Singapore commits to LNG for meeting future energy needs

Singapore has decided to go ahead with liquefied natural gas (LNG) imports to meet future energy demand and ease its dependence on piped supplies from Indonesia and Malaysia. The EMA said in a report that it sees the politically stable Australia as the preferred supplier. Other potential suppliers are Qatar and Iran, the EMA said.

The terminal is expected to cost about $500 million, Singapore's Minister for Trade and Industry Lim Hng Kiang said. Industry sources said the funding could partly come from the city's power plants that dominates Singapore's natural gas consumption and the overall project would cost more if investments in LNG tankers were taken into account.

Singapore has long sought to diversify its gas supplies, all of which come via three pipelines from Indonesia and Malaysia to fuel 80% of the island's power generation that is growing at more than 4% a year. Singapore's anxiety grew sharper two years ago when a technical outage disrupted gas flow to Singapore's power stations via the Indonesian pipeline, plunging nearly half of the wealthy city-state into darkness.

Singapore is the latest to join the growing list of LNG importers. India began imports in 2004 and China took in its first LNG cargo this summer, while the US is rushing to expand import capacity. Thailand committed to its first terminal last month after sealing a key Iranian LNG supply deal.

- Now we know how much it's going to cost (and that's not counting the LNG tankers), who are the potential suppliers, and that we are joining a race that has already started. Observe also the "funding from our power plants" part, and how it ties in with the PR effort, now getting into gear, about the full liberalisation of the electricity market in Singapore.

Translation? Higher electricity prices, with much greater volatility. Electrical rates varying in near real-time (every half an hour) instead of being adjusted once every quarter. Increases in costs due to LNG infrastructure and variations in LNG prices being passed on to the consumer (ie, you!).

- One more thing, if you have followed this blog from early on, you may know that the government's response to peak oil and increasing energy prices is to let market forces work it out. That's exactly what they're going to be doing. At least they have been consistent about it, so don't complain, ok?

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