US$2bn gas pipeline deal to link Malaysia and Singapore

MALAYSIAN state-owned oil company Petronas and Singapore’s Keppel Energy have signed a US$2 billion contract that will see Keppel Energy become the first company to import natural gas from Malaysia into Singapore's main gas network.

The 18-year deal was signed in Kuala Lumpur yesterday, with delivery of natural gas expected to start from mid-2006 via a new 5km pipeline linking Petronas’ Peninsular Gas Utilisation Pipeline to the Singapore Gas Transmission System.

Petronas Gas Bhd, a subsidiary of Petronas, and Keppel Gas, a subsidiary of Keppel Energy, will build the new pipeline.

Keppel Energy managing director Ong Tiong Guan said the contract was significant as it would give Keppel a competitive, reliable and stable source of gas.

It would also create a new business for Keppel Energy through Keppel Gas, and provide added security of supply with back-up gas from Indonesia as part of the Trans-ASEAN Gas Pipeline Development.

This pipeline is intended to transport Indonesian gas to Singapore, Malaysia, Thailand, Vietnam and Myanmar.

Petronas gas will be used to supply Keppel's 500MW co-generation plant at Jurong Island from the expected first quarter of 2007.

The deal, which is worth over S$3 billion, is the second supply contract between Petronas and Singapore power companies. The first was signed in 1992 to supply 150 million scf/d of gas to Senoko Power for 15 years.