(EnergyAsia, September 25 2014, Thursday) — Pavilion Energy said it has signed another two long-term agreements to purchase liquefied natural gas (LNG) from the US as it plans to work with other companies to help develop Singapore into Asia’s trading and pricing hub for the fuel.
The subsidiary of Singapore’s sovereign wealth fund Temasek Holdings announced it will purchase 400,000 tonnes of LNG per year from BP for 20 years starting 2019, and the same amount from Sempra Energy. It did not disclose the value of the two deals, which followed last month’s agreement to purchase 700,000 tonnes/year for 10 years from France’s Total starting 2018.
Speaking at CWC’s Asia-Pacific LNG Summit in Singapore, Seah Moon Ming, CEO of Pavilion Energy and Pavilion Gas, said BP will source the fuel from its stakes in the Freeport project in Houston in the US and from its global portfolio supply. Sempra will be supplying from its Cameron project in Louisiana state.
Pavilion Gas is a wholly-owned subsidiary of Pavilion Energy that was incorporated to manage downstream natural gas operations in Singapore.
Paul Reed, chief executive of BP Integrated Supply and Trading, said:
“We welcome Pavilion Gas as a valued new partner in the LNG industry. Supply will be from BP’s global portfolio of equity and merchant sources of LNG. This includes the Freeport LNG project where BP holds tolling rights and which is expected to reach a final investment decision before the end of 2014.”
“This deal is part of our continued effort to enhance and diversify our LNG portfolio to deliver sustainable and competitive LNG supply to Asia,” said Mr Seah.
Longer term, he said the company is working to develop a price marker as part of its goal to make Singapore the LNG hub for Asia.
The price marker would facilitate transparent LNG pricing, and enable Singapore to take a lead role in help Asian countries procure the fuel at competitive prices.
With rising demand in Asia to meet energy needs, getting the price right for Asia is critically important to sustain economic growth,” he said, estimating that the region’s buyers paid a premium of almost US$130 billion on their LNG purchases in 2012.
He said the key ingredients are now in place for such a hub to be established in Asia including:
- A large network of LNG receiving, storage and regasification terminals that is well-connected with multiple trading points for the export and import of cargoes;
- The region’s gradual shift from long-term LNG contracts to a more liquid spot market and;
- The eventual development of an Asian LNG financial trading index by
Pavilion Energy working with the Singapore Stock Exchange, IE Singapore and regional governments.
Mr Seah said the index will be independent of the oil markets and provide more transparent LNG pricing in the region. The index will motivate investment into more storage and reload facilities, foster close co-operation in LNG procurement, and contribute towards a more secure energy future for Asia.
“Once the Singapore LNG Price Marker is ready and accepted by the industry, physical trades across Asia can be transacted based on a “cost” or “net-back” approach to this price reference,” he said.