demand for more gas seems clear. The three main power generators in Singapore are all gearing up to use more gas at their dual-fuel combined-cycle power units.
"The LNG project is definitely viable...It will create price competition for piped natural gas and provide another source of gas supply for Singapore," Tang said.
Natural gas suppliers are now only interested in pricing the gas just below the power plant's production cost, he said.
"We could use LNG as bargaining tool against piped gas...We don't have much of a choice at the moment," Tang said.
Currently, piped gas from Indonesia costs about 115 percent of equivalent amounts of high sulfur fuel oil, which translates to about $4.80-$5.00 per billion British thermal units, he said.
Tang pointed out that China's LNG importers are securing LNG term contract price about $3.00-$3.50 per BBTU.
"We pay about US$400-500 million each year for our Indonesian gas supply," he said, adding that the gas suppliers to Singapore now have no incentives to reduce the price of piped gas.
SembGas, a unit in which SCU owns 70 percent share, buys 325 MMcf/d of gas from Indonesian West Natuna field.
The LNG terminal would offer more supply flexibility and cost saving to SembGas, Tang said.
SembGas could buy the 90 percent minimum of its contracted West Natuna gas supply, and fulfill its remaining requirement via LNG imports, he said.
Apart from the West Natuna gas supply, Singapore also receives 150 MMcf/d of gas from Malaysia and, by 2009, up to 350 MMcf/d from Indonesian Grissik field.
A Singapore LNG terminal could be smaller size than the normal terminal capacity of 3 million tons/year, Tang said.
A terminal of about 1.5 to 2 million tons/year capacity would be feasible for Singapore's needs, he said.