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APPEC: Carbon offset to act as starting point for decarbonizing LNG: Pavilion Energy CEO


Carbon offsets can drive improvements in LNG value chain

Natural gas has role to buffer renewable intermittency

Singapore-based Pavilion Energy is building an emission business that taps carbon offsets initially to drive decarbonization across the LNG value chain, its interim chief executive, Alan Heng said at the Asia Pacific Petroleum Conference.

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"Until we can get to the point where we can mitigate [emission from] every single molecule [of LNG supplies], what is important is to find a way to offset it and supply what is deemed as carbon neutral LNG so as to allow market forces around these offsets to drive the improvements along the entire value chain," Heng said during a CEO conversation session with S&P Global Platts President Saugata Saha Sept. 27.

"Some efforts include taking carbon offsets from specific, high-quality suppliers that can be packaged with our LNG cargoes," he added.

Pavilion Energy, which is owned by Singapore's state-backed investment group, Temasek Holdings, was the first to import a carbon neutral LNG cargo to its home country in April.

That LNG cargo was delivered one year after Pavilion Energy launched a request for proposal calling on potential bidders to supply up to 2 million mt/year of LNG supplies to Singapore and jointly develop a methodology to measure greenhouse gas emissions tied to the cargoes to be supplied.

In November, Pavilion signed a deal with Qatar Petroleum's trading unit to buy up to 1.8 million mt/year of LNG for 10 years from 2023 that will be delivered to Singapore with a statement from the supplier specifying the greenhouse gas emissions tied to the cargoes, from wellhead right to the discharge port.

Its first carbon neutral LNG cargo drew on carbon credits on forestation projects in Peru and China certified by two recognized not-for-profit standard-setting bodies, Verified Carbon Standard (VCS) and Climate, Community and Biodiversity Standard (CCB).

"We undertook the import of the carbon neutral LNG cargo at our cost [because] it is important for the industry to recognize that we have the capability to do it," Heng said.

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Gas to help in energy transition

Pavilion Energy, which was named one of Singapore's first licensed term LNG importers, has ventured into Europe through acquiring the LNG assets there previously held by Spanish group Iberdrola.

The deal was completed last January. It encompassed long-term sale and supply contracts for around 4 million mt/year, access to regasification capacity at the Grain LNG terminal in the UK and in Spain as well as the Spanish-France border pipeline capacity.

In Europe and the US however, investments have ramped up on renewable energy capacity while financial institutions have pulled back support extended to LNG and natural gas projects.

Heng described Southeast Asia as one emerging "hot spot for energy transition" with "great opportunities for solar, wind and geothermal energy projects."

"Aside from these, there's still a need for gas [to] help in energy transition [by buffering] the intermittency of renewables."

Back in Singapore, Pavilion Energy is working with authorities to boost resilience in gas supply network to complement its home country's efforts in building solar energy capacity.

"Natural gas remains a fossil fuel but it is the cleanest fossil fuel we have [and] represents the best chance we have to help with the energy transition," Heng said.

"There are opportunities to supply natural gas to growing markets in the region reliant on either domestic gas or coal," he added, naming Vietnam and Myanmar as possible markets to reach out to from Singapore.

Click here for our complete APPEC 2021 coverage