Singapore LNG sector reaches milestone with more importers

Singapore LNG sector reaches milestone with more importers
Workers at Singapore's first liquefied natural gas (LNG) terminal at Jurong Island, which is about 80 per cent complete and will be operational in the second quarter of 2013.
PHOTO: The Straits Times


BESIDES the launch of liquefied natural gas (LNG) futures, Singapore will this year see another milestone in having up to two more LNG importers appointed.

And if local firms Pavilion Energy and Sembcorp Industries in the running are selected for the hotly contested aggregator role, this could accelerate their growth as LNG players.

The Energy Market Authority (EMA) is currently in the process of appointing up to two more companies to supply Singapore with the next tranche of LNG needed by power plants and industries here.

In May last year, it shortlisted four companies: BG, Pavilion Energy, Sembcorp Industries and Shell.

Since then, however, Shell and BG have announced a merger. Asked whether this would change EMA's considerations, the regulatory body noted that the merger is still pending the approval of the firms' shareholders.

Any change to their earlier proposals as a result of a change in ownership would require EMA's approval, it said.

The new importer or importers, to be announced by the second quarter of this year, will be awarded an exclusive franchise of three years or until it has sold one million tonne a year of LNG, whichever comes first.

BG won the exclusive right to supply up to three million tonnes a year of LNG to Singapore for up to 20 years.

EMA is expecting Singapore's incremental gas demand - beyond what BG would bring in - at about 1.15 million tonnes a year up to 2018, followed by more significant increases after 2020 when the current piped natural gas contracts end.

Being named an LNG buyer will have a bigger impact on the local companies compared with the bigger international ones, said Wood Mackenzie analyst Chong Zhi Xin.

"Should a local player capture the market in Singapore, it can then develop other capabilities," he said.

"The local player will be able to begin establishing its value chain by bringing LNG into the market and developing auxiliary services like LNG bunkering and small-scale LNG."

Securing the role would provide cashflow for Pavilion Energy, and transform Sembcorp Industries into a business beyond power generation, Mr Chong added.

For international players, "the major benefit of securing the Singapore market provides more opportunities for portfolio optimisation", he said.

Pavilion Energy, a unit of Temasek Holdings, said last year that it plans to start providing small-scale LNG solutions in South-east Asia, and has already started discussions with several partners in markets such as Indonesia and the Philippines.

The group also signed a 10-year agreement to buy LNG from Russia's Gazprom Marketing and Trading, adding to its supply portfolio. Since its inception in 2013, Pavilion has taken a stake in gas fields in Tanzania, secured LNG supply from the United States and also signed various portfolio LNG supply contracts.

These have strengthened its proposal but are a "quite a risky bet" as it adds to supply that Pavilion has yet to sell, Mr Chong said.

Sembcorp, which has been quieter on this front, told BT that it has secured "several preliminary LNG supply agreements".

The role of an LNG aggregator would also be a "natural extension of its existing business and capabilities" due to its experience in piped natural gas supply, strong customer base and own source of demand from its cogeneration plants, it added.

Besides Pavilion and potentially Sembcorp Industries, another Singapore-linked firm has emerged as a notable player in the LNG sector.

Noble, which in based in Hong Kong but listed in Singapore, in late December signed its first term sales contract to an Asia-Pacific buyer.

It has reached two million tonnes of LNG in less than 18 months of operations, it said. This has been possible because new LNG buyers - Egypt, Jordan and Pakistan - have emerged, said Mr Chong.

This article was first published on January 22, 2016.
Get The Business Times for more stories.

More about

Purchase this article for republication.



Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.