A PERTH-based team believes a new online LNG exchange can transform the way the global commodity is bought and sold.
The GLX platform will allow cargoes of LNG to be sold and purchased in a way which ensures all industry participants are paying and receiving fair and transparent market prices.
The platform has been developed by a group of LNG industry executives and professionals who share the belief that the time has come for the LNG market to capitalise on e-commerce.
GLX founder and CEO Damien Criddle said that while other bulk seaborne commodities had moved to online trading platforms, trading in LNG had changed little since the industry began in the 1960s.
“The LNG industry is renowned for embracing the latest technology in the exploration, development, production, transportation and regasification processes, but when it comes to trading the product it has been slow to take advantage of the digital revolution which has transformed so many other industries,” Mr Criddle said.
“The GLX platform will create significant efficiencies and advantages for all industry participants and ensure supply and demand come together in a much more transparent and efficient manner.”
The GLX platform was developed in Perth and supported by software developers in Melbourne and Sydney. It was designed using the GLX team’s extensive experience in LNG and refined based on discussions with a number of leading LNG industry participants. Sellers of LNG can hold auctions for individual cargoes with selected counterparties, while buyers can also hold auctions to purchase cargoes from selected sellers.
Currently, the majority of spot sales of LNG are conducted based on bilateral relationships and ad hoc tenders or negotiations. These processes are not efficient and do not provide parties with the assurance that they are paying or receiving fair market prices.
The GLX platform facilitates trading of LNG based on supply and demand fundamentals and allows transparent price discovery, which will ultimately lead to the creation of reliable and trusted LNG price indices.
The global LNG trade has been characterised by long-term contracts since the industry began in the late 1960s, but spot – or one-off – trades have grown steadily over the past 20 years.
Almost 30% of LNG cargoes are now traded on short-term agreements, and that percentage is expected to grow in years to come with supply increasing rapidly and buyers looking to diversify their portfolios to a mix of long term, short term and spot.
GLX Chairman Rob Cole said the platform demonstrated Australia’s ability to export its LNG expertise.
“This platform is an international exchange, but the innovation was driven by Australian LNG professionals who believed there was a better way to trade and put their belief in to action,” Mr Cole said.
“The technology will improve the efficiency and transparency of the LNG market as a whole, for the benefit of the industry in the short term and the long term.
“We believe there are compelling reasons for buyers and sellers of LNG to embrace the move to digital trading.”
Approved LNG companies will now undertake trials of the platform to ensure they are familiar with its operation before live trading commences. Trading on the platform is expected to commence early in 2017.