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Second LNG terminal to be built in the east

Move aimed at enhancing Singapore's energy security and growing LNG industry here

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Looking ahead: Mr Lee (left) says building a second LNG terminal will give S'pore a strategic buffer, as well as support the development of ancillary services such as LNG trading . . . - PHOTO: KEVIN LIM/THE STRAITS TIMES

[SINGAPORE] A second liquefied natural gas (LNG) terminal is slated to come up in the eastern part of this island to enhance Singapore's energy security and to grow the LNG industry here.

Prime Minister Lee Hsien Loong said yesterday that land constraint at the $1.7 billion Singapore LNG (SLNG) terminal on Jurong Island is limiting its expansion potential; the facility can accommodate just seven tanks, offering up to 15 million tonnes per annum (tpa) of regasification and storage capacity, so a few potential sites in eastern Singapore are being studied for a second facility.

Speaking at the inauguration of the SLNG terminal, he said that a second facility would "enhance our energy security by geographically diversifying our LNG import infrastructure".

He added that the facility would also support new industrial sites and power plants in the area, and that the Ministry of Trade and Industry would announce details in due course.

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Mr Lee stressed that Singapore's continued investment in energy infrastructure, ahead of demand, is crucial as the country prepares for the possibility that its demand for natural gas - the dominant fuel for electricity generation here - may one day be met entirely by LNG.

Singapore started receiving LNG supplies imported by current aggregator BG Group some 10 months ago, when the SLNG terminal began commercial operations. These supplies supplement piped-gas supplies from Indonesia and Malaysia, which fuel power plants and industries here.

However, demand for domestic gas in the two neighbouring countries has been rising and even outstripping supplies there.

Mr Lee said that building a second LNG terminal will give Singapore a strategic buffer, as well as support the development of ancillary services such as LNG trading, bunkering and vessel cool-down services.

His announcement yesterday follows earlier government indications - going back to 2012 - that it was looking at building a second LNG terminal; regulator Energy Market Authority (EMA) launched a feasibility study on this in November that year.

Mr Lee said that Singapore will also continue to explore energy options such as solar energy, and to develop manpower resources for the energy sector.

Earlier yesterday, S Iswaran, Minister in the Prime Minister's Office, announced that the government had given the green light for a third-phase expansion of the SLNG. This comprises a fourth tank and related equipment, which will take the terminal's regasification and storage capacity to at least nine million tonnes per annum by 2017, from its current capacity of six million tpa.

No figure was cited, but this should easily bring total investment in SLNG to well over $2 billion.

Opening an international LNG forum here, Mr Iswaran said that EMA will launch a two-stage Request for Proposals in the second quarter to select Singapore's next LNG buyer for domestic gas needs beyond the initial three million tpa by BG Group.

Up to two importers could be appointed, with each having an exclusive franchise of three years, or until it has contracted up to one million tpa of LNG, whichever comes first.

A new LNG spot import policy will also be introduced to regulate spot imports for domestic use, said Mr Iswaran, who is also the Second Minister for Trade and Industry and Home Affairs. Under this, domestic gas buyers will be allocated annual spot credits as a percentage of their long-term gas import volumes; the scheme will kick off with a spot import cap of 10 per cent.

The latest measures are part of a comprehensive strategy to grow Singapore's gas market and support the growth of gas-related businesses here, he said.

"As our market and terminal operations grow, we expect that it will support the full spectrum of LNG activities in Asia, including marketing, trading and procurement. More than 20 companies have already established or expanded their LNG desks in Singapore, with activities ranging from market research, trading, marketing, origination and operations to risk-management functions. In addition, there are LNG service firms such as ship brokers, law firms and price-reporting agencies growing their operations here to support the LNG industry.

"As Asia's demand grows and countries take concrete steps to develop the marketplace, I believe a competitive and more liquid gas market will emerge in Asia."

His remarks come amid doubts cast by some industry players of an Asian LNG trading hub emerging anytime soon, given the lacklustre spot volumes due to a lack of new supply, plus a lack of market liquidity.

Petronas' president and chief executive Shamsul Azhar Abbas said as much, when he told the LNG forum that there was only "a slim chance" of a regional LNG trading hub emerging, and "certainly not in the next decade", as there was no liquidity to support this. Furthermore, regional gas markets are currently not fully liberalised, with some subsidised by governments.

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