Singapore to stop LNG indices, sheds hope of being main price hub

Singapore

SINGAPORE Exchange will stop producing and publishing its spot price indices - Sling - for liquefied natural gas (LNG), less than four years after its launch, dashing the city-state's hopes of becoming Asia's main pricing hub for the fuel.

Sling - short for SGX LNG Index Group - indices will be published until Oct 31 this year, provided "there is sufficient data for an accurate and robust index to be published", Energy Market Company (EMC) said in an undated statement on its website.

Sling was developed jointly by EMC, the market operator of Singapore's wholesale electricity market, and Singapore Exchange (SGX), and introduced in late 2015 in a bid to develop Singapore as a price hub for the super-chilled fuel. EMC is a wholly-owned unit of Asian Gateway Investments, which is also an SGX subsidiary.

EMC will discontinue the Sling indices after low participation over the past few years, an SGX spokeswoman told Reuters in an emailed statement. SGX delisted the futures and swaps settling on these indices with effect July 29, the spokeswoman added.

"LNG remains an important commodity for SGX. Following our acquisition of the Baltic Exchange in 2016, we are refocusing our efforts on the carriage of LNG as an internationally traded seaborne commodity," she said, adding that the company will shift efforts towards delivering indices for LNG shipping.

Through the Baltic Exchange, it has created a number of LNG freight indices, the first of which was launched in March and it plans to launch two more indices by year-end, she said.

Sling comprises three indices - Singapore Sling, North Asia Sling and Dubai/Kuwait/India Sling.

It was not immediately clear if any contracts are currently using the Sling indices as pricing reference.

"While SGX has been keen to promote itself in the LNG commodity space, it has faced competition from more established pricing agencies and has failed to gain a foothold," said Chong Zhi Xin, associate director of Southeast Asia Power, Gas, Coal and Renewables at research firm IHS Markit.

S&P Global Platts' Japan Korea Marker (JKM) in which liquidity has been growing rapidly over the past two years is fast becoming the main benchmark for spot cargoes in Asia and appears to have nudged out competitors in the sector.

"On the path to commoditisation, liquidity tends to congregate around certain price markers. This was the case for LNG as well, and the Sling was just not one of them," said Edmund Siau, an LNG analyst at FGE.

The Sling spot index is the average of expert assessments contributed by a portfolio of market participants including producers, consumers and traders who are active in the physical LNG market, according to the EMC website.

Singapore, Asia's main oil trading hub, has been expanding its LNG infrastructure by increasing storage capacity and also adding capabilities to bulk-break cargoes. REUTERS