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Record demand for liquefied natural gas in Japan and a boom in North American supplies are boosting the prospects for an LNG-trading hub in Asia and the region’s first benchmark price for the fuel.

Japan, the world’s biggest LNG consumer, is increasing purchases to replace idled nuclear capacity, and China is building terminals to handle more cargoes to feed its expanding economy. At the same time, supplies are growing as the United States and Canada extract more gas from shale, putting them on course to join countries such as Russia and Qatar as LNG exporters.

It’s a “golden age” for gas in Asia, with spot trading poised to replace long-term contracts linked to oil prices, Fatih Birol, chief economist at the International Energy Agency, said in an interview on Wednesday in Singapore. The city-state’s location and stature in container shipping and oil trading make it a “very appropriate” base for spot LNG trading, he said.

“If you see liquidity in regional gas trade, then you see possibilities for real-time gas-price discovery for the first time in Asia,” said Tilak Doshi, chief economist at the Energy Studies Institute, a research group at the National University of Singapore.

“It gives buyers the chance to convince suppliers to stop pegging gas prices to crude oil,” said Doshi, who led a study of gas trading in Dubai and says Singapore may become a global LNG hub in four or five years.

An LNG center would need to store fuel from different producers for distribution throughout the region, said Andrey Okhotkin, commercial director at Sakhalin Energy Investment, an LNG producer that is 51 percent owned by Russia’s Gazprom. That would facilitate a benchmark price and open the door to trading financial contracts based on Singapore as a delivery point, he said.

“Why can’t we create a hub which is relevant in the Asia-Pacific region, and why can’t we run all our prices linked to that?” Prabhat Singh, director of marketing at GAIL, said at the World LNG Summit in Barcelona last year.

Global LNG-export capacity has grown 48 percent in the past four years as producers anticipate rising demand, the Paris based IEA said on Nov. 9. Seaborne cargo trade will keep increasing at least through 2035, it said.

Natural gas will be the fastest-growing major fuel source through 2030 as electricity generators shift away from coal to cut greenhouse-gas emissions, according to Exxon Mobil, the world’s biggest company by market value. Gas will overtake coal as the second-largest global energy source after oil, the Irving, Texas-based company said in a report this year.

Bloomberg