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courage is contagious

Viewing cable 07SINGAPORE1167, AMENDED GAS ACT: JUST HOT AIR?

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Reference ID Created Released Classification Origin
07SINGAPORE1167 2007-06-18 03:31 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Singapore
VZCZCXRO7740
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #1167/01 1690331
ZNR UUUUU ZZH
R 180331Z JUN 07
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 3394
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
UNCLAS SECTION 01 OF 02 SINGAPORE 001167 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR AUSTR WEISEL AND DAUSTR JENSEN 
COMMERCE FOR JBAKER 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV ETRD EFIN ECON SN
SUBJECT:  AMENDED GAS ACT: JUST HOT AIR? 
 
REF: A) SINGAPORE 996 
 
     B) 06 SINGAPORE 1916 
 
(U) NOT FOR INTERNET DISTRIBUTION 
 
1.  (SBU) Summary:  Singapore's amended Gas Act came into effect 
June 11, holding out promise that U.S. company InterGen might 
finally become the first non-government entrant into the heretofore 
tightly controlled electricity market.  However, looming contract 
deadlines and legal uncertainties continue to cloud the horizon for 
InterGen's local subsidiary, Island Power.  The long-delayed 
legislation aims to increase competition in Singapore's natural gas 
sector by authorizing the Energy Market Authority (EMA) to grant new 
players access to existing pipelines.  The Act also allows EMA to 
increase the number of gas import licenses in order to enhance the 
security and reliability of the gas supply (i.e., through shipments 
of liquefied natural gas).  End summary. 
 
Island Power's Struggle for Access 
---------------------------------- 
 
2.  (SBU) InterGen, through Island Power, has been developing a 
785MW natural gas-fired power station in Singapore since 2002. 
However, its S$1 billion (US$650 million) investment has been 
continually plagued by uncertainties about pipeline access. 
InterGen recently completed financing arrangements and construction 
contracts for this project, which include Indonesian gas provided by 
ConocoPhillips, but arbitration between two Singapore 
government-linked companies (GLCs) ?- PowerGas and Gas Supply ?- has 
prevented third-party access to the section of pipeline that brings 
this gas onshore to Singapore.  (Note:  Gas Supply, the sole user of 
PowerGas' underutilized pipeline, initiated legal proceedings in 
2004 to prevent third-party access.  According to press reports, the 
arbitration was recently concluded with an undisclosed settlement. 
End note.) 
 
Don't Open That Spigot Just Yet 
------------------------------- 
 
4.  (SBU) Island Power's managing director, Michael Reading, told us 
that, while he was optimistic about the project's continued 
viability, major hurdles still remained.  He noted that the new law 
would not immediately resolve the access issue; EMA would have to 
exercise its legislated authority for this to happen.  (Note:  Press 
reports indicate EMA has given only a broad timeframe -- possibly 
six months or longer -- during which it will "thrash out pipeline 
access issues."  End note.)  InterGen in the meantime is still 
obligated to honor several tight contract deadlines with private 
companies involved in the power plant's construction, as well as 
with the Indonesian government.  Reading expressed concern, as also 
reported in the press, that Indonesia might terminate its gas supply 
agreement with Island Power due to the continued delays.  InterGen 
would likely withdraw its investment if this were the case, Reading 
concluded. 
 
5.  (SBU) Reading also anticipated that his GLC competitors might 
challenge the new law.  He relayed that in a recent meeting between 
Island Power and Gas Supply, ostensibly to reach an access agreement 
without EMA's intervention, Gas Supply representatives told him that 
they planned to take "unspecified action" to frustrate Island 
Power's efforts in Singapore.  They further expressed their "hope to 
disrupt [Island Power's] contracts with the Indonesian government." 
 
6.  (U) More details of the Gas (Amendment) Bill can be found in 
MTI's website (http://www.mti.gov.sg) and Parliament's website 
(http://www.parliament.gov.sg). 
 
Comment 
------- 
 
7.  (SBU) Singapore's amended Gas Act represents a welcome, albeit 
long-delayed, step towards a more liberalized electricity market in 
Singapore.  However, it remains to be seen how and whether the law 
will be implemented.  We will continue our advocacy efforts on 
behalf of U.S. industry ?- which has included representations by the 
Ambassador and discussions during the May 11 annual FTA review (ref 
A) -- and closely monitor how the GOS balances the interests of GLCs 
and independent competitors.  The amended Act's provision for more 
licensing also highlights Singapore's concerns about energy security 
and strong desire to decrease its dependence on Malaysia and 
Indonesia, currently the suppliers of almost all of Singapore's 
energy needs (ref B).  In addition to constructing a liquefied 
natural gas terminal, funding research for renewable energy sources, 
and encouraging energy conservation, Singapore would do well to 
ensure new entrants into its electricity market enjoy the level 
playing field the amended Gas Act is meant to guarantee. 
 
SINGAPORE 00001167  002 OF 002 
 
 
 
HERBOLD