Island Power project finally taking off

GMR Group is in talks with GSPL about securing Indonesian gas
Ronnie Lim, Business Times 31 Aug 09;

(SINGAPORE) The long-stalled $1.2 billion Island Power (IP) project finally looks set to get off the ground.

India's GMR Group, which took 100 per cent ownership of IP in May, is talking with gas importer Gas Supply Pte Ltd (GSPL) about securing Indonesian gas to fuel the 800-megawatt (MW) cogeneration plant on Jurong Island.

This will be the final hurdle for IP to clear. GMR can start building the plant once it closes a gas supply deal, likely from Sumatra.

Disclosing this in a wide-ranging interview with BT, Energy Market Authority (EMA) chief executive Lawrence Wong said that 'without going into commercial details, Island Power has withdrawn its outstanding appeal to the Trade and Industry Ministry'.

'Island Power and GSPL are now working together, or at least discussing how they can work together, to secure gas from Indonesia and bring it to Singapore. The two are very much engaging one another at this stage.

'Once they get the gas, EMA hasn't got a problem with the project as IP's (generating) licence is still valid. So it's a matter of the outcome of discussions with GSPL and its ability to secure Indonesian gas.'

GMR International chief executive Ranjit Murugason said in May that the company hopes to start building IP's plant in the fourth quarter of next year and wants to see it up and running by 2013.

News of the IP-GSPL negotiations is positive, as IP previously wanted to bring in its own contracted 110 million standard cubic feet of Indonesian gas daily through the Sumatra-Singapore pipeline but was unable to do so because of commercial issues involving incumbents GSPL and PowerGas.

Long delays in IP gaining access to the pipeline led to Indonesian oil and gas regulator BPMigas cancelling IP's Sumatran gas deal in October 2007.

It was Catch-22 for IP. It could not have access to the Singapore portion of the Sumatra-Singapore pipeline unless it had a gas deal in hand first, but it had lost its gas deal because it could not gain pipeline access.

'Our position is we do want open and non-discriminatory access to the gas pipeline, whether offshore or on-shore,' Mr Wong said.

Onshore, EMA restructured the gas market last year and now has in place a Gas Network Code that separates the gas transport business from the competitive retail and import business.

'As for the offshore pipeline (the portion within Singapore waters), we specifically amended the Gas Act to give EMA the power to direct access, so we do want to have open pipeline access,' Mr Wong said.

Incumbents such as GSPL and Sembcorp, which owned the Singapore portions of the Sumatra-Singapore and Natuna-Singapore pipelines, have been reimbursed for transferring the assets to PowerGas. The IP project, first mooted in 2002 by original owners Shell and Bechtel, has undergone several ownership changes since.

New owner GMR is keen on a power presence in Singapore after it bid unsuccessfully for Tuas Power and Senoko Power during Temasek Holdings' divestment exercise last year.

GMR's decision to acquire full and direct ownership of the project came after it gained an indirect interest in IP through its 50 per cent acquisition of InterGen in June 2008.