Singapore could lease out storage for trade at its upcoming liquefied natural gas (LNG) import terminal if demand in the city-state fails to absorb capacity for incoming shipments, a top energy official said on Tuesday.

Singapore is building a US$1.05 billion ($1.41 billion) import facility for LNG, which is gas chilled to its liquid form, to help meet rising demand for the fuel from power and industry. Neighbours Malaysia and Indonesia supply Singapore with gas, but have no capacity to boost exports.

 

The first phase of the new facility was on track for completion in early 2013, said Lawrence Wong, chief executive of Singapore's Energy Market Authority (EMA).

 

This would give the city-state capacity to import around 3.5 million tonnes per year (tpy) of LNG, while future expansion could boost the capacity to as much as 9 million tpy.

 

Most of the gas imported in the first phase was likely to go to local power plants and industry, leaving little room for trade, Wong told reporters at a news conference. But future capacity could be used for trade, imports, or both, Wang said.

 

“We could build more LNG tanks for trade if it is commercially viable,” Wong said. Companies interested in trading out of the storage had approached the EMA for talks, he added.

 

The storage could be used to break up large tankers of LNG into smaller cargoes for delivery into nearby markets, or the tanks could be used by companies that buy gas during periods of weak demand to sell out during peak periods, Wong said.

 

LNG imports in the first phase of the project would boost Singapore's gas supply to around 9 million tpy from the 6 million tpy it imports through pipelines, Wang said.

 

BG Group (BG.L) won a 20-year deal to supply 3 million tpy of LNG into Singapore in April. So far, it has found buyers for around 1.5 million tpy of gas in the power sector and was in talks with potential customers for the rest, Wong said.

 

New petrochemical plants and oil majors were among the potential clients, he added.

 

Once Singapore had seen the strength of demand, it would decide on when and how to expand the facility, he said.

 

“We are quite optimistic that BG will be able to sell its full franchise of 3 million tonnes quite soon. It is in the midst of talking to various customers now,” Wong said. 

 

“If the indication of the final take-up of gas is more than 2 million tpy, we will start thinking about bringing in a new supplier. We hope to have a clearer indication by the end of the year.”

 

The LNG was likely to be more expensive than gas imported through pipelines, he said. Still, LNG buyers may also be able to take advantage of moments of weakness in the international spot market to buy cheaply, he added.

 

The government had yet to decide whether it would need to bring in a ship capable of importing LNG and heating it into gas as a temporary measure to meet demand before the new onshore terminal is completed, Wong said.

 

The LNG import terminal would have technical capacity to import 3.5 million tpy, but actual imports would likely be closer to 3 million tpy, Wong said.

 

Singapore was also still studying the possibility of developing nuclear power in the future, he added. The government had yet to decide if nuclear power was an appropriate energy source for the city-state, but solar appeared to be the most promising among the low carbon and renewable energy options.