Keppel Corporation's infrastructure unit has signed an agreement with the Singapore Economic Development Board (EDB) to develop, own and run a gasification facility on Jurong Island.

The agreement marks an important step in preparation for the final investment decision, which will be taken at a later date, said Keppel in a statement yesterday.

The facility will produce hydrogen, carbon monoxide, syngas and other industrial gases from various potential feedstock, including coal and refinery by-products.

The agreement comes as the International Maritime Organisation has said it will require all ships to comply with the lowered global sulphur cap of 0.5 per cent, from the current 3.5 per cent, by Jan 1, 2020.

"As the refining industry in Singapore adopts the production of low sulphur compliant fuel, there will be higher demand for hydrogen from existing and new customers," Keppel said.

Mr Damian Chan, executive director for energy and chemicals at the EDB, added: "Under the Jurong Island v2.0 initiative, we explored alternative feedstock options to enhance the long-term competitiveness of the energy and chemicals sector.

"After extensive evaluation, we found that gasification would be able to meet industry's demand for competitive hydrogen and carbon monoxide, while the use of best-in-class mitigation technologies would minimise its environmental impact."

Dr Ong Tiong Guan, chief executive of Keppel Infrastructure Holdings, the Keppel unit that signed the agreement, said the facility will leverage various feedstock and synergies with available infrastructure to deliver competitively priced products.

"It also reinforces Keppel Infrastructure's capability and commitment as a solutions provider for sustainable development," said Dr Ong.

The announcement is not expected to have any material impact on the net tangible assets and earnings per share of Keppel Corporation for the financial year ending Dec 31.