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Kristie Neo Channel NewsAsia 20 Dec 12;

SINGAPORE: Singapore will be powered by liquefied natural gas (LNG) by the second quarter of next year, to diversify energy sources, when Singapore's S$1.7 billion terminal is ready to begin operations.

Currently, 80 per cent of Singapore's electricity is generated from piped gas by Malaysia and Indonesia.

The first tranche of LNG is expected to arrive at its new terminal in Jurong Island in the second quarter of next year.

S Iswaran, second minister for trade and industry said: "We are always trying to strike a balance between three key considerations. One is energy supply resilience, second is in terms of our economic competitiveness and third is environmental sustainability. These are the key elements that we want to point together and achieve an equilibrium in, and is part of our energy strategy for Singapore.

"In that context, diversification is key to our competitiveness, resilience and sustainability because we really need to have as many options as possible available to Singapore that we can tap into to feed and meet our current and future energy requirements."

But experts are not upbeat that this will bring energy costs down overnight.

LNG prices will continue to be pegged to oil prices, which remain high.

This may be frustrating news for companies like Lanxess and Shell Chemicals, which in recent months have said that high energy costs have hurt "manufacturing economics and customers".

Gas prices in Singapore are also double that in Malaysia and Vietnam.

For now, the government said businesses can negotiate with power generating companies for contracts appropriate to their business, and practicing energy efficiency can also help.

Mr Iswaran said: "I think it is important for our businesses and indeed for our households to take energy efficiency seriously. In other words, invest in energy efficiency, invest in some of the upfront infrastructure, or upfront capital costs in order to have a sustained reduction in energy consumption and energy cost. This is is something that needs to be actively pursued by businesses as well. If you can do that right, that will be durable savings for businesses, regardless of what the price of energy is in Singapore."

He added: "If you think about it differently, if you can achieve a 10 per cent saving in Singapore's energy consumption, that is the equivalent of one plant. Our peak capacity and consumption is about 6 gigawatts. So if we save 10 per cent, that's 600 megawatts, which is basically the size about a plant these days that is being developed."

Experts also say there may be room for more competitive LNG pricing with more players in the market.

Currrently, only one company - BG Group - is responsible for sourcing and delivering LNG in Singapore.

BG Group is currently contracted to supply up to three million tonnes of LNG per annum to Singapore.

Ravi Krishnaswamy, the vice president of energy and power systems at Frost & Sullivan said: "What that could mean is that once you have more players in the domestic market supplying LNG, there is a possibility that this can provide a more competitively-priced gas, but then again this will only happen over the next couple of years, I would say."

Singapore will receive its first LNG shipment from Qatar, and may subsequently receive from markets such as Russia, Australia and the US.

- CNA/xq