Singapore: Integrated LNG Hub of the future

Part A - Current global LNG market trend and future outlook

Problem:

The Liquefied Natural Gas (LNG) industry has been facing an issue of oversupply which was driven by
new large liquefaction projects in Australia, Russia, and the United States that increase the LNG
capacity and the increasing production of natural gas. (International Gas Union, 2020) The
investment was made to the prediction of Asian LNG demand to grow. However, the steady growth
in demand was unable to keep up with the faster growth in supply resulting in the oversupply and
low LNG price. (Timera Energy, 2020) Contributing to the oversupply, the COVID-19 Pandemic
resulted in the suspension of industrial activities and countries begin to lockdown. (Bresciani,
Heiligtag, Lambert, & Rogers, 2020)

Demand for LNG:

Demand for LNG proved its resilience when it is the only fossil fuel to see growth during the
pandemic in 2020 where the demand for LNG increased by about 1% to about 360 MT in 2020 even
when the demand for gas fell. (Shell, 2021). In fact, before the pandemic, demand for LNG has been
consistently growing since 2013 for six years in a row. And in 2019, the global demand for LNG
increased by 40.9 MT to 354.7MT, which is about a 12.5% increase from the previous year as shown
in figure 1 below. (Norton Rose Fulbright, 2021)

Figure 1: Demand of LNG from 2010 to 2020 (Shiryaevskaya, Stapczynski, & Chapa, 2020)

In 2020, both China and India imported 11% more LNG than the previous year as they take
advantage of the lower LNG price. (Shell, 2021) According to S&P Global, China imported 59.54MT of
LNG from January to November in 2020 which was an increase of 10.6% compared to 2019 on year
on year basis.

Current Tend for LNG

Countries such as Japan and Korea aim to become carbon neutral by 2050 and China aims to be
carbon neutral by 2060. (Endeavor Business Media, 2021) Natural gas produces about 50% lesser
greenhouse gas emission compared to coal used for generating electricity. (Shell, 2021) LNG plays a
critical role in the delivery of Natural Gas economically to these countries to achieve the target. As a
result, demand for the LNG for heating and to generate electricity is growing rapidly as compared to
other fossil fuels when countries look for a cleaner and cheaper alternative. (Shiryaevskaya,
Stapczynski, & Chapa, 2020)
Currently, with the new regulation, LNG fuelled newly built ships increase 50% when the new
regulation just begins in 2020. (Lee, 2019) Additionally, the current lower LNG prices also make LNG
more competitive and encourage not only countries to accelerate the shift from the use of other fuel
to LNG, but also maritime transportation industry such as increasing the LNG bunkering to power
LNG fuelled vessels. (Sekiguchi, 2020)

Asia pacific demand outlook

The Asia Pacific region takes up about 70% of global LNG demand and this figure would continue to
grow over the coming 10-15 years. (Gerden, n.d.) Emerging economies in the Asia Pacific become
increasingly reliant on LNG where India and China already the major importers and countries such as
the Philippines, Vietnam, Bangladesh, Pakistan, and South Asia are starting to build LNG import
facilities as domestic demand overtakes its domestic production causing them to rely on importing
LNG to meet its domestic demand. (Iwamoto, 2019) As such, future growth in LNG demand would
mostly from the Asia Pacific region as shown in the figure below.

Figure 2: Future change in imports (McKinsey, 2019)

Need to develop a terminal:

Although Asia Pacific demands the majority of the world’s LNG, there is no centralized trading hub
for LNG in the region. With higher import prices and long term contract according to oil prices has
worked for past years. However, the region has many small LNG consumers on remote islands where
LNG consumption is rising. Therefore, active spot sales of LNG in the region would be beneficial for a
change as demand for smaller LNG volume contracts has been increasing in recent years. (Gerden,
n.d.)

Part B (80%,2400 words)

The current situation in Singapore:

Currently, Singapore has an LNG terminal that consists of 4 storage tanks with a total capacity of 9
million tonnes per annum (mtpa), two jetties, and a regasification facility with a throughput capacity
of 11mtpa. (Energy Market Authority, 2019) The terminal is situated in Jurong island, on a 40-
hectare plot of land, and can only accommodate a maximum of the seven tanks with a maximum
capacity of 15mtpa. (Hand, 2014)

In 2020, 95% of Singapore’s electricity is generated from natural gas which was a significant increase
from 26% in 2001. (Ting, 2020) Out of the 95%, 71% of natural gas is imported through the pipeline
from neighboring Malaysia and Indonesia which is equivalent to a consumption of 9.96mt of LNG.
The remaining 29% of natural gas comes from imported LNG which equates to about 4mt of
imported LNG being used to generate electricity. (Snyder, 2020) On average, Indonesia ships about
7Mtpa of natural gas to Singapore, and in 2023, the contract with Indonesia for importing natural
gas through the pipeline will expire and cease. (Nurhayati-Wolff, 2020) This meant that Singapore’s
import of natural gas would decrease and import in LNG would become more prominent to cater to
the energy needs of Singapore as shown in figure 2. (Yep, 2019)

Figure 2: Singapore’s import trend for natural gas and Liquified natural gas (Yep, 2019)

In the view of the need to import more LNG for its domestic consumption while Singapore pushes
towards cleaner and sustainable energy sources, for example, Singapore signed an agreement with
Qatar Petroleum to supply 1.8mtpa of LNG for 10 years. (Ting, 2020)

Singapore intends to expand its LNG and gas assets as it aims to become the regional LNG
powerhouse by growing its shipbuilding and repair base, upgrading its LNG bunkering infrastructure,
and enhancing its LNG terminal. (Snyder, 2020) The lack of storage capacity is a hurdle in achieving
this goal. Therefore, Singapore has been looking into expansion of its current LNG capacity and also
on constructing a second term due to land constrain at the current SLNG terminal. (Yep, 2019) The
new terminal would help Singapore realize its goal of making Singapore the LNG trading hub of Asia.
(Iwamoto, 2019)

Strategical Importance of Singapore:

Situated strategically at the crossroads of the East-West trade and located in the heart of Southeast
Asia, traders consider Singapore’s location ideal as it provides a centralized location for storage,
break bulking of LNG into a smaller volume to be shipped to neighboring countries such as Malaysia,
Indonesia, Philippines, India, and China where the import and consumption of LNG are increasing.
(Gerden, n.d.) Capitalizing on its location, Singapore ramped up its effort towards the goal of
becoming the next Asia LNG hub. (Iwamoto, 2019)

Proposed location of terminal: Pedra Branca

Pedra Branca is an island which is located 24 nautical miles away from the east coast of Singapore. It
is situated at the eastern entrance of the Straits of Singapore as shown in the figure.

Figure 3: Location of Pedra Branca

The Island and the adjacent waters are under the sovereignty of Singapore. While the middle rocks
at the south of the island are under the sovereignty of Malaysia. Assuming there is no sovereignty or
political issues between Singapore and Malaysia, the proposed location for the construction of the
second terminal is at Pedra Branca where a floating LNG terminal could be built.

Economic Benefits and Considerations:

Building the second terminal would mean that Singapore would be able to increase the LNG capacity
and tap onto the rising demand for LNG by accommodating a higher capacity of LNG which would
help Singapore go towards the goal of becoming an LNG hub. By becoming an LNG hub, Singapore
would be able to expand its market opportunity to international and local firms. More traders and
related companies will come into Singapore and possibly set up their business here. This would open
more opportunities for more networking and business transactions. In 2020, more than 50 firms
have set up the LNG office in Singapore to capitalize on the rising demand for LNG in Asia which is
about an 11% increase from 2019. (Reuters, 2020) The second terminal may also bring in more
foreign investments which are keen in the LNG sector, creates job opportunities as they will tap onto
local businesses and use local financial institution when they come in and set up their business and
headquarters here which would boost Singapore’s economic development and increase Singapore’s
competitiveness in the market. (Iwamoto, 2019)

Currently, 20% of the newbuilt will be Fuelled by LNG and it is expected that LNG-powered ships will
take up 60% of newly built by 2025. (Lee, 2019). It is projected that LNG bunkering demand will grow
by 9 million MT by 2025 and to about 30 million MT in 2030 with the increasing LNG fuelled fleet
adding on to the demand for LNG. (Ang, 2020) With this growing trend, Singapore performed its first
ship to ship LNG bunkering in March 2021 which is the first in Asia, and expects its bunkering
capacity to hit 1mt in the same year. This capability is important being able to tap into this growing
need for LNG bunkering as it would allow Singapore to provide reliable LNG bunkering services to
more ships and enjoy the economic benefit.
"The challenge of establishing Singapore as a physical trading hub is that
the LNG market is not fully commoditized, and indeed discharging, storing
and reloading LNG still carries a cost penalty compared to optimizing on-
the-water LNG flows," Sims said. (Iwamoto, 2019)

- captures trade in more direction although majority is pass through the sg

Geographical Consideration

Traffic flow from diff directions (more route , more market share)

Lesser land space taken up, use sea space instead, land can be better use for other thing

Where ship slow down to hit laycan

Meteorological consideration

Wind condition in Singapore, water current, tidal range, floating terminal requirement

Technical consideration

Water depth (other possible place quite shallow)

Land reclaimation required

Safety and risk consideration

Explosion risk (away from land)

Other location at the Straits of Singapore has been explored. ( if its at ECP) ship in the opp traffic
have to cut into the traffic (90 degree procedure), which is narrow and have fast moving vessel,
increase the risk of collision and blocking the path,

Wont have all the tank at one area if sth happen – diversion of risk

Social Consideration

Having a floating terminal off the coast of east coast park obstruct nice ocean view with structure
when the no of facility increase in 100 years.

Long term considerations

Flexibility in increasing and decreasing supply and demand over the long run according to the market
consideration , mobilise the facilities since its movable, can reconfigure the position and strategy
(not fixed to one location).
Design Concept (200)

Integrated floating LNG hub, where the current existing SLNG terminal will be the control tower,
where LNG in the tank will be mainly for domestic use. With extra LNG storage vessel parked at the
side. LNG floating terminal will be built at Pedra Branca serve as a outpost that, mainly focus on LNG
bunkering activities.

Functions of the LNG terminal (describe what it can do

- Facility to be used to split large quantity of LNG for re export to neighbouring region in
smaller parcels
-

- LNG import terminal that can store and reload cargoes, provide cooling
down and bulk-breaking services, and other facilities for LNG bunkering
and small-scale industries.

Proposals are expected to involve floating storage and regasification

units (FSRUs) and floating storage units (FSUs).

Capacity – related to future demand (200)

minimum and maximum regasification capacity, number, size and

capacity of storage tanks,
Equipment, berth mooring requirements and technologies (200)

associated equipment, berthing and mooring requirements, projected

utilisation rates and operational and capital costs.
- Evaluate consumption of LNG (demand)
- Who are the parties
- What is the right size of the terminal
- How to find and evaluate right consumption
- Risk
- Common pitfall
- Safety consideration (what if there is an explosion)

https://www.oxfordenergy.org/wpcms/wp-content/uploads/2020/08/The-dilemma-of-gas-
importing-and-exporting-countries-NG-161.pdf

https://www.igu.org/app/uploads-wp/2020/04/2020-World-LNG-Report.pdf (demand?)

https://www.eria.org/uploads/media/9.RPR_FY2018_04_Chapter_1.pdf ( asia demand_)

https://www.slng.com.sg/sites/default/files/brochures%20/brochure-collateral.pdf (compnent of
SLNG)
https://safety4sea.com/watch-worlds-largest-lng-fsru-operating-in-turkey/ - largest Lng tank
263000

https://reconnectingasia.csis.org/database/projects/jurong-island-port-phase-3-expansion-
singapore-lng-terminal/840692d6-a960-40ad-b17b-d1b739e11509/ - sg and world’s largest LNG
tank 26000

https://pulitzercenter.org/stories/mirage-luxury-built-sand - land reclaimation

things I can think of for floating lng terminal: storage , electricity,accommodation, berth,

 floating storage and regasification unit (FSRU) – need to regas? Need pipeline?

Conclusion (100)