Regional LNG: Singapore?s Temasek group scours globe for sources of LNG: Report

Singapore-based Temasek Holdings? subsidiary Gas Supply Pte Ltd (GSPL) has started preparatory groundwork to find potential sources of liquefied natural gas (LNG) which can be shipped from around the globe to fuel growing gas demand by power stations and industries in Singapore, Business Times reported Tuesday.

This is because while it imports Indonesian natural gas via pipeline from Asamera, Sumatra, it will soon run short of the gas, given increasing needs, especially from new customers.

Similarly, natural gas from West Natuna, brought in by SembGas is already fully accounted for, including by various power stations, while gas from Malaysia goes towards meeting Senoko Power's needs.

As such, GSPL has started talks with potential LNG suppliers, even as the government is studying the feasibility of using LNG here, including the need for building a special receiving terminal.

"We are projecting that by 2009-2011, there will be enough demand here to justify LNG imports. And as it takes six years to bring an LNG project on stream, it means we have to start soon," Tan Chin Tung, the chief executive officer of GSPL said in an interview.

It has started sounding out potential LNG suppliers including in Australia, Indonesia and Brunei, and is also looking further afield, including to the Persian Gulf countries.

"Transportation costs will of course be lower, the closer the source," he said, citing for instance cost of about 69 US cents per million btu to transport LNG from Sakhalin to Singapore, compared to say 38-40 US cents if it were brought from say Irian Jaya.

Tan said that the timeline of about 6-7 years to get a LNG project going includes about a year for the feasibility and commercial study leading to a letter of intent. It will take another two years to cover negotiations for an LNG supply contract and preparations for a receiving terminal here, and finally about three and a half years to build the terminal itself.

Singapore already receives natural gas via three pipelines running from Indonesia and Malaysia, and LNG will provide diversity and security of gas supply, he said.

This is important, especially with power stations increasingly turning to using more-efficient gas - which makes up about 60 per cent of their feedstock currently - rather than fuel oil and diesel. There are several advantages for going the LNG route, said Tan.

Firstly economics: the cost of building both the liquefaction plant at the gas source, and at the receiving plant here has fallen considerably. A 1.5 million tonnes per annum LNG receiving terminal here will now cost an estimated US$270 million to build, he said, or 20-25 per cent less than a decade ago.

Essentially, natural gas is liquefied at the source, loaded on specialised LNG tankers for shipping, and then de-liquefied again into gas at the buyer's end.

Secondly, the price of LNG, unlike natural gas, is not linked to fuel oil prices, which move in tandem with crude oil prices, which are now at record highs. This makes LNG cheaper than natural gas, especially in the current buyers' market, Tan said, citing the example of two recent Chinese LNG deals. LNG itself is also about 30 per cent cheaper than it was six years ago.

There is now also greater operational flexibility in LNG deals, which typically are 5-6 years instead of 20 years, as these used to be tied to helping recoup high infrastructure costs.

Fourthly, there is also greater transportation option, as while dedicated LNG tankers used to have to be chartered on a long-term basis, there are now an increasing number, or about 10 per cent, which are unchartered and available. (*)