S'pore in the running to be LNG trading hub: IEA

S'pore in the running to be LNG trading hub: IEA
PHOTO: S'pore in the running to be LNG trading hub: IEA

SINGAPORE - Singapore, already a reputed global oil-trading centre, stands a good chance of becoming a regional LNG trading hub in the coming years as well, the chief economist of the International Energy Agency (IEA) has said.

Fatih Birol, speaking to reporters after presenting the IEA's World Energy Outlook 2012 report yesterday, said Singapore has strong government support behind the trading of liquefied natural gas, and plans are already afoot to expand the LNG terminal starting up next year.

And even as more tanks are to be added to the first terminal on Jurong Island, a feasibility study is being launched for a second LNG terminal.

Dr Birol, asked about potential competition to Singapore, replied: "Of course, other (regional) countries also want to be LNG hubs, but firstly, they need to have the (terminal) capacity for this; secondly, they also need the necessary trade framework in place."

What will boost Singapore's LNG aspirations is the IEA's projection that LNG's share of the global gas trade will increase from today's 30 per cent to 50 per cent in coming years.

Secondly, there will be increased production from new players such as the US and Canada, with their shale gas projects.

Dr Birol, asked whether this would mean that gas prices will fall more than oil prices in coming years, said: "I don't expect either oil or gas prices to fall. When the global economy is back on its feet, I expect higher energy prices to be with us."

He added, however, that he expected the big divergence between US gas prices and European and Asian gas prices to narrow.

Asia is now paying a premium for its oil and gas.

The latest IEA report showed, for instance, that at its lowest level this year, natural gas prices in the US were traded at around a fifth of import prices in Europe and an eighth of those in Japan or Asia.

Dr Birol said: "So in terms of gas prices, Asia now has a major, once-in-a-lifetime chance to take steps to move away from current oil-indexed gas pricing. Already, there are signals of this happening with spot deals."

"I hope new producers coming into the picture provide Asian importers with strong cards to negotiate new contracts. In Europe, oil-indexed gas pricing is coming under tremendous pressure, and Asian importers have to be hard negotiators like what the Europeans are now."

Just last week, BT reported industry buzz over BP Singapore's 15-year deal to supply 500,000 tonnes per annum of LNG to Japan's Kansai Electric, with the deal indexed to North American gas prices instead of to oil.

The LNG deliveries from BP Singapore, starting 2017 under the deal, will be around 30 per cent lower than that of currently oil-based LNG deals, Kyodo News cited Kansai Electric as having said.

Traditionally, Japanese gencos have bought LNG indexed to the Japan Crude Cocktail index; Singapore gencos are also buying LNG at prices indexed to Brent crude from aggregator BG Group.

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