By Joanna Hartley
A storage centre for LNG imports from across Gulf to kick start derivatives trading.
Dubai could develop itself as an international financial trading hub for liquefied natural gas (LNG) on the back of moves to import the fuel from Qatar, it was reported on Saturday.
Imports of LNG, supercooled gas, are due to start in two years time in a bid to tackle the power shortage issue in the emirate.
As part of the plans Dubai Multi Commodities Centre (DMCC) is looking to set up a storage centre that would kick start derivatives trading, it revealed at a conference in Dubai, according to UAE daily The National.
The storage centre would give traders the opportunity to take advantage of regional and seasonal movements in LNG, which would form the basis of a “lucrative” futures market, said Paul Wood, the DMCC’s business development manager.
Traders would be able to deliver physical gas and settle their futures market positions when contracts expired at the centre, he added.
Speaking to delegates, he said: “We hope that when the facility is complete, you will also be able to see the development of derivatives trading.”
“It would create a third pricing point for LNG and enhance transparency in the Asian market. It would also allow people to tap into the growing network for gas around Dubai and Oman,” he said.
“LNG is now the vehicle driving growth in international gas trading,” added John Roper, vice president of E.ON Ruhrgas, the German gas and power utility.
Long-term contracts between exporters and buyers form the basis of prices for LNG, and by trading on commodities exchanges in New York and London.
However, at present transactions of high volumes of LNG from the Gulf, namely Qatar, Abu Dhabi and Oman, to Asia are not covered by any trading centre.
It is a gap DMCC are keen to fill as supplies of LNG in the region grow on the back of capacity expansion plans most notably in Qatar which is already the world’s biggest supplier of the fuel.
The Gulf state is planning to more than double its annual exports, to 77 million tonnes by the end of next year.