News ID: 210656
Published: 0517 GMT February 26, 2018

Oil like gas: S&P Global Platts bags Asian LNGAsian LNG price price benchmark

Oil like gas: S&P Global Platts bags Asian LNGAsian LNG price price benchmark

Asia's booming liquefied natural gas (LNG) market has seen exchanges and commodity price agencies vie to become the region's leading price benchmark.

That race seems over with S&P Global Platts emerging the winner, over rivals including other price reporting agencies and exchanges, Reuters wrote.

With over 70 percent of global LNG consumed in Asia, and growth concentrated in this region, it adds a potentially lucrative business to the company's already profitable operations providing oil price assessments.

Platts said LNG swaps volumes, settled against its Japan Korea Marker (JKM) LNG price assessments, quadrupled in 2017 to 50,266 lots, equivalent to around 170 tankers of LNG and the growth has continued this year.

"January 2018 was a record month for JKM derivatives with over 9,500 lots cleared, equivalent to over 31 standard-sized LNG cargoes," said Dave Ernsberger, head of energy pricing at S&P Global Platts.

Platts provides price assessments of spot LNG cargoes traded in Asia and analysts and traders estimate the vast majority of deals are priced using its benchmark.

The Intercontinental Exchange, which operates financial and commodities markets, also provides a swaps contract for LNG that uses the Platts benchmark as the price for the underlying asset. More than 9,000 LNG lots were traded in January. Each lot is over 10,000 million British thermal units (mmBtu).

"The contract is increasingly seen as the benchmark for LNG in Asia," Gordon Bennett, managing director of utility markets at ICE, said in a client note.

The CME Group, which operates derivatives markets, has a similar arrangement, although only 265 lots were traded in January on its platform.

Early starter advantage — Platts started its JKM in 2009 — and the tie-up with ICE seems to have won Platts the race to be the main supplier of the price marker in Asia, creating critical liquidity that is crucial for any market to develop, according to several senior traders.

Other price reporting agencies and exchanges, including Japan's Tokyo Commodity Exchange (Tocom) and the Singapore Exchange, have vied for a slice of the price-assessment pie but have struggled for significant market share.

TOCOM declined to comment, while SGX said there was ‘strong interest’ in its Middle East and India LNG derivatives contract, known as the Dubai/Kuwait/India.

A sudden growth in spot trading of LNG in Asia has also been fortuitous for Platts.

Most LNG is traded via multi-year supply contracts, but spot trading took off from 2016 and made the need for a price assessment to settle trades more urgent.

China's imports rose rapidly and some newer suppliers to the market were willing to break with traditional long-term supply contracts and provide spot cargoes instead.

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