Singapore commits to LNG for energy diversity

SINGAPORE, Aug 7 (Reuters) Singapore has decided to go ahead with liquefied natural gas (LNG) imports to meet future energy demand and ease its dependence on piped supplies from Indonesia and Malaysia, the trade minister said on Monday.

''We need to diversify our energy sources in order to ensure that we are not overreliant on a single source for our energy needs,'' Lim Hng Kiang said in a speech prepared for an energy forum organised by the Energy Market Authority (EMA).

''As such, the government has decided to import liquefied natural gas to meet future rising demand for energy as our economy expands and our population increases.'' The wealthy city-state, whose economy is forecast to grow 5-7 percent this year, has long sought to diversify its gas supplies, all of which come via three pipelines from Indonesia and Malaysia to fuel 80 percent of the island's power generation.

Its anxiety grew sharper two years ago when a technical outage disrupted gas flow to Singapore's power stations via the Indonesia pipeline, plunging nearly half of the city -- known for its clock-work efficiency -- into darkness.

Lim said Singapore would invite investors to bid for the construction and operation of a terminal in the second half of next year.

A study prepared by Tokyo Gas Engineering Co. Ltd. at the request of the EMA has recommended building a 3 million tonne-per-year terminal by 2012.

Singapore becomes the latest country to join the list of LNG importers, whose ranks have swollen with the addition of giant Asian countries seeking cleaner and cheaper fuel.

India began imports in 2004 and China took in its first LNG cargo this summer, while the United States is also rushing to expand import capacity. Thailand committed to its first terminal last month after sealing a key Iranian LNG supply deal.

Despite sitting between the world's two biggest LNG exporters, Indonesia and Malaysia, the Singapore government appears to be targetting suppliers further afield.

''Australian suppliers rank high because of their geographical proximity, which lowers transportation costs, (and) relatively low country risk. Other potential suppliers are located in Qatar and Iran,'' an EMA report said.

Demand from Singapore may help strengthen the hand of LNG marketers such as Australia's Woodside Petroleum Ltd. and U.S. major Chevron Corp., offsetting fears that higher prices had curtailed demand from China and India.

LNG, natural gas super-cooled to a liquid state for tanker transport, is normally sold years before production begins on a long-term basis to lock in revenues for multi-billion-dollar projects.

REUTERS SBA KN1217