Southeast Asia Looks to Small-Scale LNG to Meet Power Needs i

Indonesia's ambitions to build small-scale liquefied natural gas (LNG) regasification terminals for new power plants scattered across the country will get a boost from new developments in the sector, said infrastructure firm Atlantic, Gulf and Pacific Co. (Reuters Photo/Darrin Zammit Lupi)

By : Mark Tay | on 9:00 AM October 29, 2016
Category : International, Asia-Pacific

Singapore. Indonesia's ambitions to build small-scale liquefied natural gas (LNG) regasification terminals for new power plants scattered across the country will get a boost from new developments in the sector, said infrastructure firm Atlantic, Gulf and Pacific Co.

The LNG industry, traditionally based on expensive mega-projects, has up to now struggled to develop small-scale investments that face smaller budgets and different constraints, said Derek Thomas, Atlantic, Gulf and Pacific's (AG&P's) director of advanced modular infrastructure, in an interview.

But new solutions and reductions in costs are set to stimulate demand in Southeast Asia for these smaller projects, which are expected to reach a capacity of 2.5 million to 3 million tonnes of LNG per year (mtpa) by 2020, Thomas estimates.

Indonesia's state utility PLN (Perusahaan Listrik Negara) last year requested for proposals on new power plants in the country and has since shortlisted 11 parties to construct 21 small-scale LNG terminals located on islands in the eastern part of the archipelago.

Indonesia also started up its first 0.3 mtpa mini-LNG terminal, the Benoa LNG terminal in Bali, earlier this year.

"There is a lot of inherent demand in countries like Indonesia, Philippines and Vietnam," Thomas said, adding that portfolio players that have access to multiple sources of the super-cooled fuel are keen to take on stakes in such projects to secure outlets for their supplies.

To help develop the small-scale LNG market, Woodside Chief Executive Peter Coleman in April said his company is willing to co-invest in floating storage and regasification units, which can cost less than $100 million and be developed quickly.

Interest in the sector has also been sparked by an LNG price slump caused by a supply glut from new U.S. and Australian production. Asian spot prices have fallen by about 65 percent since early 2014, to around $7 per million British thermal units (mmBtu).

"Lower prices are going to facilitate (that small-scale demand), because people who wanted to do this couldn't afford it at $20 per mmBtu, but are now seeing it as very viable," Thomas said, speaking to Reuters on the sidelines of the Singapore International Energy Week.

Small-scale projects are becoming more feasible because of falling infrastructure costs and new solutions from firms like AG&P who intend to use modular systems to customize projects.

"It is this idea of using a platform and bringing together the pieces," Thomas said, referring to the firm's newly launched small-scale LNG carrier that costs between $10 million and $35 million.

Small-scale LNG projects with capacities of around 0.5 mtpa are estimated to cost $50 million-$100 million, depending on complexity and size, industry sources said.

While the figures may be significantly smaller than the billion-dollar mega LNG projects, upfront financing of these projects for cash-strapped end-users may still be a problem.

To aid in the adoption of LNG, AG&P plans to offer leasing terms on its vessels and infrastructure solutions to customers who may not want to own the equipment, Thomas said.

Reuters

Show More

 
MORE NEWS