Singapore may set up LNG hub
Streets, 6 June, 2004
Growing flexibility in contracts sees it becoming globally traded
SINGAPORE - Minister of State for Trade and Industry Vivian Balakrishnan yesterday said that Singapore , where more than US$500 million (S$849.6 million) of oil is traded each day, is studying to become a trading centre for liquefied natural gas (LNG) as consumers in Japan and South Korea buy more individual cargoes of the fuel.
Asia's biggest oil-trading centre is considering the plan as Korea Gas, Tokyo Electric Power and rival buyers reduce reliance on traditional 25-year contracts in favour of accords of between three and five years.
Shorter contracts and the so-called spot market give consumers more flexibility in terms of prices and increased security of supply.
"The increasing flexibility in recent LNG contracts also points towards its emergence as a globally traded commodity," Dr. Balakrishnan said in a speech at the Gasex 2004 conference here.
" Singapore , as Asia 's oil trading centre, would be well positioned to become a hub for LNG trade."
The study will be completed next year.
LNG is gas that has been cooled to liquid form so that it can be loaded onto a ship for transportation to markets that are too far for a pipeline. The LNG is returned to gas form and piped to power plants, factorice and households.
"Moving from pipelines to LNG tankers has opened up the market dramatically for both gas sellers and buyers," Dr. Balakrishnan said.
"With LNG, buyers can take gas not only from sources within a 2,000km range, but potentially from any producer anywhere in the world."
LNG is increasingly being priced on demand and supply rather than being linked to oil prices.
"The eventual emergence of a spot market for LNG would allow for a good balance between long-(term) and short-term contracts for sellers and buyers, thus allowing for optimal trade-offs between energy security and price," he said.
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