Nov. 8 (Bloomberg) -- Singapore will decide by next year how it wants to bring in future supplies of liquefied natural gas after its contract with BG Group Inc. ends, according to the chief executive of Singapore LNG Corp.
The country, which has an agreement to buy as much as 3 million metric tons a year of LNG from BG Group until 2023, will decide how to purchase additional supplies, Neil McGregor, who heads the authority in charge of building and operating Singapore’s first gas terminal, said in an interview in Singapore. The contract with BG can be extended by mutual consent, he said.
“What affects us going forward is really what the government decides with the new procurement framework post-BG,” McGregor said. “Whether they repeat the current, another franchise, or something else.”
Singapore is building a terminal facility at Jurong Island to handle 6 million tons a year of LNG. The first two storage tanks, a re-gasification plant and a jetty will begin operating in the second quarter of 2013, McGregor said. A third tank and two additional jetties will become operational in 2014, he said.
“The terminal can serve more than BG’s franchise of 3 million tons,” McGregor said. “We are in discussions with all major gas suppliers in the region.”
BG Group is in talks with Singapore LNG and the country’s Energy Market Authority to provide additional spot LNG supplies in addition to its current long-term contract, Anthony Barker, general manager for BG Singapore Gas Marketing, told reporters at a conference on Nov. 4. The company is also in discussions to lease extra storage space at the terminal on Jurong Island.
BG forecasts that Singapore’s gas demand will double to 16 billion cubic meters (565 billion cubic feet) in 2020 from 8.4 billion last year.
Spot LNG Trade
The third jetty will be able to service smaller LNG tankers of 10,000 to 40,000 cubic meters, unlike the first wharf, which can only take vessels between 120,000 cubic meters and the biggest-sized Q-Max tankers of around 260,000 cubic meters, McGregor said. The second jetty will be able to handle tankers of 60,000 to 265,000 cubic meters.
“We want it to be a full import-export terminal,” he said. “We can bring volumes in and redistribute them.”
There is the “distinct possibility” that LNG cargoes will come to Asia from the U.S. as the price difference between the regions widens and makes arbitrage trading more attractive, McGregor said. Both Royal Dutch Shell Plc and BG “have made investments there,” he said.
Spot and shorter-term contracts are likely to make up 30 percent of the Asian LNG market in 2020, up from 20 percent currently, McGregor estimated. China and India are “price sensitive,” unlike traditional buyers in Japan, South Korea and Taiwan, who sign long-term contracts of 10 years or more, he said.
Gas production in the U.S. from states excluding Hawaii and Alaska rose 0.1 percent in August to a record 69.66 billion cubic feet a day as output from shale formations in Louisiana and the Northeast rose, the Energy Department said Oct. 28 in its monthly EIA-914 report.
--Editors: Paul Gordon, Alexander Kwiatkowski
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