VZCZCXRO4829
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0631/01 1831022
ZNR UUUUU ZZH
R 021022Z JUL 09
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 6916
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 3012
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 SINGAPORE 000631 
 
SENSITIVE 
SIPDIS 
 
EAP/MTS - MCOPPOLA 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EINV ECON SN
 
SUBJECT:  GOS TAKES OVER LNG TERMINAL PROJECT 
 
REF:  08 SINGAPORE 1248 
 
¶1. (SBU) SUMMARY:  The GOS has taken over ownership and development 
of Singapore's first liquefied natural gas (LNG) terminal after the 
companies developing the project struggled to secure financing that 
would keep the terminal on track for a 2012 deadline.  The LNG 
terminal is considered critical to Singapore's energy security 
strategy, which includes diversifying energy sources and reducing 
Singapore's dependence on piped natural gas from Malaysia and 
Indonesia.  Several oil and gas projects in Singapore have been 
postponed or cancelled as a result of the global financial crisis, 
but local contacts at U.S. energy firms said they are taking the 
economic downturn in stride and have been able to continue 
operations as planned.  PetroChina is proceeding with its 
acquisition of Singapore Petroleum.  End Summary. 
 
GOS Takes Over LNG Terminal Project 
----------------------------------- 
 
¶2.  (SBU) Senior Minister of State for Trade and Industry, and 
Education, S. Iswaran, made a surprise announcement at a June 30 
energy conference that the GOS would assume ownership and 
development of Singapore's first liquefied natural gas (LNG) 
terminal because the two companies developing the terminal were 
facing financing issues as a result of the economic downturn.  The 
Energy Market Authority (EMA) of Singapore designated in 2007 
PowerGas Limited (PowerGas) as the LNG terminal owner and operator. 
PowerGas is a subsidiary of Singapore Power Limited, which is owned 
by Singapore sovereign wealth fund Temasek Holdings.  PowerGas 
partnered with French firm GDF Suez and completed much of the 
engineering design for the terminal, according to a June 30 EMA 
statement.  However, recently PowerGas and GDF Suez decided that 
they would have to delay the SGD 1 billion (USD 694 million) 
terminal at least two to three years as the global financial crisis 
and lower demand for LNG made the financing and commercial viability 
of the terminal more challenging, the EMA statement continued. 
 
¶3.  (SBU) The GOS stepped in to assume ownership and development of 
the LNG terminal to ensure the terminal could be operational as soon 
as possible.  Singapore generates 80 percent of its electricity from 
natural gas piped from Indonesia and Malaysia.  The GOS considers 
the LNG terminal critical to its energy security (reftel) because it 
would allow Singapore to import gas from more diverse sources (e.g., 
Egypt, Qatar).  EMA will set up a new company called the Singapore 
LNG Corporation Pte Ltd. to facilitate the GOS takeover.  EMA 
anticipates that the terminal will be operational in 2013, only a 
year later than originally planned, Jenny Teo, EMA Corporate 
Communications Director told Econoff on July 2.  EMA still must 
determine how the GOS financing for the terminal will be structured. 
 Once the terminal is operational and market conditions improve, EMA 
may decide to divest the LNG terminal but no timeline has been set, 
Teo said. 
 
¶4.  (SBU) Teo confirmed that BG Asia Pacific Pte Ltd., a subsidiary 
of BG Group, will remain the designated LNG aggregator once the 
terminal comes online, giving BG the sole right to import LNG into 
Singapore.  The GOS had previously set strict limitations on imports 
of piped natural gas to help protect the LNG terminal developers' 
investment by ensuring demand for LNG.  The new GOS entity, 
Singapore LNG Corporation, should likewise benefit from the limits 
on further imports of piped natural gas. 
 
Other Energy Projects Delayed 
----------------------------- 
 
¶5.  (SBU) The financial crisis and drop in prices for oil and gas 
have caused other companies to delay or cancel energy-related 
projects in Singapore.  Jurong Aromatics Corporation, a 
petrochemical firm, said in May that it would delay its SGD 2.4 
billion (USD 1.66 billion) aromatics project, pushing it back two 
years to 2013.  Also in May, JTC Corporation, Singapore's lead 
industrial land developer and manager, announced that it canceled a 
tender for development of an underground rock cavern for oil storage 
in Singapore and would reissue the tender after approximately three 
years. 
 
Taking the Downturn in Stride 
----------------------------- 
 
¶6.  (SBU) Contacts from both Chevron and ExxonMobil told Econoff 
that their businesses have been hit by lower oil prices and less 
demand in Singapore for bunker fuel.  However, they were sanguine 
about the downturn and indicated that they intend to forge ahead 
with most projects as planned, noting that Asia is still a growth 
market.  Chevron contacts said that they have not had to lay off any 
local staff.  Chevron and Exxon contacts anticipate that Singapore 
 
SINGAPORE 00000631  002 OF 002 
 
 
will remain a major refining hub for some time, but acknowledge that 
there will be more competition from refineries being built in India, 
Vietnam and China.  ExxonMobil is focusing its Singapore business on 
the higher-value specialty chemicals business as a result. 
 
¶7.  (SBU) The silver lining of the downturn has been the easing of 
construction and material costs.  A contact at FMC Technologies told 
Econoff that the larger energy firms have been delaying projects, in 
part, to lock in lower costs and that more companies will kick-start 
projects as oil prices rise.  He said that USD 60 a barrel was a 
number "resonating" with many of his contacts as a benchmark for 
when many projects would be more viable. 
 
PetroChina Acquiring Singapore Petroleum 
---------------------------------------- 
 
¶8.  (SBU) PetroChina Company Limited purchased 45.5 percent of 
Singapore Petroleum in June with the expectation that it would buy 
the remainder of Singapore Petroleum in July.  Singapore Petroleum 
jointly owns Singapore Refining Company with Chevron.  Chevron 
contacts said they view the acquisition by PetroChina favorably, 
noting that Chevron and PetroChina have previously partnered on 
other projects outside Singapore.  PetroChina is unlikely to ship 
much of the refined product manufactured in Singapore back to 
mainland China, Lok Kheng Ling, Chevron Singapore's General Manager 
for Products Supply and Trading told Econoff.  PetroChina's 
acquisition is more likely a bid to expand its exports and oil 
trading capacity, she surmised. 
 
SHIELDS