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Sembcorp plans cogen plant on Jurong Island

IN what promises to be its first major new project on Jurong Island in a while, Sembcorp Industries is planning to build a second cogeneration plant to supply mainly steam to new petrochemical plants in the Tembusu sector.

Significantly, apart from some gas-firing, the company aims to use innovative, alternative fuels like refuse-derived fuel and heavier fuel oils for the new plant.

It will be unlike its current 815-MW cogen plant in Sakra which is 100 per cent gas-firing.

Sembcorp president and CEO Tang Kin Fei, who disclosed this in an interview, said that it is talking to petrochemical investors there who will need steam and other utilities for their new plants.

Germany's Lanxess, which is building an $845 million synthetic rubber plant, is, for instance, one of the newcomers in Tembusu.

'We will make a decision within six months,' he said of its alternative-fuels, cogen investment through which it hopes to be able to sell cheaper steam to customers there.

The new plant - of an undisclosed capacity - will make use of some of the additional Indonesian natural gas which Sembcorp has just contracted to buy.

Under its latest US$5.5 billion gas deal yesterday, Sembcorp contracted to buy an extra 86 million standard cubic feet of gas daily, with delivery starting in 2010/2011.

Still, as gas prices are pegged to high sulphur fuel oil prices - which have also risen in line with sky-high crude oil prices - Sembcorp's long-term plan is to try to use more alternative fuels instead, Mr Tang stressed.

'From a 50 per cent cost component when we built our first cogen plant, today, about 80 per cent of a cogen plant's cost is fuel. And if you ask an investor whether the price of steam produced by gas-firing plants is competitive, they tell you no,' he said.

That is why Sembcorp, which is currently 100 per cent reliant on gas-firing, hopes to eventually reduce this by half through use of other cheaper, innovative alternative fuels, Mr Tang said.

One way will be to backward-integrate.

As Sembcorp is big in waste-disposal and recovery - 'we collect over 2,000 tonnes of municipal solid waste daily,' Mr Tang said - it is now looking to use refuse-derived fuels to fire its new cogen plant. It could also consider collecting waste fuels, he added.

Another alternative it is considering is heavier fuel oils, including off-specification products from the oil refineries and not unlike the orimulsion - or bitumen mixed with water - used by Power Seraya.

But he declined to give more details of the alternative fuels it is eyeing at this time.

On this, Sembcorp can also tap on its UK experience where it just opened a $193 million wood-fuelled biomass power station - the first such large-scale industrial power plant there to be fuelled entirely by renewable wood.

On liquefied natural gas - with Singapore expected to name the successful LNG aggregator anytime now - Mr Tang said, 'We are a significant gas importer with a 45 per cent share of Singapore's gas imports, so naturally we are interested in LNG.'

'We are keen to work with the LNG buyer,' he added, saying Sembcorp was open to all options, including taking a stake in the LNG aggregator to give it additional flexibility in its gas business.