First supplies of Indon natural gas to S'pore expected in Dec

THE first supplies of Indonesian natural gas to Singapore are now expected in two months' time -- some six months ahead of schedule -- even as Malaysia last Thursday signed an initial agreement with Indonesia to buy gas from the same West Natuna fields.

Sources told BT that this follows the completion of the 640 km undersea pipeline connecting Singapore with the West Natuna fields. "The pipeline is ready and the first delivery is in December," one source said.

SembCorp Gas, which is buying 325 million standard cubic feet (mscf) daily of Natuna gas from Indonesia's Pertamina under a 22-year purchase agreement, confirmed last Friday it is ready to deliver gas to its customers on Jurong Island "a few months ahead of schedule", but did not specify any date.

The company's major customers include SembCorp Cogen and Tuas Power, and petrochemical companies such as ExxonMobil and Basell Eastern, a joint venture between Shell and BASF.

Under last week's preliminary deal struck between Pertamina and Malaysia's Petronas, gas deliveries from West Natuna to Malaysia of 250 mscf daily is expected to start in 2002.

Describing the Malaysian agreement as "more strategic than substantial, as not a lot of gas is being bought", one industry expert said the amount of gas purchased was "not large for Peninsular Malaysia", which currently consumes some 2,000 mscf daily.

But geographically, the Malaysian deal is a viable one, as Petronas just needs to build a new 40-km pipeline from its Duyong gas fields to connect to Indonesia's West Natuna fields, right smack next door.

From Duyong, the Indonesian gas can be transported via existing pipelines to Kerteh, Trengganu, and then via the Peninsular Gas Utilisation network southwards to Johor and Singapore.

(This is how Malaysian gas from offshore Trengganu is supplied to Singapore under a 15-year deal. Valid until 2007, Singapore Power gets as much as 150 mscf daily from Malaysia for its power stations.)

While no pricing details have been given for the gas sales to Malaysia, an Indonesian Mines and Energy official earlier said that Pertamina was hoping Petronas' purchase price would be around the same as that offered by Singapore.

This implies that the overall cost of the Indonesian gas for Malaysia is likely to be lower because of lower transportation costs, as only 40 km of new pipeline is needed versus the 640 km pipeline in Singapore's case.

The Malaysia-Indonesian gas deal is also strategic for both in that it offers the possibility of future deals and pipeline connections to untapped and potential large gas reserves in East Natuna.

The West Natuna-Duyong pipeline link will also be part of the proposed Trans-Asean Gas Pipeline grid linking the region.

"Such a link will open up markets to producers like Malaysia and Indonesia, and provide better and cheaper supplies to countries like Thailand and the Philippines," said one industry consultant.

Singapore's first deal to buy gas from Indonesia's West Natuna was signed between SembCorp Gas and Pertamina in January, 1999. The purchase agreement with Indonesia is slated to generate some US$8 billion (S$14 billion) for Indonesia.

A second Singapore-Indonesian gas deal is being negotiated between Singapore Gas, a unit of Singapore Power, and Pertamina. This involves the supply of 350 mscf of gas daily from Asamera field in Sumatra.

In August, a Pertamina official said negotiations on contract terms were near completion. (*)