Esteemed colleagues and friends,
It’s a pleasure to be part of this first-ever hybrid Singapore International Energy Week. My thanks to EMA for having me today, and for organising such an outstanding gathering.
What a year 2020 has been. Covid-19 has shaken the very foundations of our global economies, communities, families and industries. LNG included.
Today I want to address two things:
1) First, outline the resilience of Singapore energy market in this challenging moment…
2) Second, remind us that despite the rough seas, we continue to look forward… our goals are unchanged – the transition to a low-carbon economy, and a valued place for natural gas in that future.
Our industry’s resilience tested
The COVID-19 pandemic hit an oversupplied gas and LNG market with three shocks:
- Demand shocks – lockdowns have impacted energy demand and incited contract disputes, Force Majeure notices, and cargo deferments by many buyers. In Spain and the United Kingdom where Pavilion Energy has become one of the key players, we’ve seen a massive 20% drop in gas demand during the second quarter.
- Price shocks – disruptedtrade flows compounded with extreme price volatility, for example Brent prices which moved between US$20 and 70 per barrel this year… and has been oscillating there and back.
- Supply shocks – many production and upstream disruptions and several Force Majeures have added to the cancellation of more than 150 US cargoes for exports, because they were not economical this summer.
Overall, we take comfort that despite those three shocks, the global LNG market did not break.
Nevertheless, LNG has traded this year below US$2 and recently, above US$7 per MMBtu… so far…
Brutal, isn’t it.
Focusing beyond the turbulence
Against this challenging backdrop, the Singapore energy market has remained robust and well-balanced: natural gas supply into Singapore has continued to flow without disruptions or interruptions, even as markets worldwide have grappled with issues.
As the only LNG and piped natural gas licensed importer for the nation, Pavilion Energy is fully committed to its security of supply. With an enhanced sense of duty in our DNA, we deployed our full capabilities to plan for the worst, notably ensuring access to flexible supplies in the short-term, as well as onshore and floating storage of LNG.
Let me pause here and praise the excellent cooperation we’ve had with the other licensed LNG importer, Shell, alongside SLNG and EMA. And I also wish to state the key role of ship-owners such as our partners BW who maintained continuity in their supply chains and in cargo and vessel management.
Let’s also rejoice that Singapore remains a vibrant LNG community and a major LNG hub for all of us, with a vibrant and growing LNG trading community.
In fact, Singapore ranks among the top-three centres for LNG re-exports. And Pavilion Energy is very proud to be its main contributor, making Singapore a physical hub and bringing further liquidity into the Asia and global markets.
LNG bunkering projects have also made significant advances. From next year, the LNG bunkering vessels of both Pavilion Energy and FueLNG will be operational in Singapore, fully supported by the Government and the Maritime & Port Authority (MPA) – and all ready to provide ship-owners with the most efficient solutions.
Pavilion Energy continues to invest in expanding our Singapore infrastructure to bring both resilience and flexibility to our home market and to our global business.
Let me update you on our global business.
- We launched our European operations in January and now have 35 people working from Madrid in our offices there;
- We are one of the top five gas marketers in Spain and trade actively across Western Europe;
- We now import almost 10% of all LNG in Spain and we also are among the major LNG players in the Atlantic and North West European LNG market through our access to Isle of Grain in the United Kingdom and the Netherlands;
- Our fleet of 5 LNG carriers under long-term charters – four of them being under the Singapore registry, underpin our global LNG trading activities;
- Finally, Pavilion Energy today is a leading financial trader for energy hedging, portfolio optimisation and risk management.
What a year 2020 has been! But it’s not enough.
What does the future look like?
The energy transition: more urgent than ever before
Looking forward, the energy transition is more urgent than ever before. As an industry, no more status quo, no more excuses. We must tackle climate change imperatives now and with determination.
Decarbonisation of energy and power generation has become priorities. A stepping-stone towards net zero ambitions that many leaders finally put on top of their agenda.
Strong pledges are being made by Singapore, Europe, China and Japan. Remarkably, and as we’ve just heard from Brunei Darussalam, major producers of fossil fuels also rise to the challenge. Recently, His Excellency Minister Al-Kaabi spoke about the embedded green planning for the next Qatar LNG expansion – including carbon capture and storage (CCS), solar power generation and the use of LNG powered vehicles.
On this side, let me tell you that Pavilion Energy is pragmatically engaged in the energy transition. We know that natural gas will play a big role in Singapore for many years to come.
Therefore, to reconcile the twin objective of supply security and energy transition, we launched the world’s first LNG tender with carbon neutral ambitions.
Our tender will be awarded very soon. It will acknowledge the willingness of LNG suppliers to develop with us a transparent methodology for measuring GHG emissions from well to flange.
Each cargo of LNG imported by Pavilion Energy into Singapore will be accompanied by a verifiable Statement of GHG Emissions that will enable us to plan for facilitating decarbonisation and carbon offsetting strategies.
These ambitions will help promote Singapore as a reference hub for LNG pricing, for carbon pricing and carbon trading, and for Pavilion Energy to be its main actor.
But such future goes above and beyond any single player. We call on policy makers, academia and industry to align towards a shared vision, and to deliver a pragmatic but forceful timetable of actions.
Collaboration is critically important.
In conclusion, let me stress again the track-record of Singapore energy industry participants in shielding the domestic market from international shocks and ensuring continuity of supply.
Let me tell you that our staff is very proud of the role Pavilion Energy has been playing.
Pavilion Energy is committed to supplying the energy our markets in Singapore, Spain and North West Europe need in any circumstances for them to thrive.
As we awake from COVID-19 hangover, greater challenges await us. Our goal as an industry must be to promote the recovery in a sustainable way and to stimulate an accelerated path towards net-zero objectives.
I look forward to this future of collaboration with you.