Singapore eyeing LNG trading hub status: Report

Tiny island state Singapore, where more than US$500 million of oil is traded each day, is studying becoming a trading center for liquefied natural gas (LNG) as consumers in Japan and South Korea buy more individual cargoes of the fuel, Business Times of Singapore reported Monday.

Asia's biggest oil-trading center is considering the plan as Korea Gas Corp, Tokyo Electric Power Co 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,? Singapore Minister of State for Trade and Industry Vivian Balakrishnan said Monday in a speech to be delivered at the Gasex 2004 conference in Singapore. ?Singapore, as Asia's oil trading center, would be well positioned to become a hub for LNG trade.?

Singapore will complete the study next year, he said. LNG is gas that has been cooled to liquid form so that it can be loaded on to 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, factories and households.

?Moving from pipelines to LNG tankers has opened up the market dramatically for both gas sellers and buyers,? Balakrishnan pointed out. ?With LNG, buyers can take gas not only from sources within a 2,000-km range, but potentially from any producer anywhere in the world.?

LNG is increasingly being priced based on the fuel's demand and supply rather than being linked to oil prices, Balakrishnan said. ?The eventual emergence of a spot market for LNG would allow for a good balance between long and short-term contracts for sellers and buyers, thus allowing for optimal trade-offs between energy security and price.? (*)