Singapore to award its next LNG import licence through a competitive process
July 19, 2013 | Singapore
Singapore plans to award its next LNG import licence through a competitive process and adopt a flexible framework to take advantage of market developments and competitive prices. Singapore's Energy Market Authority (EMA) has stated that the city-state will not restrict the number of importers to one, or appoint them concurrently, before the gas markets mature. Industry analysts believe that this approach would boost Singapore's price competitiveness in the energy market and also help in developing its position as a secondary market for LNG. The EMA is seeking feedback on the selection criteria by July 31, 2013, after which it will begin accepting proposals. According to the EMA, the global gas market is expected to evolve with the emergence of new suppliers and new forms of contracts.
State-run Singapore LNG Corporation started commercial operations at the country's first LNG terminal on Jurong Island in May 2013. Its objective is to diversify gas imports and create a regional gas trading hub. There is currently one sole supplier of LNG to Singapore – the UK-based BG Group Plc. In 2008, the EMA awarded the BG Group's subsidiary, BG Singapore Gas Marketing Private Limited, a 20-year contract to supply 3 mmt of LNG; buyers in Singapore have purchased 2.7 million tonnes (mt).
The government now wants to keep its future options open, rather than just operating from one source, especially at a time when the global energy market is moving towards spot supplies to hedge against volatility. Another importer for the next round of supply will be appointed through competitive bidding, after which more importers may be appointed depending on demand and market developments. The LNG terminal will be able to accommodate four importers when it reaches full capacity.
Further, the EMA is also likely to allow parties to apply for licences to import spot cargoes. The EMA is also developing a Terminal Access Code to provide greater clarity on how the terminal capacity is to be allocated for spot imports without affecting its ability to cater to long-term contractual volumes.
Singapore's annual gas demand will likely remain small at around 1-1.5 mt up to 2018. However, it is expected to grow rapidly after 2020, as pipeline contracts expire and power demand increases.
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