UPDATE 1-SGX to launch fuel oil futures contract in H2

(Recasts with details from SGX statement)

SINGAPORE, May 26 (Reuters) - The Singapore Exchange (SGXL.SI) will launch a fuel oil futures contract in the second half of this year, the exchange said on Tuesday, as it attempts to boost the citystate's role as a regional energy hub. The futures contract, a revival of a similar one operated in the early 1990s, will complement physical trading and boost risk management infrastructure in the citystate, the world's largest marine port, Singapore Trade and Industry Minister Lim Hng Kiang told a traders' summit.

"This will further develop the fledgling commodities derivatives sector in Singapore and strengthen our commodities trading hub status," Lim added, confirming a Reuters report last month. [ID:nSIN435298] [ID:nSP303542]

Singapore is looking to a liquid exchange to offer a relatively better regulated environment and a more transparent pricing mechanism, the head of International Enterprise (IE) had said. [ID:nSP213486]

"The contract will offer market participants an efficient and transparent pricing mechanism in the Singapore fuel oil market," Elena Sng, the Senior Vice President for Clearing and Commodities Business at SGX, said in a statement.

The contract, for the 380-centistoke grade or bunker fuel, with a size of 100 metric tonnes each, will be traded on a free-on-board (FOB) basis, SGX said.

This means the cargoes can be loaded from any shore-based terminal in the city-state.

Singapore is the world's third-largest oil trading hub and the largest bunker fuel port, with 3 million tonnes of marine fuel traded each month. Overall fuel oil volumes transacted average about 5 million tonnes every month.

But past efforts to launch similar fuel oil futures contracts have had dismal results.

The then Singapore International Monetary Exchange (SIMEX) launched a fuel oil futures contract -- Asia's first energy contract -- in 1989. But the contract withered by the mid-1990s due to poor liquidity and investor interest.

Another Singapore 380-cst fuel oil contract, launched on the New York Mercantile Exchange (NYMEX) some years ago, also failed to live up to its early hype, but there are plans to revive it. (Reporting by Maryelle Demongeot and Jennifer Tan; Editing by Clarence Fernandez)