SINGAPORE CONSIDERS BUILDING LIQUEFIED NATURAL GAS

UNCLAS SINGAPORE 001916

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EPET TRGY ECON EINV SN
SUBJECT: SINGAPORE CONSIDERS BUILDING LIQUEFIED NATURAL GAS
TERMINAL



1. Summary: Singapore expects to decide by year's end
whether to construct Southeast Asia's first liquefied natural
gas (LNG) import terminal. The GOS hopes that the US$500
million project would help diversify the country's natural
gas sources and prevent potentially disruptive shutdowns,
which have occurred in the past. If built, officials from
Singapore's Energy Market Authority (EMA) anticipate the LNG
import terminal will commence operation in 2012. End Summary.

Need to Diversify Natural Gas Sources
--------------


2. Singapore currently imports all of its natural gas
(approximately 800 million cubic feet per day) via pipelines
from Indonesia and Malaysia. This gas provides 70 percent of
Singapore's electricity needs; oil-fired steam plants supply
the remainder. While Singapore has gas service agreements
(GSA) with both Malaysia and Indonesia, GOS officials worry
that Indonesia, which provides 80 percent of Singapore's
natural gas needs, might not renew the existing GSA (set to
expire in 2022),due to its increasing domestic energy
requirements. The proposed terminal's throughput capacity of
approximately 300 million cubic feet per day would allow
Singapore to source about 50 percent of the current
Indonesian supply from other countries.

Minimizing Service Disruption
--------------


3. Singapore views an LNG terminal as a means to reduce the
risk of severe service disruptions in its energy sector.
During a June 2004 incident, 30 percent of Singaporeans lost
power when generating facilities failed to switch to backup
diesel reserves in a timely manner after a pipeline gasket
failed, shutting down the gas supply. ConocoPhillips--which
was fined US$ 1 million after the EMA determined it was at
fault for the power failure--and EMA representatives have
told us that the LNG terminal and natural gas pipeline
systems would be closely integrated to prevent similar
blackouts.

Where to Build?
--------------


4. Tokyo Gas Engineering (TGE) recently submitted the
results of a project feasibility study to the EMA, which is
currently reviewing the findings and will shortly deliver its
final recommendations to Singapore's Cabinet. An EMA
official told us that he expects the Cabinet to make a
decision within six months. If approved, the official said
construction of the LNG facility most likely should commence
in 2009.


5. TGE has identified three possible locations for the
terminal, one of which is offshore. GOS officials, however,
will not comment on the preferred location at this time.
Given Singapore's small size and dense population,
constructing the terminal offshore could help allay safety
and security concerns, reduce pressure on limited land
resources, and allow for more efficient vessel access. An
offshore facility could, however, further congest Singapore's
already crowded shipping lanes.
STANTON