(EnergyAsia, September 30 2010, Thursday) — The following is an edited version of the speech delivered by Lawrence Wong, chief executive of Singapore’s Energy Market Authority (EMA), at the World LNG Series (Asia-Pacific Summit) in Singapore on September 21.
As countries worldwide strive to decarbonise their energy mix, natural gas will be an important part of the solution.
Compared to renewable energy sources like solar or biofuels, natural gas has higher power density, meaning that it generates a lot more power for a small amount of land, and relatively low cost. Compared to other hydrocarbons like oil and coal, natural gas produces lower carbon emissions and therefore results in very low air pollution.
Natural gas is now considered by many people to be the fuel of the future. Seven of the eight Exxon-Mobil projects last year were for natural gas developments. Shell has said that half of its output will come from gas by 2012. The opening of vast unconventional gas reserves in the US has also sparked renewed interest.
Because gas resources are largely found in places far away from the key consumption centres, LNG is critical to the take-up of gas. LNG is already the fastest growing segment of the world’s hydrocarbon industry and (will become) an increasingly important part of the world’s energy mix.
A big part of the growth is coming from the Asia-Pacific region. The key producers are here: Qatar, and Australia, with major projects being developed in Queensland and the North-Western territories. And so are the major consumers like Japan and South Korea, as well as rapidly growing markets in China and India, especially with their switch from coal and oil-fired plants to cleaner gas turbines.
Singapore’s energy needs are small but gas plays a major role in the powering of our economy. About a decade ago, 70% of our electricity was generated by fuel oil using oil-fired steam plants. After we de-regulated the electricity market in 2001, the power companies in Singapore competed aggressively for more efficient ways of power generation.
When the first piped natural gas contract was signed with Indonesia in 2003, it sparked a dash for gas amongst the companies. All our power generators switched to gas-fired plants, stranding their steam plants as this brought about a dramatic change in our fuel mix.
Today, 80% of our electricity is generated by gas, and it has contributed to a relatively low emissions profile from our power generation sector. With LNG, we will have even more gas generation capacity coming on-line. All five of our power companies have announced plans for new plants. A new company, Island Power, has announced that it will be investing in Singapore and entering the power market.
Altogether, based on the announced plans of these companies, we expect around 3,000 MW in gas generation capacity over the next 3 – 5 years. I’m sure they will phase in their investments in line with demand. Some of this gas capacity will displace existing steam sets, so they will not increase our overall capacity, but will replace existing plants with more efficient plants. Some of these will be new additions to our overall generation capacity, so we do expect a healthy pipeline of gas generation capacity going forward, which will help to meet growing demand for electricity in Singapore. Our fuel mix will therefore continue to be dominated by gas, but it will be gas from diverse sources, piped gas, as well as LNG, providing us with clean, resilient, and sustainable supply of power for years to come.
We are also positioning ourselves to take advantage of the global trends in the gas market, and create value across the entire chain of LNG activities. One area is in LNG trading. Singapore is already one of the world’s leading commodity trading hubs. We have no oil here, but we are Asia’s top oil trading centre and the world’s largest oil trading market after London and New York. We want to extend this competitive advantage to LNG trading.
We have seen greater opportunities for LNG trading. LNG spot trades or short-term LNG contracts was insignificant 10 years ago. Today, it accounts for about 20% of total LNG trade. LNG long-term contracts have become more flexible, for example in their destination clauses. With more trading activity, there will be a need for a transparent price discovery mechanism. Singapore can provide an attractive platform for all this to happen. We already have companies like ConocoPhillips and Gazprom setting up their LNG trading offices and trading in Singapore. We hope to attract even more companies to develop, grow their LNG trading business from Singapore, and to enable new platforms for price discovery.
Another area is in LNG ship repairs and refurbishment. Singapore has excellent shipyard facilities. We have one of the most technically competent and efficient repair yards in the world for refitting of LNG carriers. Two of our local companies, Keppel and SembCorp, are world leaders for LNG repairs and refurbishments, and together command a significant share of the global LNG ship repair market.
Sembawang Shipyard is the world’s leading LNG repair yard. They have a total of 75 ships repaired in the last four years, and have clinched several long-term contracts with major LNG vessel owners and operators like Shell, BP, BG and China LNG Shipping recently. Sembawang is also embarking on life extension programmes for the older fleet of LNG carriers.
Keppel has also carved a successful niche in the LNG business. They successfully delivered the first-ever conversion of an LNG carrier into an LNG Floating Storage and Regasification Unit (FSRU) in 2007. This year alone, Keppel has undertaken 8 LNG carrier refits and 1 FSRU conversion for companies like Shell, Golar, Tokyo LNG and Qatar Gas.
We need to talk about the LNG terminal which we are building (and which) will enhance the value proposition that Singapore can offer in the LNG business. The terminal will offer vessel cool-down services so that vessels completing their maintenance in the shipyards, can be gassed up, brought down to operating temperature before arriving at their loading ports. The LNG terminal will offer storage and re-loading services – which will enhance our environment for trading activities, by allowing companies to store and subsequently re-export their LNG cargoes.
We have made good progress with the LNG terminal. EMA has set up a subsidiary company, Singapore LNG Corporation (SLNG), to own and operate the terminal, and the project is proceeding on schedule. SLNG has completed piling for the first tank and they have already started piling for the second tank. The pipeline operator, SP PowerGas, is staying on top of the procurement and construction process for the connecting pipelines from the terminal to the gas network. Overall, we are on track for commissioning of the terminal in 2013.
The LNG terminal in Singapore will be located on a 40-hectare site in Jurong Island. It will have two 180,000 m3 tanks providing 3.5 million tonnes per year of initial capacity in the first phase, but there will be provisions for further expansion. What we are building with these two tanks in the initial phase of the terminal construction will be sufficient for Singapore’s gas needs in te short-to-medium term, but as the LNG market is evolving rapidly, we also have to plan for the future. And so SLNG is now developing a long-term Master Development Plan for the LNG Terminal. The intention of this plan is to give SLNG flexibility to configure and develop the terminal for expansion to meet future needs.
The site can accommodate up to five more storage tanks with the appropriate regasification facilities. This means that the terminal itself can potentially handle around nine or more million t/ya of LNG throughput for domestic consumption alone.
The terminal can also provide a range of different services, e.g., storage and sale of industrial gases like LPG, cold ‘energy’ integration and cooling services, LNG trucking or the use of LNG as bunkering fuel for ships in the future.
All these are possibilities that we have mapped out and provided for in the master plan. It is not going to be possible to do all of these things at the same time. It is also too early to say which particular activity or services we will be focussing on. A lot will depend on how the LNG market evolves, and how the industry demand shapes up. We are planning for these possibilities now, so that as the market changes, we will be well positioned to take advantage of the opportunities.
All of us in Singapore are excited about the future of the LNG industry. We are putting in place key components for a vibrant LNG eco-system in Singapore, whether through trading, ship repairs, refurbishment or the terminal itself. We will develop Singapore as an LNG hub, and a catalyst for LNG trading in the region.