Tullett Prebon, one of the world’s leading interdealer brokers, is collaborating with Singapore Exchange (SGX) to develop a spot pricing index for the Middle East and Indian liquefied natural gas markets (LNG) to enhance price discovery and risk management in the region. Following industry consultation, the new index will provide a transparent and trusted reference price for LNG Delivered Ex-Ship under flexible terms to key ports in Dubai, Kuwait and India (DKI).
The new DKI Sling Index will be published every Monday and Thursday by SGX, Asia’s leading and trusted market infrastructure. As the LNG market moves towards an oversupply, the role and relevance of spot and shorter-term contracts has increased. However, the industry still lacks transparency and credible price references. 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. It could also serve as a first step towards standardising LNG trade in the region.
With the launch of the new index expected in the second quarter of 2017, Melissa Lindsay, Global Head of LNG at Tullett Prebon, said:
“We are thrilled to be partnering with SGX to launch this new index. The group’s efforts in Asia and credibility as a Benchmark Administrator, coupled with our experience building liquidity in LNG derivatives, makes this a strong partnership. Over recent years we have seen an increase in the volume of spot trade into the Middle East and India region and this new index will provide better price discovery and fair value to our clients. 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.”
Janice Kan, Head of Commodities at SGX, said:
“Singapore Exchange is pleased to collaborate with Tullett Prebon to introduce the new Dubai-Kuwait-India Sling index. The winning combination of Tullett Prebon’s extensive network and deep understanding of the LNG market, along with SGX’s transparent and trusted methodology, will help the new index to develop as a benchmark for the region. We look forward to continue building industry support to enhance price discovery in the LNG market.”
The DKI Index will form part of the SGX LNG Index Group or ‘Sling’ series of indexes that follows the trusted methodology of collecting an average price from participants. It will be the first of its kind to use high-level terms of physical trade approach, ensuring submission of prices are on the same assumptions.
Amreeta Eng, Group Director for Trade Promotion at International Enterprise Singapore, the Singapore government agency that promotes international trade, said:
“It is encouraging to see Singapore Exchange extending its service offerings in the LNG space. As LNG markets become more spot-based, this strategic partnership between SGX and Tullett Prebon will pave the way towards more transparent, trusted and reliable price discovery benchmarks. Singapore is emerging as a key LNG hub, with storage, trading, shipping and price discovery activities, and we look forward to more industry-led initiatives to develop the LNG markets.