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Gas swap sees S'pore-bound PNG re-routed to Indonesia

Deal involving Sembgas, Gas Supply Pte Ltd is for Indonesia to meet urgent domestic demand

[SINGAPORE] A complicated gas swap which will see some contracted, Singapore-bound Indonesian piped natural gas (PNG) re-routed to meet urgent domestic needs there has kicked in this week.

The deal, which involves two Singapore PNG importers, Sembgas and Temasek-owned Gas Supply Pte Ltd (GSPL), sees Indonesia diverting up to 37 million standard cubic feet daily (mscfd) of piped gas from Sumatra - from which it currently supplies GSPL here. This otherwise Singapore-bound volume made up for additional supplies from its Natuna fields to Sembgas in Singapore.

The swap comes almost three years after it was first mooted in late-2011.

Crucially, it also sends a signal that Singapore's piped gas supplies from neighbouring Indonesia and Malaysia could shrink in future, as domestic gas demand grows in those countries.

The latest swap deal is complicated as it also involves the operators of the supplying gasfields, that is, ConocoPhillips which operates the Grissik field in Sumatra, and Premier Oil which operates the Natuna field, as well as the different pipeline operators. But right from the outset of discussions in late-2011, all the parties have understood Indonesia's needs.

News of the swap breakthrough came via an announcement by Premier Oil on Wednesday, with its CEO Tony Durrant saying: "We are delighted that our operated Natuna Sea fields are now delivering gas into the domestic (Indonesian) market as well as into Singapore via this innovative commercial agreement between multiple parties in Singapore and Indonesia."

Premier said that under the domestic swap arrangement which started on Tuesday, it will deliver additional volumes to Singapore from its Natuna Sea Block A, which will be swapped with existing supplies from Sumatra to Singapore. These Sumatra volumes will be re-directed to the Indonesian domestic gas market.

It is understood that the re-directed gas is going to PGN (Perusahaan Gas Negara), the biggest natural gas company there, which will then transport the gas to satisfy industrial or power needs.

Sembgas currently pipes in 325-340 mscfd of Natuna gas daily under its first gas sales agreement with Indonesia, and another 86 mscfd under a second GSA. GSPL pipes in another 350 mscfd of gas from Sumatra. With the swap kicking in, GSPL's volumes which have been diverted from Sumatra, will be replaced by additional supplies via the Natuna-Singapore pipeline.

Two others bring in Malaysian piped gas. Keppel Gas is importing 43 mscfd of Malaysian gas under a fresh 17-year deal, following an earlier 18-year deal for 115 mscfd which it inked in 2005. Senoko Energy's Malaysian supplies has meanwhile reportedly been slashed by over two-thirds, from 150 mscfd under a 15-year contract which expired in 2008, to about 40 mscfd and for just up to 10 years.

But with neighbouring countries increasingly needing the gas for their own needs, Singapore has started to diversify its supplies through imports of liquefied natural gas, with the start-up of the Singapore LNG regasification terminal last year. This is reflected in the latest BP Statistical Review of World Energy 2014 which showed LNG imports here accounting for 12.4 per cent of Singapore's total gas imports last year.

Singapore, which just kicked off its search for a second LNG buyer, projects that gas demand here will increase substantially around 2020 "due to growing demand from end-users and the potential need to contract for new gas to replace expiring piped natural gas (contracts)".