Inter-dealer broker Tullett Prebon and Singapore Exchange (SGX) said Monday they will launch a spot pricing index for the Middle East and Indian liquefied natural gas (LNG) markets.
The index will provide a reference price for LNG delivered ex-ship under flexible terms to ports in Dubai, Kuwait and India (DKI). It is intended to enhance LNG price discovery and risk management. The DKI Sling Index will be published every Monday and Thursday by SGX and is expected to launch during the second quarter.
LNG spot trading and shorter-term contracting have increased in a global LNG market that is currently oversupplied, the partners said in announcing the index. "...[T]he industry still lacks transparency and credible price references," they said. "The Middle East and India region, in particular, has seen a boost in spot trade but lacks an accepted price marker, and market participants are often relying on tenders for price discovery.
"Those hedging physical exposures have limited options and are using Far East LNG and/or UK oil and gas benchmarks to manage risk. The new index aims to provide a credible, consistent and transparent pricing mechanism as the volume of LNG trades in the region continues to rise." The partners said the index could spur standardization of LNG trade in the region.
"Over time there will be moments where the regional price decouples from the Far East LNG or European Gas prices, so it is important for an independent and trusted regional price," said Melissa Lindsay, Tullett Prebon global head of LNG.
The DKI Index will form part of the SGX LNG Index Group or "Sling" series of indexes, follows the methodology of collecting an average price from participants.
Separately in recent days, Magnolia LNG LLC, which is developing an LNG export terminal in Louisiana, signed a tentative supply agreement with a regasification terminal developer in India.
And according to press reports late last year, Intercontinental Exchange Inc. and CME Group Inc. each are considering bringing derivatives to the global LNG marketplace. Last year also saw launch of the Global LNG Exchange (GLX).
"GLX believes the LNG market has now reached a tipping point and requires a 21st Century trading mechanism given its size, diversity and fragmentation,” spokesman Roger Martin told NGI in September.