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UPDATE 1-U.S. State Dept approves sale of 12 F-35 jets to Singapore

SINGAPORE, Jan 10 (Reuters) - The U.S. State Department has approved the sale of up to 12 F-35 fighter jets and related equipment to Singapore at an estimated cost of $2.75 billion, pending approval from Congress, Washington's Defense Security Cooperation Agency said on Friday.

The tiny Asian city-state said last year it planned to buy an initial four F-35s from Lockheed Martin Corp, with an option for eight more, as it looks to replace its ageing F-16 fleet.

"The State Department has made a determination approving a possible foreign military sale to Singapore of up to twelve F-35B...aircraft and related equipment for an estimated cost of $2.750 billion," the DSCA said in a statement, adding it had notified Congress of a possible sale.

DSCA said the sale involved equipment from Lockheed and engine maker Pratt and Whitney. The F-35B variant of the jet can handle short takeoffs and vertical landings, attributes seen as benefiting land-scarce Singapore.

The Pentagon in October announced F-35 jet prices for the next three years which lowered the cost of the jet by 13%, a move seen as encouraging other nations to buy the warplanes. The jet currently makes up about 25% of Lockheed's annual revenue.

With Southeast Asia's largest defence budget, wealthy Singapore is a key prize for global arms companies as it looks to invest in new technology and upgrade its equipment.

Singapore, which is expected to hold an election within months, set aside about 30% of its total expenditure on defence, security and diplomacy efforts in its 2019 annual budget. (Reporting by John Geddie and Aradhana Aravindan Editing by Robert Birsel, Raju Gopalakrishnan)