New subsidiary Orchard Energy may be answer to supply security concerns

(SINGAPORE) With oil prices continually testing new peaks - they touched US$118 a barrel yesterday - Temasek Holdings is entering into big-money exploration and production (E&P) ventures in oil and gas to ensure Singapore's energy supply security.

So, for the first time, Temasek has set up an E&P subsidiary, Orchard Energy Pte Ltd. And in a clear indication that Orchard is preparing to strike out into E&P joint ventures regionally and beyond, it has been recruiting a team of oil specialists, sources told BT.

'Mostly foreign talent, they include geophysicists, geologists and petroleum engineers who can help Temasek assess potential E&P property that the Singapore investment company can put money into,' one source said.

BT has also ascertained that Temasek managing director Tan Suan Swee is heading Orchard Energy as its director, with Greg Solomon being its ventures director. Mr Tan was unavailable for comment as he is on an overseas trip.

The Orchard Energy venture marks Temasek's return to the offshore arena after it failed in 2004 to buy into Indonesia's largest listed oil and gas company, Medco Energi.

Temasek was named the preferred bidder for a 44.9 per cent stake in Medco, but the company's founder, the Paniogoro family, eventually exercised its pre-emptive right to match Temasek's bid and bought back its stake.

Temasek's bid to acquire Medco was not seen as a mere investment play, but also one that would potentially boost supply security for the Republic, especially given its dependence on Indonesian natural gas supplies.

'Although SembCorp recently managed to get more Indonesian gas, the talk is that this (supply) is drying up,' one source said yesterday.

He was referring to SembCorp Gas's recent US$5.5 billion deal to buy an additional 86 million standard cubic feet daily from Natuna for 7-10 years, which adds about 26 per cent to its current Indonesian supplies.

Singapore is also preparing to source liquefied natural gas (LNG), to supplement its Indonesian and Malaysian piped gas supplies, and just last Friday appointed a sole LNG buyer which is expected to source for the LNG from Egypt, Trinidad & Tobago, Equatorial Guinea, Nigeria, and Australia's Queensland project.

A Reuters report yesterday cited a Temasek source saying that its new E&P venture could potentially look at participating in ventures in the Gulf of Thailand and offshore Myanmar.

Orchard is also unlikely to be a passive investor in the E&P ventures; it hopes to quickly become a lead operator working with more established upstream firms, the source reportedly said. This explains why it has been aggressively recruiting upstream specialists for its operations.

Temasek also has a deemed interest of 45.7 per cent (through KepCorp and DBS) in Singapore Petroleum Company (SPC), which has been aggressively building up its upstream asset portfolio.

SPC in its just-released 2007 annual report said that its average oil/gas production had shot up to 10,000 barrels of oil equivalent a day by end-2007 - from below 3,000 barrels at the start of the year.

This came from its acquisition of producing oilfields in China's Bohai Bay, as well as production from its Indonesian Kakap and Oyong fields.

Orchard, which was incorporated with a share capital of S$5 million, is also seen by some analysts as a bid by Temasek to diversify its financials-heavy global investment portfolio of some S$164 billion.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.

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This story was printed from TODAYonline The third 'green' pillar Business community has a part to play in becoming more environmentally friendly Wednesday • April 23, 2008 Lin Yanqin yanqin@mediacorp.com.sg WHERE governments are unwilling to take steps to tackle the issue of climate change, businesses should take the initiative. And even as such calls were being made by United Nations (UN) officials at the Business for Environment (B4E) Global Summit on Earth Day yesterday, Singapore urged the business community and domestic population to play their part as the "third pillar" of efforts to build the Republic into a "sustainable development hub". With Government schemes and incentives to promote energy efficiency already in place, it was time for companies to "be prepared to take the initiative and invest in advance to make their businesses more environmentally friendly," said Minister for National Development Mah Bow Tan. This, he stressed, need not come at the expense of business profitability. Making the opening address at the conference — organised by the UN Environment Programme and Global Compact — Mr Mah emphasised the importance of "joint leadership" even as the Government took the lead in addressing climate change. To build Singapore into an "international exchange for knowledge and expertise in sustainable development", a "ground-up movement among the people and private sectors" will have to be nurtured, he said. Said UN Global Compact programme head Georg Kell: "Business ... can show that solutions are feasible, that solutions are possible, and thereby prepare the ground for governments to be proactive where they have not been." But getting businesses in Singapore to heed the message could be a challenge: Singapore came last in a ranking of 32 countries in a survey last year on what businesses had done to manage future energy cost pressures. Hyflux group executive vice-president and chief technology officer Fong Chun Hoe felt it was a "tough call" for small businesses to foot the green bill because many were struggling to get their concerns going. What the Government has done so far — allocating $350 million for clean energy research and providing assistance to encourage and support energy efficiency programmes — was good, but perhaps many businesses were still unaware of the initiatives, he suggested. "When the cost of going green was less expensive or at least equal to current costs, perhaps more companies would be encouraged," he added. Businesses, it seemed, were ready to heed the call, according to an ongoing B4E survey of global business leaders, but a lack of clear directives and consistency from governments was a barrier to doing so. Another significant barrier was competing strategic priorities for businesses. Senoko Energy Supply managing director Eu Pui Sun said businesses need not wait for signals from governments to go ahead with green efforts. Innovative solutions to becoming resource efficient in an economically viable way however, would need to come from the industry itself, he said, citing power generation companies that desalinate their own water as examples. "And other companies will follow," he said. Agreeing, Hyflux's Mr Fong said: "As businesses, you don't wait for it to come. You forecast what is coming and prepare yourself for it and try to be ahead of the curve." And yet "carrots rather than sticks" remain key in galvanising companies to become more environmentally friendly. Relating the experience of Barbados in promoting energy efficiency, senator and former Minister of Energy and Environment Liz Thompson said that financial incentives and tax rebates helped to push businesses to make changes. More than 500 participants from over 30 countries attended the B4E summit, which also saw the launching of a new initiative for benchmarking and research on becoming a less carbon-intensive business.