Singapore's Sembcorp Inks Deal for Natural Gas from Indonesia

Sembcorp Gas Pte Ltd, a subsidiary of Singapore-based energy firm Sembcorp Industries, has signed a deal to import natural gas from Medco E&P Natuna Ltd, a unit of Indonesian oil and gas company PT Medco Energi Internasional Tbk, according to a recent news release.

The agreement to import natural gas piped from the West Natuna gas fields in Indonesia is estimated at $1.41 billion (SGD 1.9 billion), Sembcorp said in the release. The company expects the agreement to come into effect by the second half of 2023, conditional upon the necessary agreements to transport the new supply of gas. Delivery is expected to begin in 2024 for a period of four years, according to the release.

According to an investor presentation from PT Medco, the West Natuna Transportation System is a 403.9-mile (650-kilometer) natural gas pipeline that services gas sales from three production facilities in the South Natuna Sea near Indonesia to an onshore receiving facility in Singapore.

PT Medco reported oil and gas production of 163,000 barrels of oil equivalent per day (boepd) for 2022, which was a 73 percent increase year over year, according to its 2022 earnings release. In the first quarter of 2023, oil and gas output was 165,000 boepd, up 30 percent year-on-year.

PT Medco’s reported 2022 oil and gas capital expenditure (CAPEX) of $269 million, to be spent mainly on starting up two new Natuna gas development projects. In the first quarter of 2023, the company’s CAPEX was $47 million, also to progress new development projects.

Sembcorp said that the agreement supplements its existing natural gas supply from piped and liquified sources, allowing it to “maintain its position as Singapore’s leading natural gas importer”.

The agreement is not expected to have a material impact on the company’s earnings per share and net tangible assets per share for the current fiscal year, Sembcorp said.

Sembcorp oversaw the first delivery of natural gas to Singapore from Indonesia in 2001, with an initial agreement of 325 million standard cubic feet per day of natural gas sent to Singapore for 22 years, also delivered through the West Natuna pipeline, according to Sembcorp.

Focus on Renewables

In its 2022 annual report, Semcorp said it is continuing the buildout of its renewables portfolio, securing 3.6 gigawatts (GW) of renewables capacity through acquisitions and organic growth last year. The company said it was “well positioned to support the government’s ambition to develop hydrogen as a major decarbonization pathway” as it plays “a key role in green hydrogen production”.

In an earnings release, Sembcorp said it delivered a group net profit “before exceptional items” of $654.71 million (SGD 883 million) for the fiscal year 2022, an increase from $349.97 million (SGD 472 million) in the previous fiscal year, due to higher contributions from its Conventional Energy and Renewables segments. Sembcorp President and CEO Wong Kim Yun said that the company’s gross renewables portfolio grew to 9.8 GW in 2022, almost reaching the company target of 10 GW of gross installed renewables capacity by 2025.

The Singaporean company closed the sale of Sembcorp Energy India Limited in January 2023.

To contact the author, email rteodoro.editor@outlook.com