Tuas Power may lease out excess fuel oil storage
Business Times, June 15, 2004
It's in talks with China Aviation Oil as power plants use more natural gas
By Taila Krishnakumar
and Daniel Buenas
TUAS Power, Singapore 's third largest electricity Supplier, is in talks to lease out its excess fuel oil storage tanks to mainboard listed China Aviation Oil, according to industry sources.
This development comes on the back of an industry shift towards the increased use of natural gas to fuel Singapore 's power generation plants.
In 2002, the Singapore government set out in an environmental initiative known as the Singapore Green plan 2012 a target to have 60 per cent of the country's power generation fuelled by natural gas. The Energy Market Authority confirmed that this target was met last year.
The shift is also supported by cost saving as natural gas is a more efficient source of energy for power plants, say the local power companies.
Still, the EMA requires all power companies to maintain a strategic reserve of fuel oil to generate electricity on the island.
As a result of the move towards natural gas, Singapore 's power stations are believed to have excess storage capacity for fuel oil and may be looking for ways to put it to use.
Sources say China Aviation Oil (CAO) inspected Tuas' six storage facilities last week. When contacted, CAO denied that it was in talks with Tuas to lease its storage facilities.
Tuas has about 420,000 cubic metres of storage capacity for fuel oil, say sources. Previously, its fuel consumption was estimated to be 160,000 tonnes a month, but sources report that its current consumption has gone down to about 40,000 tones monthly after the company's move towards natural gas.
Industry sources say that the cost of storage space for fuel oil ranges from $4.50 to $5.50 per cubic metre each month.
Power generators typically do not like to discuss excess storage capacity because it weakens their negotiating position when leasing out commercial storage capacity to interested parties.
Singapore 's three biggest power companies are Senoko Power, PowerSeraya and Tuas Power, which are all linked to investment holding company Temasek Holdings. Together, they control about 90 per cent of the maximum electricity that can be generated here.
When contacted by BT, PowerSeraya did not say whether it had excess capacity at the moment, but that it had put its excess storage facilities up for lease in the past. "We do have the necessary storage capacity to meet both our operational and strategic storage requirements for PowerSeraya generation needs. And on occasions when we have less fuel requirements, we do make our storage tanks available for lease," said John Ng, director of Oiltanking Seraya, and senior vice-president at PowerSeraya.
In 1996, Oiltanking Singapore , a subsidiary of the Oiltanking Group of companies, entered into a 50-50 joint venture with PowrSeraya. The initiative involves a shared contribution of oil tanks and infrastructure, including PowerSeraya's jetty, pipelines and capital.
The Oiltanking group of companies is the world's second largest oil storage company and a division of German Marquard & Bahls AG group.
Meanwhile, Singapore 's biggest electricity power generator, Senoko Power, told BT it had no excess capacity at its fuel storage facilities, which are located in the north.
Last week, Tuas Power signed a $1 billion 18-year contract for natural gas supply with one of Singapore 's major natural gas importers and suppliers.
Under the agreement, Tuas Power will be using the natural gas supplied from South Sumatra for the commissioning - the period before actual commercial operations of the gas turbines - of its final two blocks of combined cycle plants, which are expected to be commissioned from April 2005.
This will bring Tuas Power's total number of electricity plants powered by gas to four, from its current two. Its current gas-powered plants produce more electricity that its oil-powered ones.
Separately, China Aviation Oil yesterday said it has agreed to buy 630,000 tonnes of jet fuel for the July-September quarter, 16 per cent up from the same period alst year and representing the largest initial quarterly tender in its history.
The group also said its 5 per cent owned Spanish pipeline and infrastructure company Compania Logistica de Hidrocaburos has declared a dividend, with China Aviation having a net entitlement of about S$1.9 million to be recognized in the current financial quarter.
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