The decision whether to liberalise Singapore’s town gas market – which was supposed to have been made by last year – could now come 12 months down the road, sources tell BT.
If the government’s go-ahead is given, it will be a challenging and lengthy, drawn-out exercise – as it involves conversion of town gas-fuelled appliances, like cookers and heaters, of 630,000 residential customers alone (not counting industrial ones) to work with natural gas, as well as conversion of the town gas pipelines.
The estimates are that this will take 6-7 years in all to complete and cost over S$320 million.
The sources were commenting on the liberalisation move which was discussed in a just-published book by City Gas to commemorate its 150th anniversary.
City Gas, which holds the monopoly for town gas supplies – a market reportedly worth over S$300 million annually – said it has been discussing the issue with regulator Energy Market Authority.
Singapore is increasingly looking to greater use of natural gas – especially with LNG supplies starting in 2013 – and the market for natural gas ‘will be bigger than today’s town gas’, City Gas president and CEO Ng Yong Hwee is cited as saying in the book.
City Gas’ only non-pipeline competition currently is from suppliers of bottled LPG, or liquefied petroleum gas.
Potentially, prices could come down once the switchover from piped town gas to natural gas is completed, as other gas retailers, like Gas Supply Pte Ltd, SembCorp Gas and other gencos, can come in to compete with City Gas to retail natural gas.
Furthermore, natural gas will cost less than town gas as it is a ‘direct feed’ to customers, whereas there is a production cost incurred by City Gas in processing natural gas at its Senoko Gasworks into town gas.
But the conversion exercise is costly, with a cost recovery period of 15 years – and this will figure in whether government will ultimately go ahead with the liberalisation.
Disclosing some details of the negotiations with EMA, City Gas chairman Tan Ek Kia said that this involves a regulatory deal ‘that will provide a steady framework to allow us to go through the conversion programme, whilst continuing to grow our business’.
The deal ‘will provide franchise periods for City Gas for the residential, commercial and industrial sectors within which it can carry out the programme, recover its conversion cost, gas tariff arrangements and execute programmes that will bring benefits to end-consumers’.
Once agreed on, the ‘mammoth task of conversion’, as City Gas’ book puts it, will take 6-7 years to complete and will cost City Gas an estimated $230 million to convert, or replace entirely, the town gas appliances of customers.
Additionally, PowerGas – in charge of Singapore’s gas transmission network – will need to convert the town gas network to transport natural gas, with this costing another $90 million.
The complicated network conversion will have to be carried out in phases. PowerGas will have to isolate each area and segregate it from the town gas network while City Gas will have to go to every household within the isolated area and replace gas appliances or reconfigure them to accept natural gas.
Another impact of the switchover to natural gas will be to make Senoko Gasworks, which currently processes natural gas into town gas, redundant.
But City Gas’ Mr Ng said that the plant could then be potentially used for other purposes, such as producing hydrogen or industrial gas. ‘We could also go into new areas of multi-utilities generation such as district cooling, tri-generation and co-generation,’ he adds.
