Business Times 8 Oct 08;
ISLAND Power is understood to be appealing the Energy Market Authority's recent decision on its application for access to the Singapore portion of an existing Sumatra-Singapore pipeline to bring in its own Indonesian gas. The gas is meant to fuel its long-stalled, $1 billion Jurong Island power plant project.
But Island is in a Catch-22 situation, sources said.
Indonesia will not sell it natural gas without Island first having pipeline access, which was why oil and gas regulator BPMigas cancelled Island's earlier gas supply deal last October - while EMA now says that Island cannot have pipeline access unless it has a gas deal in hand.
Responding to EMA's decision last week, an Island Power spokesman told BT yesterday: 'Island is evaluating EMA's latest correspondence and is also actively reviewing various options for taking the company forward.'
'We still believe the Island Power project has merit and is important to Singapore's energy future,' he added, underlining Island's commitment to press on with its long-delayed project.
There are two main conditions which EMA set out in its recent decision, before it can issue directions under Section 38(4) of the Gas Act for Island to gain pipeline access.
The first is that Island needs to secure a new gas supply agreement (GSA) after BPMigas cancelled Island's earlier GSA to buy 110 million standard cubic feet of gas daily from a ConocoPhillips gas field in Sumatra. The reason cited was Island's inability to gain pipeline access.
Secondly, it has to reach an allocation agreement with the incumbent players - importer Gas Supply Pte Ltd and pipeline owner and operator PowerGas - on how gas delivered through the Singapore portion of the pipeline is to be measured and allocated.
But this second condition clearly remains a bugbear as Island, which has been trying to gain access to the pipeline since 2002, was first blocked by legal tangles, and subsequently by commercial issues involving the incumbents.
Another consideration is the recent change in ownership of Intergen, Island's parent company.
India's GMR Infrastructure in June signed a purchase agreement to buy 50 per cent of Intergen from AIG Highstar Capital II, with the transaction expected to be closed anytime soon.
GMR, which was among the bidders for Singapore's two earlier gencos being divested by Temasek Holdings, is expected to also bid for PowerSeraya, the sale of which was just launched yesterday.
Asked how it will impact the Island Power project should GMR succeed in its bid for PowerSeraya, a spokesman told BT that 'as the sales process (involving Intergen's 50 per cent stake) has not yet concluded, it would be inappropriate to discuss GMR's plans with regard to Intergen'.
