Sembcorp Industries - UOB Kay Hian 2023-09-21: Catering To Singapore's Long-Term Energy Security

• Sembcorp (SGX:U96)’s recent gas supply contract from a new gas field in the West Natuna Sea ensures security of supply for its new 600MW power plant as well as for Singapore. While the gas price is unknown for now, pipeline prices are materially less volatile than LNG prices thus ensuring more stable margins over the long term.
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New pipeline gas supply for Sembcorp & Singapore.

• Sembcorp announced last week that it has signed a termsheet with Conrad Asia Energy (CRD AU) for the supply of gas from its offshore Mako gas field located in the Duyung Production Sharing Contract (PSC) in the West Natuna Sea.
• It will utilise the existing West Natuna Transportation System (WNTS) pipelines with first gas production from the Mako field in 4Q25 or 1Q26. This ties into the startup of Sembcorp’s 600MW hydrogen-ready power plant which is part of the company’s new S$900m multi-utilities centre on Jurong Island that started construction in 2H23.

Volume certainty is important for Sembcorp; gas pricing unknown for now.

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• Historically, pipeline gas has been priced at a 11-12% slope to Brent oil, e.g. at a Brent oil price of US$100/bbl, the equivalent gas price would be US$11-12/mcf. With inflation and other factors however, we believe that this slope will naturally be higher for the new contract, and may be disclosed when the full gas sales agreement is signed.

Catering to Singapore’s energy security.

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Adrian LOH UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-09-21 SGinvestors.io

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