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Singapore poised for LNG hub

The country is ready to play a leading role in meeting surging liquefied natural gas demand in the region's rapidly expanding market. In emailed responses, Singapore LNG Corporation's (SLNG) chief executive said his company is strategically placed to meet emerging market demand

For SLNG chief executive John Ng, there's no beating around the bush. He's in no doubt about the fact that his company is in the right place at the right time to meet the region's burgeoning LNG demand rise.

"With Singapore situated at the crossroads of major LNG trade routes, we believe SLNG is well-positioned to facilitate the growth of a vibrant LNG market in the region," he said. "Singapore's fortuitous geographical location puts us in a highly advantageous position to develop as an LNG trading hub, using the SLNG terminal as a platform".

Ng sees the services provided by SLNG as helping to give traders better access to the region's LNG market.

"With an expected increase in LNG supply in the coming years, we see greater demand for LNG storage in the region, in order to facilitate trading opportunities," he said.

From its base on Jurong Island in western Singapore, SLNG offers storage, break bulk and reload services to the local and international markets. Facilities include three 188,000-cubic metre storage tanks with regasification capacity of some 6m tonnes per year. A fourth tank will be operational in 2018, adding 260,000 cm of storage capacity for trading, and increasing throughput capacity to around 11m t/y. Other plans include modifying SLNG's secondary jetty to accommodate LNG vessels as small as 2,000 cm from 2019.

"In the longer term, when demand for small-scale LNG distribution grows and there is a viable business case, SLNG will be able to develop a third jetty at our terminal which is currently designed to berth LNG vessels ranging between 10,000 and 40,000 cm,"

SLNG is well-positioned to take advantage of the developing LNG market where a surplus of supply into Asia-Pacific is set to increase spot trading. A central component of trading is the ability to store and release LNG as required and it's here that the company expects to play a leading role.

"SLNG does not trade in LNG molecules. But as an open-access, multi-user LNG terminal owner and operator, we welcome any development that may lead to greater LNG trading activities and consequently, greater demand for our terminal infrastructure services," SLNG's chief executive says.

A major milestone in the development of a fluid, Asian LNG market is the recent probing by Japan, South Korea and China into contractual constraints on reselling LNG cargoes because of destination clauses.

Ng says the relaxation of restrictive destination clauses is "a positive move in the right direction" for the region's LNG hub aspirations. This will give buyers greater flexibility in trading LNG cargoes which won't be needed in their own domestic markets, he says.

The result will be higher volumes of LNG flowing into the market, which will in turn boost liquidity and potentially demand for spot cargoes in emerging market such as China, India and Southeast Asia.

Asia's LNG buyers have also been pushing for shorter-term contracts of between five-to-nine years, compared to 20-plus previously. These changes are expected to free up volumes and further increase liquidity in the Asian LNG market.

"Given the fast-changing LNG market environment where buyers now have many more LNG supply options, there is a greater push for shorter-term and smaller contracts," Ng explains. "SLNG is in discussions with the market players, including existing terminal users, to evolve our service offerings in line with market requirements. This includes both large-scale as well as small-scale LNG infrastructure services."

As well as importing and storing LNG, SLNG provides transhipment services whereby a large LNG cargo can be transferred from one ship berthed at one jetty to another smaller ship berthed at a second jetty. This service is of particular benefit for large LNG providers looking to supply smaller ones and is expected to become a growth market for SLNG.

The rising role for small-scale regasification services means SLNG is looking to modify its second jetty to cater for smaller vessels and will also consider extending its third jetty if the need arises.

"While our primary mandate and focus remains to provide regasified LNG for the domestic market, our reload and break bulk services were developed mainly with the regional market in mind," Ng said. "We believe that there is good potential for these services to grow, especially in the area of break bulking for small scale LNG deliveries."

Bunkering boost

Another growth area for SLNG is serving the LNG-fuelled ship (bunkering) market which is expected to expand as a result of International Maritime Organisation (IMO) limits on sulphur in fuel oil—which will be enforced from 2020.

SLNG expects the IMO regulations to increase the number of LNG-powered ships to enter into service over the medium-to-long term, leading to increased demand for LNG bunkers. However, Ng acknowledges that the speed at which this market will grow depends on LNG prices compared to other competing fuels, the availability of bunkering facilities and regulations in place at the time.

FACTS Global Energy consultancy expects Singapore bunker sales to increase by 3% in 2017—from a year earlier-reaching 50m tonnes. This is down from the 7.7% growth rate seen in 2016, which was boosted by a surge in global seaborne trade.

Domestically, other growth areas for SLNG include storage and reload, and truck-to-ship LNG supply. SLNG recently entered into a two-year storage and reload deal with Singapore's Pavilion Gas which, together with Shell Eastern Petroleum, will begin importing Singapore's first LNG this year.

SLNG launched Singapore's first LNG truck-loading facility, in April 2016, in conjunction with the Maritime and Port Authority of Singapore. The facility is part of SLNG's overall strategy to help grow the small-scale LNG market and is the first of its kind in Singapore. Not only does it represent an important first step towards developing the LNG trucking business there, but it also facilitates truck-to-ship LNG bunkering.

"The entire LNG trucking business is still very new in Singapore. It is going to take considerable time for demand to really pick up," Ng said.

"We are in this for the long haul as we see good potential, especially in the realm of truck-to-ship LNG bunkering. We also see the LNG trucking business growing when there is greater incentive for industrial users to switch from existing fuel sources such as diesel, LPG (liquefied petroleum gas), CNG (compressed natural gas) to LNG."

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