New import licences awarded as S'pore gears up to be regional LNG centre

As Singapore presses ahead with its goal to become a regional liquefied natural gas (LNG) centre, Pavilion Gas and a unit of Shell have won their bids to become the next importers of LNG here.

The two companies will have the right to import and sell up to one million metric tons of LNG a year for up to three years to power-generating firms and industrial users, starting in the second half of next year.

The licences were awarded by the Energy Market Authority (EMA) at the end of a two-stage proposal process launched in June 2014, in a bid to create a more diversified and secure energy market here.

Minister for Trade and Industry (Industry) S. Iswaran, who announced this yesterday at the opening of the Singapore International Energy Week, said the Government is also planning to allow third-party spot imports and new piped natural gas imports on a case-by-case basis.

"Energy is a key part of our economy, and our objective is to ensure our energy supply is diversified, sustainable and secured. Many of our new initiatives are geared towards that, while giving consumers more options and flexibility in how they manage their consumption and spending," Mr Iswaran said.

The process was launched under a new licensing framework that aims to break the LNG supply in Singapore into shorter tranches, with more flexible pricing. Prior to the process, BG Singapore Gas Marketing was the only importer and seller of LNG. The cost was indexed to oil price movement.

Pavilion Gas and Shell - which acquired BG in February - were selected because, when bidding for the licence, they were able to offer shorter-term contracts and alternative price indexes such as the Singapore Exchange's LNG Index Group.

The duo also secured the most demand in the bidding process, "which indicates that the market is responding to (the Government's) initiatives", Mr Iswaran added.

The EMA believes that the licensing model marks further progress in Singapore's aim to become a regional trading hub.

Mr Lee Seng Wai, a director at EMA's gas policy and infrastructure department, said: "The appointed LNG importers will help promote competition in our gas market, thus encouraging LNG trading in Singapore. To ensure sufficient capacity at the LNG Terminal, the terminal's capacity will be increased to around 11 million metric tons per annum by 2017, with a fourth storage tank by 2018."

Singapore's LNG Terminal on Jurong Island was opened in February 2014. A second terminal, to be built in the east, is being planned.

LNG bunkering - the supply of LNG to vessels as fuel - is also coming into shape.

In January this year, the Maritime and Port Authority of Singapore awarded the first two licences for LNG bunkering to Pavilion Gas and a joint bid between Keppel Offshore & Marine and BG Group.

A version of this article appeared in the print edition of The Straits Times on October 25, 2016, with the headline 'New import licences awarded as S'pore gears up to be regional LNG centre'. Print Edition | Subscribe