New Terminal on the Agenda
SLNG CEO John Ng stated that when the government decided to look for an operator for the terminal, they were already prepared to meet the challenge. Although the Singapore government has not disclosed when the second terminal will be operational, industry insiders reveal that it is expected to be put into use after 2020.
Ng said: "We have always been preparing to build an Asian LNG trading hub. If you ask whether we have the capability to design, build, and operate such a large-scale LNG terminal, the answer is clearly yes."
As Asia replaces Europe to become the world's largest LNG import market, Singapore has keenly seized this opportunity. Leveraging its own advantages and the robust demand for LNG in Asia, Singapore hopes to establish itself as an Asian LNG trading hub. This is also highly beneficial for Singapore itself, as 90% of the country's electricity supply comes from natural gas. Singapore Prime Minister Lee Hsien Loong recently announced that a site is being selected in the eastern region for the second LNG terminal, which will provide strong support for the development of Singapore's industrial and power sectors.
Tony Regan, an analyst at Singapore-based energy consultancy Tri-Zen International, stated that SLNG is the most promising candidate to be the operator of the new terminal because they have extensive experience in this area. It is also a model the government is familiar with. To manage the first domestic LNG terminal on Jurong Island, which involved an investment of over 1.7 billion Singapore dollars (approximately 1.3 billion US dollars), the EMA established SLNG in 2009, and the terminal officially began operations in March of last year.
According to data from the International Energy Agency (IEA), Asia's LNG trade volume accounts for 46% of the global total, making it the undisputed largest market in the world. This has created a favorable environment for Singapore to build a regional LNG trading hub. Data from the International Group of Liquefied Natural Gas Importers (GIIGNL) shows that Asia's LNG consumption accounted for 75% of the global total last year. Among them, Japan was the world's largest LNG consumer last year, with consumption reaching 87.5 million tons.
According to the Energy Market Authority (EMA) of Singapore, the scale of the new terminal will be similar to the LNG terminal currently being sold. The terminal on Jurong Island has three LNG storage facilities. A fourth storage unit with an annual capacity of 6 million tons will be completed in 2017, at which point the storage capacity will increase to 9 million tons. EMA spokesperson Sharon Tan stated that the sale plan is currently in progress, and there is no confirmed buyer yet.
Lee Hsien Loong stated that the new terminal will have seven LNG storage units and an annual processing capacity of 15 million tons. The Jurong Island LNG terminal is the only terminal in Asia with storage capabilities, allowing traders to store LNG during the off-season and sell it when demand peaks in the winter and summer seasons. Ng stated that the newly completed third LNG storage unit may be used for short-term trading.
Market Potential Highly Regarded
Although it has not yet taken full shape, the potential of Singapore as a regional LNG trading hub has already been recognized by many companies. E.ON and Glencore have business dealings with Singapore, and even the world's largest LNG producer, Qatargas, is no exception. The company's Chief Marketing Officer, Abdullah Al-Hussaini, stated in an interview late last year that they would expand their business in Singapore.
Ng said that more terminals will not only help increase Singapore's LNG trade volume but also make the Asian LNG pricing mechanism more flexible and competitive. GIIGNL data shows that currently, 27% of Asia's natural gas supply, equivalent to approximately 65 million tons, is traded through short-term contracts or spot markets, while the remainder uses long-term supply contracts linked to crude oil prices.
The latest data from Energy Intelligence on March 24 shows that the LNG price in Northern Asia for the next 4 to 8 weeks has fallen to $15.80 per million British thermal units, a 20% decrease compared to February 3.
May Build an Offshore Terminal
EMA Chief Executive Chee Hong Tat stated that they are currently considering building an offshore facility for the new terminal.
"I am full of confidence in building a second LNG terminal, even if it is an offshore terminal," Ng said. "We have the experience of building the Jurong Island LNG terminal, so we will certainly be able to overcome new challenges."
A Floating Storage and Regasification Unit (FSRU) might be a better option for the second LNG terminal that Singapore plans to build in the eastern region. Moreover, with technological updates, this is no longer difficult to achieve. FSRUs allow LNG carriers to transport liquefied natural gas to the ship via LNG pipelines without having to dock at the shore.
Regan stated that FSRUs not only have lower costs but also shorter construction cycles. They can be completed and put into use within 5 years, which will significantly enhance Singapore's LNG trading capabilities. Building an FSRU also allows for a wider range of site selections for the LNG terminal.
