Temasek arm signs 2nd LNG purchase contract
September 24 2014 08:16 PM
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Singapore state investor Temasek-owned Pavilion Energy said yesterday its wholly owned subsidiary Pavilion Gas Pte has struck a deal with BP under which the UK company will supply it with 0.4mn tonnes per year of LNG for 20 years from 2019.

Reuters

Singapore state investor Temasek-owned Pavilion Energy has signed a second long-term contract to buy liquefied natural gas (LNG) for trading and supply to Asia, taking another step towards its goal of becoming a global company in the fuel.

Pavilion Energy said in a statement yesterday its wholly owned subsidiary Pavilion Gas Pte has struck a deal with BP under which the UK company will supply it with 0.4mn tonnes per year of LNG for 20 years from 2019. It did not say how much Pavilion would pay for the LNG.

Armed with a $6.9bn warchest, Pavilion Energy, created last year by Temasek Holdings, has already bought a stake in a gas field in Tanzania and started an LNG shipping joint venture.

The moves have come as Singapore positions itself as an LNG trading hub for the region, aiming to link up producers such as Indonesia, Malaysia and Australia, and countries with growing demand such as China, India and Thailand.

Just a month ago, Pavilion signed a 10-year deal with France’s Total for 0.7mn tpy of LNG from 2018.

BP will supply the LNG from its global portfolio of equity and merchant sources, Paul Reed, chief executive of BP Integrated Supply and Trading, said in the statement issued by Pavilion.

“This includes the Freeport LNG Project in the US, where BP holds tolling rights and which is expected to reach a final investment decision before the end of 2014,” Reed said.

The time is ripe for an Asian LNG hub as import-export terminals and storage facilities are in place and the region is gradually shifting from long-term contracts to a spot market, Pavilion Energy said.  The company is also working with the Singapore Stock Exchange, IE Singapore, regional governments and commodity exchanges to develop a Singapore LNG price marker, Seah Moon Ming, chief executive of Pavilion Energy and Pavilion Gas, said at an industry conference.

The price gauge will be independent of the oil market and better reflect regional demand-supply balances, Seah said.

LNG sold to Asia is mostly pegged to the Japan Crude Cocktail (JCC) price which is often higher than gas price benchmarks in Europe and the US.

Asian buyers currently pay a premium for LNG, which amounted to almost $130bn in 2012, according to Pavilion Energy.

While the recent downturn in spot prices “posed a pricing challenge for gas producers, it was a wonderful opportunity for traders who were able to buy and store spot for seasonal trade”, Seah said.

Pavilion Energy has stored an LNG cargo at the Singapore LNG terminal for trading purposes, he said.

 

 

 

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