Singapore-based Pavilion Energy expects to nearly double the number of LNG cargoes it trades each year by 2024, with an even split between Europe and Asia, its chief executive Alan Heng said during an interview with S&P Global Platts on Oct. 22.
“Today we are trading about 70 cargoes around the world, increasing over time from the first cargo in 2014. By 2024, we will be doing 120 cargoes. It’s a very realistic target,” Heng said.
Pavilion Energy
He also said that while Europe, as an active market, carries a heavier weight on Pavilion Energy’s trading exposure, the firm expects to even out its trading exposure between the Pacific and Atlantic basins.
In recent years, Pavilion Energy has invested heavily to extend its footprint to Europe and its interim chief executive argued for continuing investments in natural gas as part and parcel of a low carbon energy future that counts on this cleanest burning fossil fuel to back up the intermittency in renewables.
“Volatility is a function of supply and demand, and as demand increases significantly for natural gas — the only fossil fuel that is growing — supply must keep up,” Heng remarked.
Spot LNG prices have soared to record highs from record lows over the past 18 to 24 months, with the S&P Global Platts JKM hovering around $35/MMBtu, more than 500% higher than a year ago, Heng noted.
In early October, the European gas benchmark, TTF surged to around Eur160/MWh, while JKM soared past $50/MMBtu, equivalent to crude prices of above $200/b, he observed.
These price surges came about a year after the market witnessed record lows for these same benchmarks, that had bottomed out at below $2/MMBtu during April-September 2020.
SIEW 2021
During a keynote speech for the SIEW 2021 Singapore Energy Summit Oct. 25, Heng warned that the depressed LNG prices of a year earlier have come to constrain the pipeline of new LNG projects, which take years to build and commission.
“There have been no significant new investments outside Qatar’s 30 million mt/year North Field expansion,” he lamented, contrasting this with vastly more investments that have gone into renewables and carbon abatement technology.
“Everyone is jumping on the bandwagon to declare carbon neutrality targets, with banks onboard, [while viewing] projects in oil and gas with trepidation,” he observed.
Such attitudes are of concern because renewables as he argued, are not yet ready to assume a greater and more stable role in the global energy mix.
Pavilion Energy chose to buck the trend by announcing and completing the acquisition of Spanish utility group’s Iberdrola LNG portfolio over the last two years, granting it access to mid-stream and downstream LNG and gas-related assets in Europe.
Energy supply disruption
Meanwhile, high spot LNG prices persisting through to the early weeks of peak winter demand in the northern hemisphere are not helping the low carbon transition.
“We saw how countries have reverted to coal and oil-fired generation to avoid the high price of gas, [which] is particularly [notable] in developing markets where energy needs to be not just reliable, but also affordable,” Heng noted, adding that even in Europe, a confluence of events leading from lower wind power production subsequently fueled higher gas prices and increased use of coal.
This contradicts the coal-to-gas switching approach Pavilion Energy and many public and private sector players in Asia have mooted as one priority to help lower carbon emissions.
Neutral LNG
Pavilion Energy’s home market, Singapore, is not spared the brunt of gas supply challenges, with the regulator Energy Market Authority recently attributing spikes in wholesale electricity prices to supply disruption from Indonesia, citing upstream production issues at Indonesia’s West Natuna fields.
Heng described the supply disruption as “aberrations to what has been to-date a stable market”.
“I am confident that the EMA will work with the industry to address these challenges,” he said, adding that Pavilion Energy, which has been meeting over a third of Singapore’s gas requirements, has “kept gas supplies flowing reliably into Singapore”.
Having ventured beyond the shores of land-scarce Singapore, Heng maintained that Pavilion Energy’s key role in ensuring the energy security of its home country will always remain a priority even as it is evolving into a “global energy merchant” with headquarters in Singapore and Spain, two hubs boasting subsea pipeline gas network and LNG re-loading facilities.
Pavilion Energy has also piloted Singapore’s first import of carbon neutral LNG and is developing a methodology to profile the greenhouse gas emissions of LNG cargoes it supplies to Singapore.
Sceptics have described carbon neutral LNG as greenwashing, drawing a retort from Pavilion Energy’s interim chief executive.
He argued that the efforts put to using science and technology to profile emissions of LNG cargoes is an important and proactive step towards ascribing a cost to emissions and actualizing emission reductions.
“How can you say there is greenwashing [when] there is an active attempt over time to reduce emissions?” he quipped.
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Source: Spglobal
