(EnergyAsia, July 10 2013, Wednesday) — Could Singapore’s newly established Pavilion Gas be next to buy into Canada’s natural gas boom through an equity stake in Petronas’s Pacific NorthWest LNG?
The subsidiary of Singapore sovereign wealth fund Temasek Holdings was established in May with an initial capital of S$1.25 million to focus on buying, marketing and selling natural gas. (US$1=S$1.28).
Temasek has named senior managing director Seah Moon Ming as CEO of the new company as well as Pavilion Energy, which looks after non-gas energy businesses.
Since taking over Calgary-based Progress Energy last December, Malaysian state energy firm Petronas has shown some neat moves in advancing the development of its proposed US$16 billion liquefied natural gas (LNG) project. In the seven months since Ottawa approved the US$5.9 billion takeover of Progress, Petronas has formed Pacific NorthWest LNG for the purpose of developing natural gas reserves in BC, tying up supply deals, building an export terminal and securing long-term purchase agreements with customers in Asia.
PacificNorthWest has raced ahead of its various rivals who have tabled at least 10 proposals to develop export-oriented LNG projects from locations near or at Kitimat and Prince Rupert. It has sold a 10% equity stake to Japan’s Japex, which has also committed to buying up a certain volume from the proposed 12-million-tonne/year terminal.
This is a proven strategy for companies building large capital-intensive projects as they greatly reduce risks by bringing in equity partners who will double up as customers, ensuring that they don’t have to fight the competition for future sales. The “we’re all in this together” strategy has been tested and proved in developing the LNG industry in Australia and the Middle East.
Petronas is continuing talks to recruit others into the project, with Reuters reporting that it is hoping to close a deal with state-owned Indian Oil Corp.
Pavilion Gas and SembCorp, both subsidiaries of Temasek, could fit the bill too, given that Singapore has just started up its new import terminal and needs to build up a supply chain and gas reserves abroad. Pavilion Gas has made clear that LNG will be a major part of its focus while SembCorp owns and operates power plants in Singapore and elsewhere.
Also, Hassan Marican, the former CEO of Petronas, is chairman of S$1-billion sister company Pavilion Energy and sits on the boards of SembCorp and Singapore Power.
For the financial year ending March 31 2013, Temasek said it made net investments of S$4 billion in the energy and resources sector. The company raised its stake in Spain’s Repsol to 6.3% as well as bought into Kunlun Energy, the listed natural gas subsidiary of state-owned PetroChina and US-based LNG terminal operator Cheniere Energy.