Gencos should look at alternative fuels as oil prices increase
Ronnie Lim, Business Times 6 Nov 08;
AUSTRALIA, because of its geographical proximity, will be one of the key sources of liquefied natural gas (LNG) for Singapore's power stations - although initially, it will be shipped here from elsewhere, a BG Group official said here yesterday.
Out of an initial 20-plus bidders, the London-listed group was appointed in April by Singapore's Energy Market Authority to be the republic's LNG aggregator or monopoly buyer.
The Australian LNG will come from Queensland, where BG in February entered a partnership with Queensland Gas Company (QGC) to build a world-scale LNG plant there, using QGC's coal seam gas as feedstock.
QGC's two LNG trains are expected to produce seven million-plus tonnes a year of LNG for export, including to Singapore, although this will not be available until 2013-2014, Dan Werner, BG Group's general manager for Singapore LNG, told BT.
The $1 billion Singapore LNG terminal being built on Jurong Island is scheduled to start operating in 2012, he said, which means that BG will source the Singapore-destined LNG from elsewhere in the interim.
'When we first bid to be Singapore's LNG aggregator, we told the Energy Market Authority that the LNG is likely to come from five possible locations. These are namely, Australia, Egypt, Trinidad & Tobago, Nigeria and equatorial New Guinea,' Mr Werner said on the sidelines of the Singapore Electricity Roundtable.
He earlier told the conference that BG, which is an integrated player with equity stakes in upstream LNG exploration to downstream LNG terminals, has the flexibility to move LNG supplies to anywhere in the world, depending on where the demand is and where it can get better prices.
For each one million tonnes LNG capacity, BG has to invest US$3 billion in the LNG value chain, Mr Werner said. 'This means that its investment for the Singapore project works out to over US$10 billion,' he said.
BG has a monopoly to initially supply between 800,000 tonnes per annum (tpa) and 1.2 million tpa of LNG to Singapore starting in 2012, with the imports building up to three million tpa by 2018.
The BG official assured that the LNG supplies, wherever it may come from, will be of consistent, good quality. 'The LNG, when intermingled with the piped natural gas from Malaysia and Indonesia, will improve the overall quality of the gas supply here,' he said.
At the Electricity Roundtable, Tang Kin Fei, group president of Sembcorp Industries, said that with oil prices shooting up by about five times over the years, fuel costs - which previously accounted for 50 per cent of generating companies' variable costs - now accounts for as much as 85 per cent.
This means that gencos here have to urgently start looking at alternative fuels, the Sembcorp chief said, pointing to its UK experience where its Teeside plant can optimise use of coal, natural gas and fuel oil, depending on which gives it the best economies.
In Singapore, Sembcorp is studying using waste materials as fuel for a new investment on Jurong Island aimed at producing steam needed by the petrochemical plants there.
This is not unlike IUT Global's just-unveiled plan to build a small 3-4 MG bio-methanisation plant which will convert food waste into energy. Separately, Tuas Power has supplied 'embedded' tri-generation plants, producing electricity, steam and chilled water, to pharmaceutical plants here.
With volatile oil prices, Tan Soo Kiang, chairman of the Energy Market Company, said that he expects more such 'innovative generation' energy projects to enter the Singapore market next year.
