BEYOND just choosing an aggregator or buyer for its next tranche of LNG (liquefied natural gas) supplies, Singapore is aptly taking a "big-picture", longer-term approach to sourcing for its future natural gas needs. This is critical, given that gas is the fuel of choice, accounting for 85 per cent of electricity generated here today. Another underlying consideration is how the aggregators secure their LNG imports, or source this, and in turn, how it could help the Republic grow as a regional gas hub. The Energy Market Authority (EMA) is now finalising the framework for such future LNG supplies - not just through long-term contracts as is done now, but also through short-term, spot deals.

Additionally, in its draft determination on LNG imports beyond those by current aggregator BG Group, EMA is taking into account potential new piped natural gas (PNG) supplies. It is lifting the current restrictions on PNG, once BG reaches its franchised LNG sales volume of three million tonnes per annum (tpa), or in 2018, whichever is earlier. Besides these measures, the regulator is also looking to develop a dynamic secondary gas market to allow gas buyers to on-sell gas within Singapore through the domestic gas pipeline network. This will enhance competition by allowing gas buyers and sellers to procure gas from one another.

This is clearly the intent behind the Competitive Licensing Framework (CLF) that EMA has come up with after two rounds of industry consultation. It will see Singapore adopt a tranche- by-tranche approach to enter the global market to procure LNG, with a competitive process to select the importer/importers with the most reliable and price-competitive supplies. The CLF offers flexibility, as the timing of purchases - taking into consideration prevailing global demand and supply conditions each time - would be a key factor affecting LNG contract pricing. Currently, for instance, it is a seller's market, with Asian demand far outstripping supply, especially with Japan and South Korea buying more LNG to make up for nuclear power losses. Furthermore, exports from US shale gas developments are not expected to begin till later this decade. Fortunately, as incremental gas demand here until 2018 is estimated to be "not large", Singapore, in the coming tranche, is looking for the next aggregator to import just an additional one million tpa, or for three years, whichever comes earlier.