The International Energy Agency (IEA) today held the Southeast Asian launch of its report titled, “Developing a natural gas trading hub in Asia,” in Singapore, detailing what needs to be done for Asian natural gas prices to reflect local demand and supply.

Asia is tipped to become the world’s second-largest gas market by 2015 and the IEA believes that natural gas has the potential for improving energy security and yielding economic and environmental benefits for the region.

Singapore seems best-placed to be a regional gas trading hub, said Laszlo Varro, Head of the Gas, Coal and Power Division at the IEA, who presented the report’s findings in Singapore. He said: “Singapore is an important candidate for establishing an Asian gas trading hub. It is of course already a globally important hub of oil trading, and some of its broader strengths including its good location and supportive legal environment will be applicable for LNG trading as well.”

The IEA report suggests that Asia is large enough, both geographically and market-wise, to have more than one trading hub. But governments will have to adopt a “hands-off” approach if they want to encourage the move to a competitive natural gas trading hub, something that the IEA acknowledges is challenging due to governmental efforts to safeguard energy security. What is necessary to facilitate the development of a regional trading hub, according to the IEA, is that governments ensure price deregulation at the wholesale level, sufficient network capacity and non-discriminatory access, a competitive number of market participants, and the involvement of financial institutions.

The report is available at http://www.iea.org/media/freepublications/AsianGasHub_WEB.pdf

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