Push for LPG import terminal gains pace
Push for LPG import terminal gains pace
Published February 21, 2012
(SINGAPORE) High oil prices and petrochemicals oversupply vis-a-vis demand are putting pressure on Singapore’s mainly naphtha-fuelled crackers – namely those run by Petrochemical Corporation of Singapore (PCS), Shell and ExxonMobil – to build an LPG import terminal to enable them to better compete with crackers, like those in the Middle East, which use such light, alternative feedstock.
BT understands that the industry is hoping to secure some land on Jurong Island shortly for the estimated US$100-120 million liquefied petroleum gas terminal, with a project go-ahead possibly by Q3 this year.
‘The LPG import project is picking up speed again,’ a source said, amid industry discussions with the Economic Development Board and Jurong Town Corporation for a project site on Jurong Island. This is likely to be near, or even at, the upcoming S$1.7 billion Singapore LNG (SLNG) terminal site.
‘We expect a decision on this around April,’ the source added.
The push for an LPG terminal here comes as crude prices rise, with Brent crude pushing US$120 a barrel recently – not far from its previous US$144 record high. This in turn makes naphtha, a refinery by-product, costlier.
PCS’ managing director Akira Yonemura in his ‘review of 2011 and directions for 2012’ message to staff, said that following a difficult 2011 for PCS, demand for petrochemicals continues weak.
‘For the petrochemicals industry, the 2012 outlook remains challenging as the (global) overcapacity built up over the last few years will take time to be absorbed, particularly with the slowdown in demand.’
‘The high crude and naphtha prices will put liquid crackers like ours under pressure vis-a-vis ethane (LPG) and other light feedstock crackers. The weak US dollar also makes us less competitive as our fixed costs are mostly incurred in Singapore dollars,’ he said.
The situation is especially critical for PCS which relies on naphtha supplies from the refineries here, while the newer Shell and ExxonMobil petrochemical crackers here are fully integrated with their respective refineries and are at least able to make use of some cost-advantaged refinery feedstock from the heaviest and cheapest hydrowax to some LPG.
In fact, the idea of having an LPG terminal first arose when gas-rich Qatar, through Qatar Petroleum International, acquired half of Shell’s stake in the S$5.4 billion PCS at end-2009. A Japanese consortium, led by Sumitomo Chemicals, owns the other half stake.
‘PCS would have been prepared to host the LPG terminal if they had space at their site,’ sources said, adding that a floating LPG storage, using a very large crude carrier, had also been considered earlier.
Since then, SLNG – which has a greenfield site for its project on Jurong Island – has also hired a consultant, Fluor Daniels, to study the viability of having an LPG terminal alongside its liquefied natural gas terminal. Its site masterplan has catered to this possibility.
Sources said that eventually, it all revolves on the end-users – ie. PCS, Shell with its new US$3 billion cracker, and ExxonMobil which is adding a second US$5-6 billion cracker to its earlier similar-sized one here – deciding if the economics justify the project.
International LPG prices in the Asia Pacific are generally based on Saudi-Aramco contract prices, whereas naphtha prices are more market-determined. ‘So the end-users have to decide on a risk-reward basis, and how they are going to secure the LPG which is normally on an annual contract basis, but which could run up to 10 years,’ one source said.
‘Once there is consensus, the project go-ahead could come by September.’