S'pore 'has role in setting LNG prices in Asia'

International Enterprise Singapore CEO Teo Eng Cheong said he hoped the Singapore SGX LNG Index Group, a new weekly LNG spot price index, will evolve to become "the Asian LNG price" over time. He was giving his keynote address at the Gastech conferen
International Enterprise Singapore CEO Teo Eng Cheong said he hoped the Singapore SGX LNG Index Group, a new weekly LNG spot price index, will evolve to become "the Asian LNG price" over time. He was giving his keynote address at the Gastech conference yesterday.PHOTO: IE SINGAPORE

New weekly LNG spot price index a boost to goal of becoming regional hub for commodity

Singapore can play a role in forming a neutral liquefied natural gas (LNG) price in Asia, much like it already does in commodities such as oil, rubber or iron ore, said International Enterprise Singapore chief executive Teo Eng Cheong.

This is especially so as "bright sparks" are beginning to emerge amid the slump in global LNG prices, including a more liquid market for trading, he noted.

Mr Teo said in his keynote address at the Gastech energy conference at the Singapore Expo yesterday: "To support trading, you will need to have a good price discovery mechanism.

GROWTH REMAINS STRONG

More countries are starting to import LNG and multiple buyers are emerging in markets that previously lacked energy competition. There should be no doubt LNG will have an increasingly influential role in the changing landscape of global energy supply.

MR HELGE LUND, BG Group chief executive

"An Asian LNG price will be helpful despite the reduced tension and pressure because of the Asian premium phenomena in the past."

He hopes that the Singapore SGX LNG Index Group (SLInG), a new weekly LNG spot price index, will evolve to become "the Asian LNG price" over time.

The SLInG index, which is derived using submissions from about 20 global industry players who offer their assessments of LNG prices, was launched by the Energy Market Company and the Singapore Exchange (SGX) yesterday.

SGX derivatives head Michael Syn told The Straits Times that Singapore has "many of the right ingredients" for the creation of a vibrant LNG marketplace, such as its strong network of traders and supportive infrastructure.

"Today, it's a relatively opaque market. The thing that we're trying to contribute is some visibility as to what the price is," said Mr Syn.

"If the industry believes that, through this process, they can create a price for Asian LNG that is independently formed - not linked to oil, for instance - you will get a market where you can confidently buy or sell or hedge LNG."

The formation of the index, he added, brings Singapore a step closer to fulfilling its aspiration of becoming a regional LNG hub as well.

BG Group chief executive Helge Lund, who also gave a keynote speech, acknowledged that "it is not a comfortable time" to be in the energy sector, given the sharp fall in commodity prices.

"But it is a moment when we have the opportunity to look afresh at what we do," he said. He also noted that the fall in LNG prices was a result of the industry's "undisciplined decision-making over the past decade".

"Last year, international oil companies were spending more than twice as much as they had in 2004 to provide the same volumes of oil and gas.

"In other words, as the oil price sat mostly above $100 for 10 years, the returns we delivered, as an industry, collapsed."

He said the industry's business model "needs adjusting" - companies, for instance, should be more disciplined in investment and project management through the commodity price cycle.

Mr Lund remained optimistic about the future of the global LNG business as the "fundamentals for the energy business are strong", and expected demand to grow between 4 and 6 per cent a year through 2025.

"More countries are starting to import LNG and multiple buyers are emerging in markets that previously lacked energy competition," he said. "There should be no doubt LNG will have an increasingly influential role in the changing landscape of global energy supply."

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A version of this article appeared in the print edition of The Straits Times on October 28, 2015, with the headline 'S'pore 'has role in setting LNG prices in Asia''. Print Edition | Subscribe