Oil and Gas

UPDATE 3-BG wins 20yr contract as sole Singapore LNG importer

(Adds more details, updates shares)

SINGAPORE, April 18 (Reuters) - BG Group Plc BG.L won a 20-year exclusive contract to supply Singapore's planned liquefied natural gas (LNG) terminal on Friday, giving one of the world's most active LNG traders a long-term outlet in Asia.

The deal is a key step in BG Group’s quest for a strong position in the Pacific basin, a goal the British company had voiced for several years but which some had questioned after it sold its interest in Indonesia’s Tangguh gas field in 2004.

“BG will have an exclusive licence to import LNG and sell regassified LNG in Singapore for a demand of up to 3 million tonnes per annum (tpa) starting in early 2012,” Khoo Chin Hean, Chief Executive of the Singapore regulator Energy Market Authority (EMA), told a news conference.

Singapore expects initially to import 0.8-1.2 million tonnes per year (tpy) of LNG by 2012 through its planned import terminal on Jurong Island, building up to 3.0 million tpy by 2018.

It also has capacity to expand the terminal in stages to 6 million tpy and ultimately to 10 million tpy in the mid-2020s, with the additional LNG to be used to establish a trade hub for cargoes of spot LNG.

Both sides declined to disclose price details but said the deal had been done at “competitive rates”.

The market for Asian long-term contracts is trending towards oil-price parity, which at $100 a barrel oil equates around $16 per million British thermal unit. Independent consultant Andy Flower said he expected this deal was done at similar levels.

Supplies of LNG -- gas chilled to liquid form so it shrinks to a 600th of its original volume -- are mostly sold on a long-term basis, though the number of cargoes sold on a prompt spot basis is increasing.

Short-term deals make up around 10 percent of total traded LNG, and analysts expect that to grow to 20-25 percent of total LNG trade in future.

But some are sceptical it will grow beyond that, as fears LNG supplies from major producers such as Qatar or Indonesia will run short mean Asian buyers like Japan and South Korea may prefer to stick to long-term contracts.


BG, the first company to import LNG commercially by ship in 1964, last year ferried 60 spot LNG cargoes from the Atlantic Basin to Asian markets, or around half of total volumes of the gas moved between those two regions, it said earlier this month.

BG Group, part of the former British state-owned gas monopoly that was broken up in 1997, already manages a portfolio of 13 million tonnes of LNG, but said this was its first long-term LNG contract in Asia.

“BG are demonstrating they are serious about the Pacific basin,” said Frank Harris, Head of Global LNG at Wood MacKenzie.

BG’s shares rose 1.8 percent to 1,281 pence by 1158 GMT, extending their more than 10 percent gain since the start of the year.

BG would source the LNG from its global portfolio of LNG project, including from Egypt, Trinidad and Tobago and future Australian supplies.

The news comes two months after BG said it had tied up with Australian coal seam gas producer Queensland Gas Company Ltd to build a $7.3 billion LNG plant.

The supplies from Australia would come from the Queensland LNG project, which will come online by 2013, said Martin Houston, BG Group’s global director of LNG.

“Once we surpass the 3 million tpy stage, we could get another aggregator for the extra volumes or... decide to go ahead with BG as well,” Rod Duke, the EMA’s project director, told Reuters on the sidelines.

In 2006, Singapore decided to go ahead with LNG imports to meet future energy demand and ease its dependence on piped gas from Indonesia and Malaysia.

BG Group said earlier this month it would start selling imported LNG in India later this year, and sought to expand its city gas business in the country.

Global demand for LNG, led by the United States, China and India, is set to more than double to 400 million tpy by 2015 on the back of economic growth and environmental concerns. (Editing by Ramthan Hussain)