New gas terminal could cut fuel costs

PUBLISHED : Sunday, 06 October, 2013, 12:00am
UPDATED : Sunday, 06 October, 2013, 12:46am


It is not uncommon nowadays for the man in the street to be hit with an increase in energy costs, passed on by utilities companies affected by rising world fuel prices.

We were told that to meet the requirements in emission limits set out by the government a year ago as part of overall energy policy, the utility companies would have to increase use of cleaner natural gas as fuel.

As the long-term natural gas price is linked to the oil price, which has gone up from around US$20 per barrel in the early 2000s to around US$100 per barrel today, an increase in the proportion of natural gas used to generate our power produces correspondingly higher fuel costs charged to end-users.

However, in the United States, because of the increase in the production of natural gas from shale rock layers using hydraulic fracturing techniques, the price of natural gas has dropped substantially and is not linked to, and so less influenced by, the oil price. The New York Mercantile Exchange (Nymex) natural gas price is only around 25 per cent of the Asia Pacific long-term imported natural gas price.

Due to the resultant decline in the need for gas fuel imports to the US, there are substantial spot shipments of liquefied natural gas (LNG) cargoes available for international buyers, at prices not indexed to oil and so being sold at a substantially cheaper price than the oil-indexed Asia Pacific long-term contract price.

In order to receive these LNG shipments a special LNG terminal is needed to convert the fuel from liquid to gaseous form for use. There was at one time a proposal by one of the utility companies here to build such a terminal in Hong Kong for this purpose, but it was turned down over fears of construction cost increasing prices.

If the government were to install a public body to build and run a local terminal on a limited-return basis, the average citizen might be able to enjoy cheaper energy costs for years to come instead of using natural gas with a price structure indexed to the ever-increasing oil price.

To overcome safety fears and other operational difficulties, such a terminal could be sited on an artificial island, as has been executed by some other advanced economies.

Kenneth Chu, Wan Chai