THE Government has taken over the development of Singapore's first LNG terminal as the global credit crunch threatens to delay plans for its completion.

Singapore Power's unit PowerGas and French partner GDF Suez were originally appointed to develop and operate the $1 billion terminal, designed to import liquefied natural gas (LNG) and add an emerging energy source to Singapore's power supply.

Senior Minister of State for Trade and Industry S Iswaran said on Tuesday that the fallout from the global economic crisis had made it 'significantly more challenging' for PowerGas and GDF Suez to proceed on a commercial basis.

So the Government has decided to take over ownership and development of the LNG terminal, he said.

The consortium, with a 30 per cent stake by GDF, had been due to make its final investment decision this month for the project which will now be completed by 2013 instead of 2012.

'If we were to pursue this option of continuing on a commercial basis, there will inevitably be further delays as PowerGas tries to put together a proposition that works for all parties,' Mr Iswaran told reporters at an Asia-Pacific LNG conference at the Pan Pacific Hotel on Tuesday.

'It is in our national interest to proceed with this project at the earliest opportunity... because it is an essential part of our energy strategy to diversify our sources,' he said.

The Energy Market Authority (EMA) will now facilitate the takeover by setting up a new company - Singapore LNG Corporation - to take ownership of the terminal and oversee its development.

PowerGas staff familiar with the project will be seconded to this new firm to continue the work, said Mr Iswaran.

In 2007, Singapore first announced plans for an LNG terminal designed to reduce its reliance on piped natural gas from its neighbours Malaysia and Indonesia.

Read the full report in Wednesday's edition of The Straits Times.