Sunday, April 28, 2013

SINGAPORE: Regulator and industry to meet again next month on guidelines for LNG imports

(EnergyAsia, April 29 2013, Monday) — Singapore's energy regulator and natural gas companies will meet again next month to help shape guidelines on the import of additional volume of liquefied natural gas (LNG), said trade and industry minister S. Iswaran.

The Energy Market Authority (EMA) initiated the first round of industry consultations last year after UK's BG Group had successfully placed 90% of its exclusive contract to import and supply the first tranche of three million tons to Singapore's domestic users.

Amid increasing competition for LNG supplies throughout Asia, Singapore has been forced to quickly address the challenge of securing additional volumes. LNG prices in Asia have stayed strong in the US$14-$18 per million BTU range the last two years following the loss of Japan's nuclear power capacity in the aftermath of its earthquake-tsunami tragedy.

China, India, South Korea and Southeast Asian countries have all joined in the global scramble for LNG supplies.

Singapore is scheduled to start up its first LNG import terminal this quarter after successfully importing its first cargo from Qatar last month. Starting with two tanks with a total capacity of 3.5 million tonnes, the terminal will be expanded to six million tonnes by end-2013 with the addition of a third tank. It will be expanded to nine million tonnes by 2015 to support LNG trading, redistribution and bunkering.

Speaking at the inaugural KPMG Global Energy Conference in Asia, Mr Iswaran said the new Jurong Island terminal will enhance Singapore's energy security.

"Ultimately, our aim is to ensure that end users of gas in Singapore will have more options and flexibility in securing stable, secure and competitively priced gas to meet their needs," he said.

With LNG set to play a significant role in the country's energy mix, Singapore's planners are seeking to implement an import framework that helps achieve energy security through a diversity of reliable supply sources while ensuring end-users receive competitively priced gas.

Mr Iswaran said regulators have several considerations in assessing what makes for a viable LNG import framework.

"First, while Singapore's incremental gas demand in the near-term may be relatively small, our total demand for gas could eventually increase to about 15 million tonnes/year by 2024. It's a substantial volume, and any procurement framework for future LNG must be able to effectively address this future demand for us.

"Second, future LNG import should enhance the price competitiveness of our gas supply and also help to minimise volatility. This could be achieved through a diversified portfolio of LNG from multiple supply sources and, where possible, a blend of contract durations and price indexation.

"Third, the future LNG import framework should take into consideration the available capacity and operational efficiency of the LNG terminal, and the number of users it can effectively accommodate.

"Finally, the framework should allow our domestic end users to benefit from opportunities that may arise from developments in the global gas market, such as the emergence of new gas supplies and movements in gas prices."

Last year, the EMA published a consultation paper to seek industry views on the two options for Singapore's future import of LNG.

The first was the model of the regulated sole importer as the framework which has been adopted by South Korea, Japan, Taiwan and Thailand. Under this framework, a regulated sole importer is tasked with procuring all future LNG demand for end users in the country. It also simplifies negotiations on terminal access and operational issues.

The second option is the multiple aggregator framework which has been adopted in the EU and the US. Under this model, importers could either be appointed by EMA through a competitive request-for-proposal process, or it could emerge from the natural competition between players in the LNG import sector, resulting in natural aggregation.

Mr Iswaran said there has been considerable debate over the strengths and weaknesses of these two models. Some industry players argue that demand aggregation under a sole importer would allow for scale in procurement that would help to secure more favourable LNG prices and terms. On the other hand, some are concerned whether a sole importer would be able to secure the most competitive terms for end-users. They note that allowing multiple aggregators will allow for price discovery, and that recent empirical data suggests that there are limits to the price advantage that can accrue to volume buying.

With the debate still far from resolved, he said the EMA will launch a second phase of industry consultation next month on a proposed LNG import framework for Singapore.




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Thursday, April 25, 2013

Corporate: Singapore LNG Terminal on track for 2Q launch; gets ready for global suppliers


By Kang Wan Chern

Towering storage tanks for liquefied natural gas (LNG), jetties for tankers to berth and unload their LNG cargo and a complex maze of pipes have gradually defined the skyline at the Meranti Seafront of Jurong Island over the last three years. The Singapore LNG Terminal now occupies as much as 10% of the 32 sq km man-made island off the southwestern part of the city-state. Scheduled to begin operations in 2Q2013, the LNG terminal will be able to import and store liquefied gas and could boost Singaporeâ s aspirations to be Asiaâ s first LNG trading hub.  

Constructed by South Korean engineering company Samsung C&T Corp at the cost of about $1.5 billion, the LNG terminal will have an initial capacity of three million tonnes per annum (mpta), more than half of which has already been booked by local power companies. Meanwhile, a third 180,000 cu m gas storage tank at the terminal is already being built. It will double the terminalâ s LNG storage and regasification capacity to 6mtpa by 2014. There are plans to build a fourth tank by 2017 that will cost $500 million and have the capacity to store up to 266,000 cu m of gas â " enough to fuel up four A380 jets. That will take capacity up to 9mtpa.

But for now, as the terminal prepares to open for commercial operations, SLNG Corp, the government-owned company that will be operating the facility, is rushing to complete all the trial runs to ensure the LNG terminal is operationally fit and safe. On March 27, the terminal received its first shipment of LNG from Qatargas Operating Co â " the worldâ s largest LNG producer â " as part of a series of shipments intended for use in initial test runs and to cool down the terminal for full and continuous operations. It was fitting that the cargo was delivered to Singapore in a Qatargas Q-Max LNG tanker, the largest vessel in its class.

â The purchase of LNG from Qatargas is a significant milestone not only because it is Singaporeâ s first LNG shipment, but also because it affirms that Singapore now has the capability to import LNG from anywhere in the world,â says Neil McGregor, CEO of SLNG. â Singapore has invested in this flexible import-export LNG terminal to ensure it has secure options to power the economy in the future, as demand for gas is expected to rise.

LNG is natural gas stored in liquid form at atmospheric pressure and a temperature of -160°C. Natural gas is extracted from gas fields and cooled into liquid form, or LNG, enabling it to be shipped over long distances when pipeline transportation is not feasible. Once the cargo reaches the Singapore LNG Terminal, it is transferred to storage tanks and later reheated back into its gaseous form and injected into Singaporeâ s vast gas network when needed. LNG is an attractive alternative to oil and coal because it is a cleaner and cheaper form of energy. The LNG terminal is also designed to be enviroment-friendly.

â The Singapore terminal has the infrastructure required to store LNG and the technology to heat and regasify LNG using seawater,â says McGregor. â Seawater at 28°C is pumped into the LNG storage tank, which is kept at -160°C. When both meet, the gas immediately vaporises. This is a more efficient system of regasification than using a gas-powered system to turn liquid into gas,â he explains.

The new terminal is turning operational at a time when demand for electricity from Singapore homes, offices and factories is fast rising. In 2010, the countryâ s consumption of natural gas grew to 8.7 billion cu m (bcm) from 1.3bcm in 2000, and consumption is forecast to continue growing by around 5% a year over the next five years, according to the International Energy Agency (IEA). Currently, about 80% of Singaporeâ s electricity is generated by gas, of which a large portion is imported from Malaysia and Indonesia through four offshore pipelines by power companies that belong to Keppel Corp and Sembcorp Industries. Singapore imports 9.6bcm of natural gas a year currently, according to the IEA. Meanwhile, the remaining power requirements of the countryâ s households are met by town gas, which is manufactured domestically.

Diversifying from piped gas

However, Singapore has always been keen to diversify its supply of gas from piped natural gas (PNG) from its neighbours to globally sourced LNG gas fields such as those from Australia, West Africa and the US. â Under the PNG contracts, we are price takers forced to accept whatever price is set by our suppliers,â notes Pek Hak Bin, head of energy and natural resources at KPMG Singapore. â If we had alternative sources of energy, we would be able to manage our position much better. With more alternative sources of LNG coming into Singapore, this should help to bring the prices down.â

To encourage the switch to LNG, the Singapore Energy Market Authority (EMA) enacted regulations imposing import controls on PNG when the idea of building the LNG Terminal was mooted in 2006. Currently, power companies are allowed to import PNG for commercial purposes under a bridging option, but this will cease once the LNG terminal opens.

â Singapore is working on a blueprint for its future gas supplies, which will comprise a diversified portfolio of PNG from neighbouring countries and LNG from further afield, with these secured on long- and short-term [contracts] as well as spot basis. The import of new PNG for commercial power generation under the bridging option has been extended to end when the LNG terminal commences commercial operation,â an EMA spokesperson tells The Edge Singapore.

As of now, LNG will be supplied through contracts between BG Singapore Gas Marketing, a unit of the UK-based gas producer BG Group that was appointed by the government; and Singaporeâ s power companies that include Singapore Power, Senoko Energy, PowerSeraya, Tuas Power Generation, Sembcorp Cogen, Keppel Merlimau Cogen and Island Power. But that could change in future, as the EMA is studying options for future imports that could involve appointing other LNG distributors besides BG to create a more competitive market.

â BG will buy and transport the LNG to the terminal, where it has a contract with us to store the LNG until it is needed,â says McGregor. â We will then regasify the LNG and inject it on demand into the Singapore gas network system, where the gas will be combined with PNG from Malaysia and Indonesia. But over time, as PNG contracts expire and we expand the capacity of the terminal, a higher proportion of Singaporeâ s electricity will be powered by LNG.â

â The terminal gives us the opportunity to be more flexible when buying LNG, such as buying portions of our gas on long-term contracts, mid-term contracts and on the spot market for more competitive prices,â adds McGregor. â If you buy LNG on long-term contracts in this market â " like what Japan is doing â " you secure your supply of LNG, but consumers end up paying a higher price for electricity. But if we purchase a portion of our LNG on the spot market â " such as additional gas supplies diverted from Europe into the market â " we could be paying much less.â

Making of an LNG hub

More importantly, the terminal could turn Singapore into a major hub for trading LNG in Asia, which accounted for 71% of global demand in 2012, according to Paris-based International Group of LNG Importers.

As Singapore is ideally situated between the gas-exporting Middle East and gas importers such as China or Japan, this gives rise to the potential for backhaul cargo. â Ships sailing back after unloading in China or Japan can now refill in gas-producing areas such as Australia, Brunei or Indonesia, and trade with Singapore on their way back to the Middle East, enabling their owners or operators to generate more cash on their fleets instead of sailing back empty,â says McGregor. â In the next few years, there will be as many 50 LNG terminals across the region, but we will be the biggest and offer connectivity between all these ports.â

Over the past few years, investments in the exploration and production of natural gas have led to massive gas discoveries, particularly in the US, China, Australia and Malaysia. â If these plans materialise, we are likely to see a huge influx of supply to Asia, which will benefit Singapore as a trading hub for LNG,â says KPMGâ s Pek. Consequently, a large number of commodity trading firms have already established offices in the city-state, including trading houses such as Trafigura, ConocoPhillips and Gazprom, in anticipation of higher trade flows.

In future, the LNG terminal can also be expanded to handle up to an average of 15 million to 20 million tonnes of gas and house as many as seven gas storage tanks. â As a deepwater terminal, we are also able to handle up to two Q-Max tankers and one smaller LNG tanker at a time, and that enables cargo to be delivered, stored and reshipped to other parts of the region in smaller carriers, based on demand and over a much shorter time,â says McGregor. For instance, shipments from Europe to Japan, which currently take about 45 days, can be shortened to a mere 10 days by buying stored LNG from Singapore when needed. Meanwhile, countries, such as Taiwan, with limited storage infrastructure, will also benefit from trading with Singapore. â What we are selling is access to a trading platform for LNG, and frequency of LNG shipments to countries such as Japan and Taiwan,â says McGregor.

The establishment of a regional hub could eventually help revolutionise existing pricing mechanisms under which LNG is bought and sold in Asia. Currently, 90% of the natural gas traded in Asia is dominated by long-term contracts, where the price of gas is pegged to that of oil, resulting in higher and more volatile prices than in other parts of the world. This is because of â the regionâ s lack of both a trading hub to facilitate the exchange of natural gas and the development of a transparent price signal to steer investment in natural gas infrastructureâ , according to the IEA.

Boost for local businesses

Meanwhile, a vibrant LNG hub would mean more business opportunities for local companies, especially those in the marine and oil and gas (O&G) industries. For a start, Singaporeâ s two main shipyards, Keppel and Sembcorp Marine, will likely benefit from potential orders for LNG carriers as well as repair work from tankers calling at the Singapore LNG Terminal. â Singapore is also home to a large number of SMEs [small and medium-sized enterprises] that provide supporting services such as engineering, repairs and maintenance and servicing to the O&G industry. These companies are likely to benefit from a rise in the physical LNG trading business in Singapore,â says Pek.

A handful of banks such as ABN Amro and Standard Chartered Bank are also positioning to benefit from LNG. â LNG projects tend to be capital-intensive and have traditionally relied heavily on the debt markets. Aside from expansions of existing facilities and the new land-based mega-projects that have traditionally been the mainstay of the LNG business, we see a whole range of opportunities where LNG can contribute to a more diverse and sustainable energy market in the future. These are likely to include development of floating liquefaction facilities, small-scale liquefaction projects and increased use of LNG as a transport fuel,â says Benjamin Arnott, director of O&G financing at Standard Chartered.

Earlier this month, Singapore sovereign wealth fund Temasek Holdings announced that it had set up a company to invest in the LNG industry. With an initial capital of $1 billion, Pavilion Energy will invest in upstream project development, build storage and regasification terminals and invest in LNG shipping. Temasek may also co-invest alongside the new company, which is expected to commence operations in September, Pavilion said in an April 5 statement. The company has appointed Hassan Merican, former president and CEO of Malaysiaâ s state-owned oil company Petronas, as chairman of its board, and also enlisted Liew Mun Leong, former CEO of CapitaLand, to join its senior management team.

Ultimately, McGregor is confident that the LNG terminal will achieve break even within the first few years of operations and quickly generate a steady rate of return over the longer term, given the level of demand in the region. â The fact that we have an LNG terminal and can act as a gateway between producing and consuming regions is a feather in our cap; it underpins our economy by increasing our energy security, pricing competitiveness and market liquidity,â he says. â That is why we have gone ahead with this bold $2 billion decision. We have definitely invested at the right time.




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Monday, April 22, 2013

SINGAPORE: SembCorp Industries secured separate power deals in India and the UK

(EnergyAsia, April 23 2013, Tuesday) — Singapore-listed energy and utilities company Sembcorp Industries said its subsidiaries have recently concluded two power deals in India and the UK.

The company's jointly owned Thermal Powertech Corp India has secured a 25-year agreement to supply a total of 500MW of electricity to four power companies owned by the Andhra Pradesh state government.

Sembcorp said it will supply the electricity to the Central, Eastern, Southern and Northern Power Distribution Companies (APDC) from a 1,320MW coal-fired power plant in Krishnapatnam that will help the state close a power deficit running as high as 19% during peak periods.

The 68.7-billion rupee plant's supercritical technology will enable it to enhance energy efficiency and reduce carbon dioxide emissions, said Sembcorp which owns a 49% stake in TPCIL through its wholly-owned subsidiary, Sembcorp Utilities. The majority 51% stake is held by Gayatri Energy Ventures, a wholly-owned subsidiary of India's Gayatri Projects. (US$1=55 rupees).

In a separate deal, Sembcorp said it will be developing a new waste-to-energy plant on a 770-hectare industrial site in Teeside in the UK, making it the first outside Singapore for the company.

The plant has the capacity to produce up to 49 megawatts of gross power or 190 tonnes per hour of steam from municipal and commercial waste.

Sembcorp will have a 40% stake in the joint venture that includes Suez's SITA UK (40%) and Japan's Itochu Corp (20%) that will use up to 450,000 tonnes of municipal waste that would otherwise have gone to landfill.

The waste will be supplied by the Merseyside and Halton Waste Partnership under a 30-year contract, which the joint venture won through a competitive bidding process.

Tang Kin Fei, Sembcorp's Group President and CEO, said:

"We are very pleased to embark on this project and to develop a new energy-from-waste facility at our Wilton International site, a quality industrial site that offers integrated services, from land, utilities to infrastructure, to customers there. This new energy-from-waste facility will complement our existing assets at the site to generate power and steam competitively, enhancing the competitiveness of our UK operations. It is also a significant milestone as we continue to grow our renewable energy capabilities."



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MARKETS: “Significant” gas liquefaction capacity needed to meet global demand over next decade, says consultant

(EnergyAsia, April 22 2013, Monday) — The world will need 180 trillion cubic feet (tcf) of natural gas feed and "significant" liquefaction capacity over the next decade to meet a projected doubling in global liquefied natural gas (LNG) demand by 2025, said consultant Wood Mackenzie.

Presenting at the LNG 17 conference in Houston, US last week, Frank Harris, the company's head of global LNG consulting, said companies will be challenged to access and develop these gas resources.

He said production must increase to satisfy the world's incremental LNG demand growth of 4.5% per year to 2025 as well as replace supplies "lost" to existing LNG projects.

"These are projects where production is going into decline, either due to depleting reserves or diversion of reserves to meet demand from local gas markets," he said.

"Several major gas resource holding countries, such as Egypt and Indonesia, now have such strong domestic demand for gas that reserves can no longer be made available to fully support export – from new, and in some cases existing facilities.

"This creates the requirement to look for new sources of supply."

For now, natural gas supply is plentiful, due to successful exploration and discovery of conventional gas and largely to the huge growth in unconventional reserves, said Mr Harris.

In North America, the shale gas revolution has created the potential for significant LNG exports, although proponents face challenges. While explorers have found large reserves from Australia to East Africa to the Levant, turning them into LNG remains a challenge.

LNG developers have the options of exploiting existing conventional resources, finding additional conventional resources, or developing unconventional resources, said Wood Mackenzie. However, each of these options has its challenges, typically a mixture of technical, political and/or economic factors.

"From the LNG industry's perspective this means that the main challenge is how to combine exploitation of discovered conventional resources, with exploration for more conventional gas and the development of unconventional resources," said Mr Harris.

While unconventional gas to LNG remains a key industry theme, Wood Mackenzie sees limits to its ultimate role, driven by a combination of competing, domestic requirements for gas, economics and environmental concerns.

"Unconventional gas for LNG is an increasingly exciting development opportunity for the industry, although local issues may restrict its ultimate contribution," said Noel Tomnay, the company's head of global gas research.

"We expect gas focused exploration to continue as a major theme, particularly in light of burgeoning exploration budgets, but there will be the need for greater or increased focus, otherwise players risk just adding to the bank of already stranded gas."



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