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Singapore's LNG Hub Ambitions Reloaded - Sohbet Karbuz

In 1891, M. Samuel & Co. (later Shell Transport & Trading) decided to use Singapore as a base for the import and distribution of kerosene from Russia. For this purpose, a fuel depot was built on the island of Pulau Bukom, located 5.5 km southwest of mainland Singapore. The depot opened on 16 September 1892 when its first shipment of kerosene arrived on board the SS Murex, the world's first bulk-oil tanker to pass through the Suez Canal.

Today, the city-state Singapore is one of the world's largest refining and petrochemical complexes, the world's busiest bunkering port, and Asia's leading oil pricing and oil trading hub.

Capitalizing on its location as an established centre of finance and trade, its considerable infrastructure in place, its pool of highly skilled human capital in a multi-lingual environment, its internationally recognized legal, regulatory, and tax frameworks, and attractive fiscal policies, Singapore also aims to become a regional hub for liquefied natural gas (LNG) trading, major LNG bunkering supplier too.

Singapore and LNG

Singapore generates 96% of its electricity from natural gas. Over 85% of natural gas is used in electricity generation. And all the natural gas consumed in the country is imported. This is why the security of the energy supply has always been a major concern for Singapore.

In 2019, Singapore imported 11 billion cubic meters of gas. Indonesia and Malaysia provided 71% of imports via pipeline, with the remaining 29% coming from elsewhere via LNG.

Gas flow from Indonesia is expected to cease in 2023 (when the 20-year contract will expire), and the future of gas imports from Malaysia is uncertain. Both countries will need their own gas due to rising demand. Concerned by the long-term reliability of its pipeline imports, Singapore has already been preparing itself to be completely dependent on LNG.

Singapore built an LNG import terminal (Singapore LNG, or SLNG) on Jurong Island with a capacity of 3.5 Mtpa. SLNG commissioned its inaugural LNG cargo in March 2013 from Qatar, and the terminal has begun commercial operations on 7 May 2013. With capacity and storage expansions, SLNG's Jurong terminal now boasts 11 Mtpa regasification capacity and four storage tanks. There are plans for further expansion to bring the total capacity to 15 Mtpa. Further expansion in the form of second LNG terminals at a different site (a floating terminal) is being explored to become operational after 2025. This is more than enough to meet the country's gas demand.

There are four main reasons for expansion in LNG regasification and storage capacity:

First, to secure supplies for Singapore's growing gas demand.

Second, to transform into an LNG bunkering hub. Singapore's annual LNG bunkering capacity, which is expected to hit 1 Mt by 2021, is estimated to increase in the future further. In January 2021, Keppel Offshore & Marine Ltd has delivered Singapore's first LNG bunkering vessel, FueLNG Bellina, to FueLNG, a joint venture between Keppel Offshore & Marine and Shell Eastern Petroleum. The vessel will provide LNG bunker to LNG-powered vessels that call at the Port of Singapore.

Third, to increase its small-scale LNG capability. The modifications to jetties are done to allow reloading of small-scale LNG carriers. The substantial storage capacity will enable buyers to purchase a wide range of cargo sizes so that Singapore can act as a small-scale LNG distribution center. The motive for this is the development of the small-scale LNG market in Southeast Asia. Through small scale LNG trade, a large LNG cargo will be physically imported into Singapore and then re-traded through smaller parcels distributed through Southeast Asia.

And finally, to position Singapore as an emerging LNG trading hub, a place for price discovery. The motivation for that was the fact that despite being the world's largest consumer of LNG, Asia does not have a trading hub for LNG. Historically, long-term contracts linked to oil pricing kept import prices high for the buyers in the region, and gas to gas competitions could not develop.

Path to become an LNG hub

In 2015, the Energy Market Authority (EMA), a statutory board under the Ministry of Trade and Industry in Singapore, announced that it is considering setting up a Secondary Gas Trading Market which will allow gas buyers and sellers to trade gas within Singapore, enabling domestic gas price discovery that reflects Singapore's demand and supply conditions.

In January 2016, the Singapore Exchange (SGX) launched a mix of financial instruments to allow more flexibility on the contracts for LNG. These contracts, based on a price index created in Singapore, were expected to become a physical delivery mechanism in Asia and hence a new benchmark for LNG pricing in Asia. Sling spot price indices for LNG (SLInG, short for SGX LNG Index Group, is also Singapore's most famous drink), was developed jointly by Energy Market Company of Singapore and SGX.

As a small country and a much smaller market for LNG, it could be difficult to create sufficient liquidity in a spot LNG market in Singapore, compared to the much larger potential Asian hubs, such as Shanghai or Japan. But although it handles much larger volumes of pipeline gas and LNG, the Shanghai hub is not really a hub because of its heavily regulated nature, including regulated pricing, whereas Singapore has been planned to be created as a true liquid LNG trading hub.

Unfortunately, reality did not meet expectations. Singapore Exchange stopped producing and publishing its spot price indices for LNG in 2019, less than four years after its launch, dashing the hopes of becoming Asia's pricing hub for LNG.

There were several reasons. The limited size of Singapore's market did not generate enough liquidity to provide a transparent and legitimate price signal for wider Asian LNG markets. Despite its competitive advantage compared to other Asian nations, competition from more established pricing agencies (such as S&P Global Platts' Japan Korea Marker (JKM) was fierce. Moreover, Singapore lacks physical connectivity to larger gas markets in the region, and the existing connections (from Malaysia and Indonesia) do not have the reverse capability. It is argued that Singapore's capacity to establish an LNG hub is limited due to monopolization and state strategies surrounding market development in neighboring countries that are contradictory to the financialization of natural gas trading. [1]

There are still hopes

Singapore government remains committed to developing Singapore as an LNG trading hub. With the opening of LNG plants in Mozambique and Tanzania, Singapore could be a trading and distribution bridge between the sellers in East Africa to buyers in Asia, and hence play an intermediary step between suppliers and buyers. In addition to East African LNG, Singapore could also serve as Qatar's hub for LNG in Southeast Asia, at minimum as a storage hub.

Singapore has a world-class trading infrastructure already in place, and it has excellent institutions, it offers low geopolitical risk, it is situated in an ideal geographic location with deep and liquid financial and capital markets, it has an attractive tax and regulatory regime. Besides, currently, over 50 companies with LNG trading or business development have a presence in Singapore.

Another important issue is the increasing likelihood of becoming a new financial, equity, and commodity trading center in Asia, especially following the imposition of China's new National Security law for Hong Kong on 30 June 2020.

Note that Hong Kong was handed over to China by Britain in 1997 (after a century and a half of British colonial rule) under a "one country, two systems" framework valid until 2047, with Hong Kong existing as a special administrative region. Hong Kong would be self-governing in domestic affairs, enjoying a "high degree of autonomy." But by imposing the national security legislation in June 2020, China has granted itself the power to intervene in Hong Kong in any matter that China's government deems relevant to national security. The law has allowed the establishment of entirely new security infrastructure in Hong Kong. [2] Since then, the developments in Hong Kong are not encouraging. There are building expectations that Singapore will eventually replace Hong Kong as Asia's preeminent financial center in a decade.

Finally, another recent development may also help facilitate Singapore to reach its goal of becoming an LNG hub: the creation of an LNG exchange (Abaxx Exchange) offering standardized LNG contracts, something lacking in the LNG business. In September 2020, the Singaporean authorities granted Abaxx Exchange to launch of an LNG exchange in the first half of 2021 (based in Singapore) that utilizes Abaxx Technologies Corporation software application, which might revolutionize commodity trading by leveraging Ethereum based smart contracts on an Ethereum-based distributed ledger. [3] Final approval is expected to be received in early 2021. If major trading houses such as Glencore, Trafigura, or ICE are involved in this exchange, the likelihood of its success will increase tremendously.

In short, Singapore has not yet given up its ambition to become an LNG hub. Perhaps, the proponents of Singapore LNG hub will shout the lyrics of the song titled "I'm not giving up" louder: "even when nobody else believes, I'm not going down that easily, so don't give up on me."


[1] Alexander Dodge (2020), The Singaporean natural gas hub: reassembling global production networks and markets in Asia, Journal of Economic Geography, Volume 20, Issue 5, September 2020, Pages 1241–1262,

[2] For more on this, see, Yunxin Tu (2020). The Question of 2047: Constitutional Fate of “One Country, Two Systems” in Hong Kong. German Law Journal,21(8),

[3] Abaxx technologies: Canadian Fintech looking to disrupt the global commodity supply chain, Seeking Alpha, 7 December 2020,


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