Singapore Begins Construction of First LNG Terminal on Jurong Island

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Researched by Industrial Info Resources (Sugar Land, Texas)--State-owned Singapore LNG Corporation Pte Limited (SLNG) (Singapore) has begun construction of the company's first liquefied natural gas (LNG) terminal, the Singapore LNG Terminal, on a 30-hectare site within the premises of the industrial hub on Jurong Island. The groundbreaking ceremony was held March 31. The two-tank terminal will be constructed with an initial capacity of 3.5 million tons per year, with provisions to increase the capacity to more than 6 million tons per year.

The terminal has been designed to import LNG from various suppliers and then re-export it to regional markets. The $1.07 billion terminal project is expected to be operational from 2013, a year later than originally scheduled. The funds for the project will be secured through loans and equity raised by the Singapore government. When completed, the LNG terminal will be Asia's first open-access, multi-user LNG terminal.

The project is part of the island state's energy diversification program outlined in 2006. According to Singapore's Minister of State for Trade, Industry and Education S. Iswaran, the LNG terminal will enable Singapore to meet its rising energy needs and also boost the growth of a healthy gas market that can support the nation's industrial growth.

In 2008, BG Singapore Gas Marketing Pte Limited (Singapore), a subsidiary of natural gas and oil company BG Group plc (OTC:BRGYY) (Reading, England), was selected as the LNG aggregator for Singapore. Under the terms of the contract, BG will be the only company licensed to import LNG and sell the re-gasified fuel to users in Singapore. The company can sell up to a maximum of 3 million tons per year. From 2012 onwards, the company will aggregate the requirements of the nation's end users and procure the required quantities.

BG has also committed to a 20-year supply of LNG after initially sourcing it from Egypt, Equatorial Guinea, Trinidad and Tobago, West Africa, and later from the company's Curtis Island coal seam gas fields venture in Queensland, Australia. According to plans, the coal seam fields will be ready to operate from 2014. The company will initially supply 800,000 tons to 1.2 million tons per year of LNG. With increasing demand, the supply will be ramped up to 3 million tons per year by 2018

Singapore's six power-generating companies--Island Power Company Pte Limited, Keppel Merlimau Cogen Pte Limited, PowerSeraya Limited, SembCorp Cogen Pte Limited, Senoko Energy Supply Pte Limited and Tuas Power Generation--have signed 10-year, multibillion dollar contracts with BG under which they will each purchase 1.5 million tons per year of the regasified LNG. The committed quantity is equivalent to about 25% of the LNG currently imported by Singapore via pipeline. The contracts are renewable, and the quantities purchased may be increased if the power companies invest in new power generation facilities and consequently, require additional fuel to operate them. SLNG has not signed any re-export contracts so far.

In February 2010, SLNG awarded the project's engineering, procurement, and construction (EPC) contract to trading and construction company Samsung C&T (SEO:000835) (Seoul, South Korea). The selected project management consultant is Foster Wheeler Asia Pacific Pte Limited (Singapore), a subsidiary of Foster Wheeler AG (NASDAQ:FWLT) (Clinton, New Jersey). The gas storage tanks are likely to be designed by Korea Gas Technology Corporation (Seoul, South Korea), a unit of Korea Gas Corporation (SEO:036460) (Kogas) (Seoul).

The regasified LNG will be transported to the existing pipeline network through a 65-kilometer pipeline to be constructed by PowerGas Limited (Singapore), part of the Singapore Power Group (Singapore). In 2008, PowerGas was selected as the developer of the LNG terminal, but because of the financial crunch and the ensuing problems, the government took over the project in June 2009.

The Singapore government hopes that the LNG terminal will be used by several companies for storage and reloading, making the terminal a center for LNG trading in Asia. SLNG Executive Director Neil McGregor said that SLNG is talking to several companies, one of which is oil, gas, and pipeline company Gazprom OAO (OTC:OGZPY) (Moscow, Russia), regarding trade. Gazprom recently opened an office in Singapore.

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