What you need to know about Singapore's LNG role

Singapore may be a late member to the exclusive 'LNG Club' but it is about to become one of, if not the important one is shaping the future of this once very conservative business. From the initial plan of Singapore building a regas terminal for its own use the LNG Club ignored the very nature of Singapore business history.

Singapore is a huge hub for shipping in general as well as SE Asia industry. Import and export forms the basis of Singapore and LNG was always going to feature.

As LNG flows into Singapore, not forgetting it is on the US FTA list, then re-distribution into the biggest market of LNG will be logistically easy. Moreover as many of the smaller economies in APEC need gas but not on the large scale that the big players want to sell then Singapore can be the supplier from its huge storage depot.

This can therefore feed the burgeoing FSRU market that will develop in SE Asia, and India/Pakistan. And a natural expansion of Singapore's LNG role will no doubt to initiate the price Index for Asian LNG trading which should overshadow the US Henry Hub index, which really has no reference for the global market.

Given that Asia is now considered to stretch from India to Japan and not just what was commonly referred by Westerners as the Far East the FSRU actually encompasses a wide area. Where an FSRU was originally considered as a regas solution because building on land was impossible it is now a fundamental solution for regas when those who should plan better suddenly wake up and realise the lights are about to go out as there is no gas for power stations!

To order an FSRU today would see a unit delivered around the end of 2016 which may not be that much quicker than land based unit. However, thanks to brave shipowners, some FSRU are already on order waiting for projects that need them.

Hoegh have 4 on order 3 of which were fixed to projects after they were ordered. Likewise Golar fixed two of their three speculation orders whilst all of Excelerate ships (8) were speculation units. This is the reason why FSRU solutions are quicker.

Nusantara regas in Indonesia was a conversion of an existing vessel, Malacca uses old ships as storage with regas on the jetty and China uses a GdF Suez vessel from the aborted Neptune regas project off Boston. Other planned projects in India and Pakistan look like using existing regas vessels as their decision making process is so slow a regas project would take forever if it were not for available tonnage.

Indonesia has one more FSRU planned for 2014 for PGN whilst Pertamina will soon tender for one on the south coast of Central Java. Such is the rapid growth of domestic demand for gas with LNG as the solution that LNG originally destined for export is diverted to domestic use but at non export pricing.

And perhaps this is the catalyst for FSRU in Asia where in some countries high International prices are prohibitive and regas costs could at least be lowered especially where FSRU are the subject of aggressive tenders.

An FSRU should be introduced as a temporary solution whilst governments assess the need to build a larger facility to meet expected growth demands. Vietnam, Cambodia, Myanmar and the Philippines are all candidates for FSRU in the immediate future where the costs of building infrastructure at this time is not budgeted for whilst the FSRU is merely leased with the necessary infrastructure installed quite quickly: the Escobar project in Argentina only took 10 months from sign off to first gas!

And after the recent terrible disaster in the Philippines maybe an FSRU could be deployed to get gas into devastated areas with power barges alongside to get cities back up running more quickly: a possible plan for the UN?