Petronas in talks with Singapore's Keppel on Pengerang power plant

The Star Thursday October 4, 2012

By RISEN JAYASEELAN
risen@starbiz.com.my

PETALING JAYA: Petroliam Nasional Bhd (Petronas) and Singapore's Keppel Corp are in negotiations to build a planned power plant in Pengerang, Johor, sources close to Petronas told StarBiz, confirming an earlier report by Singapore's Straits Times.

The power plant both parties will build is aimed at supplying electricity to industries at Petronas' planned RM60bil refinery and petrochemical integrated development (RAPID) petrochemical complex in Pengerang, as well as into the Singapore power grid.

“Petronas' talks with Keppel follows from their acquisition of a 30% stake in Singapore power company GMR Energy, to ultimately participate in the dynamic power supply system in Singapore, aside from powering' up RAPID,” said one source.

Last September, Petronas purchased a 30% stake in GMR Energy Singapore Pte Ltd, which is developing an 800MW combined-cycle gas-turbine power plant on Jurong island, Singapore.

The Singapore Straits Times report stated that Keppel might get a 30% stake in the 1,200MW plant that would be part of Petronas's RAPID project in Pengerang. Petronas has yet to respond to queries from StarBiz on this deal.

If and when the Petronas-Keppel joint venture goes through, it would mark the first time a Malaysian-based power plant supplies power into Singapore as well as the first time for a Singapore entity to invest in the Malaysian power sector.

A power sector professional told StarBiz that it only made sense for Petronas to seek to sell power to Singapore from its planned power plant in Pengerang.

“It doesn't make sense to just produce enough power for industrial demands in Pengerang. It is also better to build a larger plant than a smaller one, to achieve economy of scale' benefits and to ensure there's a sufficient buffer.

“It then also makes sense for the balance electricity to be sold into the Singapore grid, which has a very dynamic price discovery system,” the expert said.

Although more known for its shipbuilding prowess, the choice of Keppel as a partner for Petronas is not surprising.

A unit of Keppel Corp, Keppel Energy has a track record in developing, owning and operating power plants in Brazil, China, the Philippines and Nicaragua.

In Singapore, Keppel Energy operates a 500MW gas-fired combined-cycle power plant on Jurong Island that commenced operations in 2007. In 2010, work began to expand the Jurong plant's capacity to 800MW.

Since 2000, Keppel Energy has had a licence to participate in the Singapore electricity market.

Keppel Energy has also had a past relationship with Petronas, having a long-term natural gas supply deal with the latter since 2004.

Petronas is in the power sector in Malaysia via investments in the Kimanis power plant and the proposed Lahad Datu power plant in Sabah.

The Kimanis plant is jointly developed by Petronas Gas Bhd in partnership with Yayasan Sabah through NRG Consortium (Sabah) Sdn Bhd.

Meanwhile, the Lahad Datu plant is being built by a Tenaga Nasional Bhd-led consortium together with Petronas and a Sabah state entity.