PORT OPERATOR POSTPONES GATE EXPANSION DUE TO ECONOMY;

UNCLAS SINGAPORE 000088

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EWWT KNNP ETRD ECON SN
SUBJECT: PORT OPERATOR POSTPONES GATE EXPANSION DUE TO ECONOMY;
MEGAPORTS AFFECTED

REF: 08 SINGAPORE 1201


1. (SBU) Singapore port terminal operator PSA Corporation Ltd. has
decided to postpone construction to expand Gate 4 at the Pasir
Panjang terminal due to a substantial drop in container traffic.
Construction at the new gate was more than 50-percent complete, but
PSA decided to mothball the project once it evaluated the costs
against the sudden, dramatic fall in cargo volumes in recent months,
LEE Tat Wee, manager for security projects in the Business
Continuity Department of PSA, told Econoffs January 30. As a
result, Megaports equipment that would have been moved to the new
gate will remain where it is currently installed for the foreseeable
future and any discussions of expanding Megaports into new lanes at
Gate 4 (reftel) are on hold.

2. (SBU) PSA decided to discontinue construction once it understood
the extent of the reduction in container traffic and determined that
an expansion at Gate 4 was not necessary. Container volumes in
November dropped 1.5 percent compared to the same period in 2007,
the first year-on-year decline PSA had experienced since 2001, Lee
said. By December the year-on-year decline increased to 15 percent.
On January 15, PSA notified the U.S. Department of Energy (DOE) of
the change in plans and abruptly cancelled a January 19 and 20 visit
and site survey that were planned in anticipation of relocating the
existing Megaports equipment from two lanes at the old gate to two
newly built lanes at the expanded Gate 4 in April.

3. (SBU) Lee could not say exactly when the new gate construction
might resume, but predicted it would be two or three years before
shipping volumes recovered to the point where an expanded gate would
be necessary. Container volumes in Singapore have fallen to 2006
levels and six percent of the world's container vessels have been
idled due to the economic downturn. PSA will notify DOE at least
six months before resuming the Gate 4 construction so that DOE will
have adequate time to relocate the Megaports equipment, Lee stated.
Conduit was laid at the new gate that might support expansion of
Megaports into more lanes (reftel),but the decision to expand
remains with the GOS and will be on hold until economic conditions
improve, Lee added. The GOS is ramping up some public
infrastructure projects in Singapore to stimulate the economy, but
PSA and the port facilities are considered private operations and
will not be subsidized by the GOS, Lee said.
SHIELDS