S'pore to build LNG facility
S'pore to build LNG facility
SINGAPORE (Dow Jones): Singapore's SembCorp Engineering, a unit of SembCorp Industries (P.SEC), said news this week that the Indonesian House of Representatives may delay the pipeline construction for the Natuna natural gas project has prompted SembCorp to make "contingency" plans to build a liquefied natural gas import and storage facility in Singapore.
A SembCorp official confirmed Wednesday that SembGas, also a unit of SembCorp Industries, and SembCorp Engineering are exploring alternative sources of energy after reports out of Indonesia surfaced Monday about hitches in the tender process for the pipeline portion of the $8 billion Natuna project.
"This is part of our plans to ensure alternative sources of energy, as we shouldn't put all our eggs in one basket by depending on any particular source," said SembCorp Engineering President Tang King Fei, quoted in the Singapore Business Times Wednesday.
"We're looking at alternatives so the delivery of the gas doesn't get too delayed," confirmed the SembCorp official, who asked not to be named. "You have to satisfy your offtakers who sign up with you. You can't have questions regarding sourcing."
The $335 million contract for PT McDermott Indonesia to build a pipeline connecting the Natuna gas fields to Singapore is reportedly in jeopardy after a special committee formed by the Indonesian House of Representatives found irregularities in the tendering process.
The construction company, a subsidiary of J Ray McDermott SA of the U.S., was contracted to build a 650-kilometer, underwater pipeline for the transportation of natural gas from the gas fields in the South China Sea to Singapore for 22 years.
The project, being developed by a consortium of state-owned Pertamina and its production contractors Conoco Inc. of the U.S., Premier Oil of Britain and Gulf Shores Resources Ltd. of Canada, is scheduled to deliver 150 million cubic feet of gas a day from the gas fields near the Natuna islands beginning in 2001.
The volume is slated to increase to 325 million cubic feet a day by the second half of 2001.
The House committee found evidence indicating that McDermott had benefited from "insider information" to cut field survey costs, allowing it to submit a lower bid than its competitors, The Jakarta Post reported Tuesday.
Ever since the decision was made in May, legislators have criticized Pertamina for selecting McDermott because of the construction company's partnership with former president Soeharto's close friend, Muhammad "Bob" Hasan, who holds an 18 percent stake in McDermott.
Pertamina officials couldn't be reached for comment Wednesday, but have maintained that McDermott won the project in an open, transparent bidding process.
The Indonesian Parliament reportedly will debate the motion to cancel McDermott's contract between Aug. 16 and Aug. 23.
SembGas has obligations to invest an estimated $1.2 billion in the project, including the Singapore portion of the pipeline, two power plants and transmission infrastructure on Jurong Island.
The gas, if delivered, will supply Singapore power stations and petrochemical plants.
But SembCorp is taking no chances. "If the Pertamina deal is off, it isn't like we have no other options," the SembCorp official said. "But it doesn't mean the Pertamina deal has been completely ruled out."
SembCorp Engineering's Tang confirmed Tuesday that SembGas is in discussions with Singapore's Jurong Town Corp. and other authorities on its plans to secure a suitable site for the LNG facility, the Business Times said.
SembGas is also in discussions with Australian LNG suppliers and has plans to talk with LNG suppliers in the Middle East before the end of the year.