The Government on Tuesday announced plans to build a second terminal for liquified natural gas (LNG), a key fuel used to generate the bulk of the country's electricity.

Prime Minister Lee Hsien Loong said that a few potential sites in eastern Singapore are being studied, although no timeline was provided for the project.

"This will enhance our energy security because it will geographically diversify our LNG import infrastructure," said Mr Lee.

The new terminal will also support new industrial sites and power plants, he added.

Mr Lee was speaking at the launch of the country's first LNG terminal - the Singapore LNG Terminal on Jurong Island.

More than 90 per cent of Singapore's electricity is generated using natural gas, which is cheaper and more environmentally friendly than oil.

Previously all the gas came via pipes from Malaysia and Indonesia, and to diversify the sources the Government built the Singapore LNG Terminal which can handle imports from all over the world.

The terminal started operating in May last year and has already received shipments from the African state of Equatorial Guinea and Trinidad and Tobago in the Caribbean.

The shipments have so far been used in Singapore but the terminal also has the ability to reload LNG to other vessels to be shipped elsewhere.

The Singapore LNG Terminal can handle six million tonnes per annum and plans are afoot for a fourth tank which will raise the capacity to at least nine million tonnes per year by 2017.

The terminal has space to accommodate seven storage tanks with capacity of 15 million tonnes per year.

"But that's the limit because of land constraints," said Mr Lee. "Therefore we will build a second LNG terminal."

Other than meeting its own energy needs, Singapore is trying to develop an LNG hub including fields like LNG trading.