Issue 2 | APRIL 2012
Get Ready for an LNG-fuelled Future

As Singapore continues to rely on natural gas to generate its electricity, it is vital to ensure a stable and secure gas supply to mitigate disruptions. Diversification of our energy sources is crucial.

The Expanding Role of Gas

Our country’s increasing dependence on natural gas is apparent. In 2001, 26% of Singapore’s power generation was fuelled by natural gas. Today, this figure has grown to approximately 80%. This sharp increase can be attributed to the switch by power generation companies from costly oil-fired steam plants to gas-fired combined cycle gas turbines, which are more efficient. There are also more refineries and petrochemical companies that use natural gas for their operations. It is hard to ignore the implications of gas supply disruptions; such occurrences can cost our economy millions of dollars daily.

Coming Soon: Singapore’s First LNG Terminal

Several significant initiatives were undertaken to improve and secure the supply of natural gas in Singapore. In particular, the Government announced in August 2006 its plans to build a LNG terminal on Jurong Island to import LNG. This pioneering facility will enable us to access global gas supplies to meet Singapore’s increasing demand for energy. The Government also announced a policy on gas import controls that limits the supply of new piped natural gas. This helps to build up demand for LNG. In the following year, EMA invited proposals for the role of demand aggregator for regasified LNG from end-users in Singapore and to procure LNG supply. In April 2008, BG Asia Pacific Pte Ltd (BG) was appointed as the LNG aggregator for Singapore with a franchise to import up to 3 million tonnes per annum of LNG into Singapore.

The LNG terminal was originally intended to be developed commercially by PowerGas. However, financing the terminal became difficult when the global financial crisis hit in 2009. To prevent delays, the Government announced in June that year that it would take over the development and ownership of the LNG terminal. The EMA followed with the formation of the Singapore LNG Corporation to develop, build, own and operate the LNG terminal with the help of Government funding.

LNG Today

Today, construction of the LNG terminal is well underway and it is expected to be operational by the second quarter of 2013. With two tanks initially, the terminal will be able to process up to 3.5 million tonnes of LNG per year. This is set to increase up to 6 million tonnes a year when a third tank and additional facilities are added in 2014.

Sales of LNG have been encouragingly strong; BG has already sold 90% of its franchise. Local gas buyers are beginning to see the value of having a diversified gas supply to alleviate possible disruptions. The Government has also embarked on a study to explore options for future LNG procurement, in which the industry and stakeholders have been consulted on in March this year. A set of potential LNG procurement frameworks ranging from a complete open access model to a single regulated importer have been considered. The consultation will yield a shortlist of feasible alternatives for the industry to consider, taking into account how the global LNG market works and the restrictions required to maximise the use of the LNG terminal.

Staying Ahead

The LNG terminal will enable other related businesses to take off as well. Many LNG traders have set up their bases here in Singapore to leverage on its prime geographical location and the abundance of financial, legal and IT expertise. The availability of spare capacity within the terminal during the initial years will also provide trading opportunities for them. This will enhance Singapore’s position as an LNG trading and bulk-breaking hub once the terminal is ready.

Singapore is also preparing itself for the use of LNG for marine vessel bunkering in the future, as carbon emissions restrictions are set to be phased in globally in the coming years. Watch out for LNG as it assumes a key role in fuelling our nation’s economy in the long run.

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