Gas âGolden Age' Heralding Asia LNG-Trading Hub: Energy Markets
Comment of the Day

December 16 2011

Commentary by Eoin Treacy

Gas âGolden Age' Heralding Asia LNG-Trading Hub: Energy Markets

This article by Yuriy Humber and Dinakar Sethuraman for Bloomberg may be of interest to subscribers. Here is a section:
Singapore may need a shipping fleet to succeed as an LNG center, Okhotkin said. It would also benefit from facilities to service ships of various sizes, and ample storage space, he said.

“Today there are willing buyers and sellers but sometimes no ship to carry the load,” Okhotkin said.

The cost of shipping LNG almost tripled in September from a year earlier, according to Drewry Maritime Services Ltd., as record summer import volumes in China and India strained transport capacity.

State-run Singapore LNG Corp. is scheduled to complete the city's LNG terminal in the second quarter of 2013, Neil McGregor, chief executive officer, said in an interview. The terminal is designed to be Asia's first so-called “open access” LNG import terminal. It will accommodate multiple user and shipping types, allowing the fuel to be imported and re- exported, according to the company's website.

“Singapore will become an LNG hub in less than five years,” McGregor said. “It has a great location with oil and petrochemicals and a major marine hub. Environmental regulations may push ships to use LNG as fuel, and given that Singapore is the world biggest bunker-fuel market, some may switch to LNG in the medium to long term.”

Eoin Treacy's view Natural gas is the fossil fuel of the future. Supply is increasing in leaps and bounds. It is increasingly easy to trade internationally, has a cost and environmental advantage relative to the oil and coal. Major economies such as the USA and China have the potential to exploit massive domestic unconventional reserves. Shipping companies are among those best placed to benefit from the surge in internationally traded gas.

Golar LNG continues to trend consistently higher. It is currently somewhat overextended relative to the 200-day MA so the risk of a reversion is increasing. However, a sustained move below NOK200 would be required to question medium-term demand dominance.

Belgian listed Exmar found support in the region of €4 from July and has rallied back up into the overhead range. It will need to sustain a move above €6 to indicate a return to demand dominance beyond the short term.

Teekay LNG encountered medium-term resistance in the region of the 2007 peak from early this year and has held a progression of lower rally highs since. A sustained move above $37 would indicate a return to medium-term demand dominance.

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