EMA sets conditions for Island's access to Indonesian gas pipeline
Ronnie Lim, Business Times 3 Oct 08;
ISLAND Power - which has been fighting for access to an Indonesian gas pipeline to try to revive its stalled $1 billion power plant project on Jurong Island - has just been told by the Energy Market Authority (EMA) that it first needs to secure a new gas supply agreement (GSA), after losing its earlier Indonesian gas deal.
Island also has to reach an allocation agreement with the incumbent players on how gas delivered through the Singapore portion of the Sumatra-Singapore pipeline is to be measured and allocated, it added.
The EMA decision - just out on its website - comes over a year after Island applied in July 2007 to the Singapore regulator for access to this portion of the offshore pipeline to bring in its own Indonesian gas.
It was its inability to access the pipeline that led to Indonesia cancelling last October Island's earlier GSA to buy 110 million cubic feet of gas daily from a ConocoPhillips gas field in Sumatra.
EMA in its directive said that before it can give Island any direction for pipeline access, the company needs to procure a new GSA 'within a reasonable time'.
There must also be an 'allocation agreement' between Island, Island's gas seller, incumbent gas importer Gas Supply Pte Ltd (GSPL) and Indonesia's Pertamina to determine how their co-mingled gas in the pipeline is to be measured and allocated.
Once these conditions are fulfilled, EMA said, it can then issue directions under Section 38(4) of the recently amended Gas Act and specify the terms under which Island can enter a transportation agreement with the pipeline owner and operator PowerGas.
This should cause minimum disruption to the existing arrangement between PowerGas and incumbent importer GSPL.
The latest EMA ruling may, however, be all but moot for Island, whose US parent Intergen is now 50 per cent owned by India's GMR Infrastructure.
GMR was unsuccessful in its recent bids for Tuas Power and Senoko Power, the first two of three Singapore generation companies being divested by Temasek Holdings, and the Indian power player will very likely now try for the last one being sold - PowerSeraya.
The fate of the long-stalled Island project will therefore hinge on whether GMR succeeds in its third attempt to land a Singapore asset.
Furthermore, Intergen, with new owner GMR on board, will likely review its global asset portfolio before deciding whether to proceed with the stalled Singapore project, observers said.
Island has been blocked for years - from as far back as 2002 - from access to the Singapore portion of the Sumatra-Singapore pipeline to bring in its own contracted Indonesian gas because of earlier legal tangles, and subsequently commercial issues, involving GSPL and PowerGas.
Thus, despite earlier having Indonesian gas in hand, and building contracts ready, its project stalled. The final straw came when Indonesia's oil and gas regulator BPMigas cancelled Island's gas deal, with the gas said to have gone to other buyers.
Island's parent, Intergen, has undergone several ownership changes since the Singapore project was first mooted.
It was originally owned by Shell and Bechtel Group, which subsequently sold out to a partnership of Ontario Teachers Pension Fund and US private equity fund AIG Highstar Capital II. AIG Highstar recently sold its 50 per cent stake to India's GMR.
