Projects melt, Jurong Island feels the heat

Projects melt, Jurong Island feels the heat

Investments put on hold as demand starts drying up

By RONNIE LIM

(SINGAPORE) As major investors postpone their mega projects on Jurong Island, the knock-on effect is making matters worse.

Generating companies like Sembcorp Utilities and Tuas Power have responded by holding back their own multi-billion-dollar cogeneration investments that would have used innovative fuels to supply power and steam to the industry there.

Sources say Tuas Power (TP), which is owned by China Huaneng group, has delayed plans for a S$2 billion clean coal/biomass cogeneration plant by 6-12 months as potential customers like Germany’s Lanxess put off new projects for up to a year.

Lanxess’s planned S$828 million plant to produce synthetic rubber for tyre inner-tubes and liners was aimed at the Chinese market, which is now in decline, while Jurong Aromatics Corporation has delayed its US$2.4 billion petrochemical investment due to financing hiccups.

‘There is uncertainty about new demand for utilities on Jurong Island, so we have to proceed with caution,’ a TP source said. ‘There may be a bit more clarity in the next six months or so. But right now it’s a chicken-and-egg situation.’

TP, which announced its new cogeneration plant on Jurong Island last September, has been negotiating with contractors but has not awarded any tenders.

The planned plant will be fired by coal, which is cheaper than piped natural gas from Malaysia and Indonesia or liquefied natural gas (LNG); so TP’s postponement is not due to fuel prices. ‘It’s more of a demand factor,’ the source said.

BT understands also that Sembcorp is holding back on its plan to build a second cogeneration plant on Jurong Island. ‘We have to temper our plans because our approach is to build in tandem with customer demand,’ a source said.

Sembcorp said in April last year that it planned an innovative cogeneration plant on Jurong Island using innovative alternative refuse-derived fuel and heavier fuel oil. Its current 815 megawatt plant there is 100 per cent gas-fired.

PowerSeraya, which was sold recently to Malaysia’s YTL Corp, has started building an S$800 million 1,500 megawatt (MW) cogeneration plant on the island to produce electricity, steam and cooling water for industry there. This remains on schedule for completion late this year or early next year, a spokeswoman confirmed.

But amid the economic downturn, there has been no update on Power- Seraya’s plan to build a second desalination plant and a booster plant to extend the reach of its cogeneration units to petrochemical plants farther away on the island.

BT reported yesterday that Singapore Petroleum Company (SPC) is also deferring its ‘green’ gasoline project and a planned 60-70 MW cogeneration plant because of the downturn.

The one bright spot is that construction of two new giant petrochemical crackers - by Shell for US$3 billion and ExxonMobil for US$5 billion-plus - remains on track. Completion is expected by late 2009/early 2010 and early 2011 respectively.

But this will not mean new business for utility companies. ExxonMobil is building a 220 MW cogeneration plant - its second after an earlier 150 MW unit - to meet all of its in-house needs. Likewise, Shell has sufficient in-house cogeneration capacity to meet its needs.

Source : Business Times - 06 Jan 2009

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