Deal is part of local firm’s focus on developing regional demand to build robust LNG ecosystem
SINGAPORE — In a spate of announcements yesterday, home-grown Pavilion Energy said it has signed a 10-year liquefied natural gas (LNG) supply deal with a unit of Russian energy giant Gazprom as well as a memorandum of understanding to supply cargoes of LNG to Huadian — one of China’s top state-owned power generation companies — from 2020.
Pavilion Energy, Temasek Holdings’ LNG unit, is also collaborating with Japan’s JERA, a joint venture between the top two global LNG buyers (Tokyo Electric Power Co and Chubu Electric Power), for joint LNG procurement and investments.
“This alliance gives us huge negotiating powers in the process of procuring LNG contracts,” Pavilion Energy chief executive officer Seah Moon Ming said at the sidelines of Gastech Conference 2015 in Singapore.
According to Mr Seah, Pavilion Energy is currently focused on developing regional demand to build a robust LNG ecosystem in Singapore and Asia. In its bid to establish Singapore as an Asian LNG trading hub, the company also announced plans to transact cargoes based on the newly formed Singapore price index for LNG, known as SLInG. The weekly index is based on the submissions from international LNG players who offer their assessment of LNG prices. About 20 out of the top 30 global players, Pavilion Energy said, are on board with SLInG, up from 13 players when it was launched in June this year.
Singapore, Mr Seah said, has the potential to be a significant global LNG trading hub given that about half of all global LNG cargoes pass through the Strait of Malacca or South China Sea.
“Singapore is neither a significant LNG seller nor significant buyer. The regional and international markets are more likely to trust price discovery from a neutral platform. With a clearer price benchmarking, the region will benefit,” he added.
Founded in 2013, Pavilion Energy has acquired stakes in gas fields in Tanzania, secured LNG supply from the US and bagged various other LNG supply contracts. Despite current conditions of oversupply and slowing demand, Pavilion said it is confident of global LNG demand growth as countries and governments come to realise the importance of balancing economic and environmental objectives.
“The LNG business globally is undergoing fundamental change. Nowhere is this more obvious than in Asia. There are also interesting changes in LNG supply and demand dynamics … Whether it is upstream or downstream capability, transportation and storage or LNG trading, Pavilion Energy wants to take advantage of these shifts,” Mr Seah said.
While global LNG supply is predicted to grow by 150 million tonnes per annum in 2018, global LNG demand is slowing down, he noted. Asia presently accounts for 76 per cent of global LNG demand, led by China and India, which are witnessing rising rates of urbanisation and increasing peak power demand.