Following its latest deal with Chevon USA, Pavilion Energy now has two long-term SPAs that will track well-to-discharge greenhouse gas (GHG) emissions for LNG cargoes
Sustainability underpins many of the investments made by Singapore’s Temasek, and will become increasingly critical as it moves towards net-zero carbon emissions across its portfolio. In 2020, Temasek achieved company carbon-neutrality, with plans to reduce net-zero carbon (CO2e) emissions in its portfolio to 7M tonnes by 2030 – half of its 2010 levels – and net-zero carbon emissions by 2050. Temasek Holdings is one of the world’s top-10 sovereign wealth funds.
Two recent LNG sale and purchase agreements (SPA) Temasek’s wholly owned subsidiary Pavilion Energy Trading & Supply are advancing meet those sustainability goals, providing more transparency and laying the groundwork for a carbon-neutral LNG supply in Singapore.
In February, Pavilion Energy and the Singapore branch of Chevron USA inked a six-year LNG SPA for the supply of approximately 0.5M tonnes of LNG per year to Singapore from 2023.
To promote increased sustainability and transparency in the LNG value chain and as required by Pavilion Energy under its supply tender, each LNG cargo delivered under this agreement will have a statement of its GHG emissions measured from wellhead-to-discharge port.
In addition to supplying LNG to Singapore, Pavilion Energy and its strategic partners are committed to co-developing and implementing a GHG quantification and reporting methodology for LNG. The methodology is being developed based on internationally recognised standards and will cover emissions from wellhead-to-discharge terminal, including LNG transportation.
Pavilion Energy group chief executive Frédéric H Barnaud says, “As we proactively promote GHG emissions reduction and offsets, we are thrilled to be joined by Chevron.”
Adds Chevron Singapore country chairman Law Tat Win, “I am excited that Chevron will be partnering with Pavilion Energy to develop processes and tools which will enable us to offer lifecycle carbon footprinted products to the market in Singapore.”
Six months prior to its deal with Chevron USA, Pavilion Energy signed a 10-year SPA with Qatar Petroleum Trading with similar well-to-discharge terminal GHG emissions tracking for the supply of up to 1.8M tonnes of LNG per year to Singapore from 2023.
Law firm Norton Rose Fulbright advised Pavilion Energy on both SPA agreements. The firm provided advice on the structuring and terms of the procurement exercise as well as supporting the negotiation of the LNG SPA.
“These transactions are opening an important route to a low-carbon future”
The agreement with Qatar Petroleum Trading was the first long-term LNG SPA that required the seller to track carbon emissions associated with the LNG’s delivery.
Norton Rose Fulbright partner Ben Smith says “Pavilion Energy has signed another LNG deal where GHG emissions associated with the production of the LNG and its delivery to Pavilion Energy will be tracked. These transactions are opening an important route to a low-carbon future. We are very pleased to have supported Pavilion Energy on another important transaction in its evolution, after working with Pavilion Energy on its acquisition of its European business from Iberdrola in 2019 and its purchase of LNG with carbon-emissions tracking from QP Trading announced in November 2020.”
Climate change and clean energy lawyer Andrew Hedges comments “We are pleased to have worked with the parties to develop new methodologies to enable the accurate reporting of the carbon footprint of cargoes to a buyer. This is a step towards markets where the carbon footprint of products is known and accounted for by parties.”
Issued by Pavilion Energy on 31 March 2020, the tender for the SPA won by QP Trading sought a reliable and competitive long-term supply to Singapore, and a commitment from LNG suppliers to co-develop and implement a GHG quantification and reporting methodology for LNG from well-to-discharge port. Pavilion Energy expects this methodology to become standardised as a common industry framework via a statement of GHG emissions, paving the way towards more environmentally responsible and sustainable natural gas strategies.
There is no fixed way as yet of providing carbon offsets, but it could involve three approaches: nature-based such as a reforestation project, community-based such as replacing coal-fired power generation with cleaner energy, or through investing in renewable energy and using those earned carbon credits to offset carbon emissions from another project.
MPA awards third LNG bunkering licence
In theory, as one of three LNG bunkering licence holders in the Port of Singapore, Pavilion Energy could provide well-to-discharge GHG emissions data for the LNG it supplies.
In March, the Maritime and Port Authority of Singapore (MPA) expanded the number of LNG bunker suppliers in the port with the award of a licence to Total Marine Fuels Private Ltd (TMF) for a five-year term starting 1 January 2022.
TMF was awarded the licence after responding to MPA’s Request for Proposal issued 28 October 2020 for parties seeking to supply LNG bunkers in the port. Singapore currently has an LNG bunker supply capacity of up to 1M tonnes per annum.
“This achievement underscores Total’s goal to be a leading LNG bunker supplier globally and is in line with our climate ambition to get to net zero by 2050, together with society,” says Total marine fuels vice president Jérôme Leprince-Ringuet. “LNG is the best, immediately available solution to reduce our shipping customers’ carbon footprint and it paves the way towards carbon-neutral bioLNG and synthetic methane. We will continue to ramp up our investments to deliver competitive, reliable and end-to-end LNG bunkering solutions for customers in Singapore and beyond,” says Mr Leprince-Ringuet.
MPA chief executive Quah Ley Hoon says, “As the world’s top bunkering hub, the Port of Singapore is well-positioned to expand its offering of marine fuel solutions. LNG serves as a viable and clean transitional marine fuel to reduce carbon emissions from ships.”
Ms Quah says the addition of TMF as an LNG bunker licensee would “bolster the country’s ambition in becoming Asia’s leading LNG bunkering hub. We will continue to work with interested parties to grow the bunkering ecosystem in the Port of Singapore and drive the transition to a more sustainable future.”
The other LNG bunkering licence holder is FueLNG Pte Ltd, a joint venture between Keppel Offshore & Marine and Shell Eastern Petroleum (Pte) Ltd. In December, FueLNG took delivery of Singapore’s first LNG bunkering vessel, FueLNG Bellina, which is operating in the Port of Singapore, and being technically managed by Japan’s K-Line.
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