Singapore bourse clears first Dubai/Kuwait/India Sling LNG futures

The Singapore Exchange (SGX) has cleared the world's first futures contract for liquefied natural gas (LNG) delivered to Dubai, Kuwait and India.
The Singapore Exchange (SGX) has cleared the world's first futures contract for liquefied natural gas (LNG) delivered to Dubai, Kuwait and India.PHOTO: REUTERS

SINGAPORE - The Singapore Exchange (SGX) has cleared the world's first futures contract for liquefied natural gas (LNG) delivered to Dubai, Kuwait and India.

A total of 100,000 million British Thermal Units (MMBtu) of February 2018 Futures traded and cleared at a price of US$9.85/MMBtu on Dec 8, said the exchange in a statement on Wednesday (Dec 13).

The futures were brokered by Tullett Prebon and traded by Eni Trading and Shipping, and Trafigura.

The underlying price index, DKI Sling or Dubai/Kuwait/India SGX LNG Index Group, is the world's first LNG derivative based on an index representing delivered LNG prices in the Middle East and India region.

The SGX noted that the LNG market is in a period of transition as it is moving away from long-term oil-linked contracts to increased spot market activity.

The DKI Sling aims to provide a transparent benchmark, and the developing liquidity in the futures market is important to ensuring that risk management tools are available to hedge exposures in this region, it said.

The DKI region has seen growing LNG demand as well as growing volumes of spot trades. India imported its first cargo of LNG in 2004, and is forecast to import 20 million tonnes in 2017.

Neighbouring countries have since also started to import LNG, including the United Arab Emirates (three million tonnes), Kuwait (4.5 million tonnes), Pakistan (4.6 million tonnes), Egypt (six million tonnes) and Jordan (3.5 million tonnes) - bringing the total projected LNG imports for the Middle-East/India region this year to 41.6 million tonnes, more than 10 per cent of global LNG demand.

Melissa Lindsay, global head of LNG at Tullett Prebon, which developed the DKI Sling Index in collaboration with the SGX, noted that the bourse's experience, efforts and reputation, as well as its role as a benchmark administrator, has accelerated the process of creating a trusted price index - making it possible for the first DKI trade to take place within a year since the launch."Singapore has also helped build a home for the LNG trading community in Asia, increasing appetite and need to trade financial instruments from Singapore, making SGX an ideal partner to drive liquidity in Asia forward," she said.

SGX head of commodities William Chin added that the clearing of the first DKI Sling LNG futures marks an important milestone for the growing LNG risk management market and is "an affirmation of the DKI Sling price index developing well as an accepted price marker".