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By RONNIE LIM



This spells 'big-time' competition for the first time for the likes of Semb- Corp Cogen, which has been virtually enjoying a utilities monopoly there. Seraya, in a just-announced strategic move, is investing over S$800 million to build a new 800-megawatt, natural gas-fired cogen plant (replacing three of its older oil-fired steam plants). Additionally, it is also converting its two more efficient, combined cycle gas turbines of a total 750 MW to cogen units as well. This means it will have a total 1,550 MW of cogen 'firepower' when all the projects are completed by early 2010. This is double or triple the capacity of SembCorp's 815 MW cogen plant and KepCorp's newly-started 500 MW unit respectively.

One thing then is abundantly clear, competition to supply utilities - including to upcoming new petrochemical complexes like Shell and possibly ExxonMobil, and to a string of other expected investors - is going to be fierce.

Another new player, US Intergen's Island Power, is also set to enter the arena in 2009 - once it finally settles its gas supply issues - with its new S$1 billion, 785-MW cogen plant. This is not to mention that smaller players are also starting to nibble at the market, including mainboard-listed Federal International which is making its foray by building a 5MW power plant for Australian biofuel maker Natural Fuel on the island. Under its longer term plans, Federal intends to eventually build as much as 25MW of capacity here, OCBC Investment Research said in a June report.

Still, even before Seraya dropped its latest bombshell, companies like Semb- Corp had recognised the opportunities in the upcoming petrochemical investments on the island - some US$8 billion worth is being sunk into Jurong Island in the next three years - and said in February that it was investing S$58 million to build an additional 400 tonnes per hour very high pressure boiler to meet customer demand. This is identical to the 400 tonnes per hour of steam capacity which the new Seraya cogen units can also supply.

But is this enough, given the stiff competition? Supply of utilities, like steam and compressed air, has always been considered a 'proximity' game, that is, it is limited by distance of the customers to the cogen plant. But Seraya intends to change the rules of the game, with its plan to invest in a 'booster' to enhance the reach of its cogen units to customers further away.

No doubt, others will also follow suit. In the wake of Seraya's big announcement, the others will likely be also 'strategising' what they need to do next, and the market can expect more projects to come.

The utilities market on Jurong Island is set for exciting times. Big business there - including ExxonMobil and Shell - are even considering building their own cogen units, or if not, to get others in the business to operate their 'embedded' or dedicated cogen plants on their behalf.

ExxonMobil, for instance, is negotiating to buy natural gas from Borneo, to fuel a cogen plant connected with its upcoming US$4 billion second petrochemical complex here. Instead of losing this business altogether, if the cogen operators like SembCorp or Seraya play their cards right, they may just land the deal to operate such embedded plants for the oil giants.

Of course, there is also another way to beat the upcoming competition on Jurong Island. Corporates with deep pockets like SembCorp or KepCorp can also simply buy over Seraya - which could go for over S$3 billion (including its latest S$800 million investment) - once Temasek Holdings puts it up for sale in its genco divestment exercise, which is being launched this month.

 

 

THERE will certainly be much more 'heat' felt on Jurong Island come 2010 - especially by existing cogeneration players there like SembCorp and Keppel Corp - when PowerSeraya (Seraya), one of the three biggest generating companies here, starts up its first-time cogeneration (cogen) units. This is because Seraya, literally leaping from zero to hero, is set to become the largest cogen player there providing, apart from electricity, other utilities like steam, cooling water and compressed air for the petrochemical investors on the island.