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Last Updated: November 29, 2016
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Gas & LNG
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TEMASEK-backed Pavilion Energy on Thursday urged the liquefied natural gas (LNG) industry to develop LNG ecosystems, ahead of a rise in demand for the fuel.

Pavilion Energy chief executive Seah Moon Ming said: "There is a clear need to shift our thinking away from just supply-demand dynamics, towards investing ahead for a clean and sustainable future."

He was speaking at the LNG Producer-Consumer Conference in Tokyo, where Pavilion Energy announced its partnership with US marine transportation firm Harley Marine, Mitsui OSK Lines and Mitsui & Co to jointly take part in Singapore's LNG bunkering pilot.

Mr Seah said that, for a start, the LNG sector should not conceive of emerging countries as "demand centres" to absorb LNG; the focus should instead be on developing LNG solutions - transportation and marine fuel and building LNG ecosystems.

"These ecosystems can be introduced into emerging markets as a turn-key solution for supplying LNG as well as generating and distributing electricity to emerging markets."

Citing Myanmar as a country keen on powering its cities with LNG, Mr Seah noted that the LNG value chain there was still in its infancy and could take a long time to mature.

"Introducing an integrated LNG ecosystem would not only speed upits adoption of LNG, but also pave the way for sustainable development of clean-energy solutions in the country."

To do this will require close regional cooperation among governments and businesses, he added, reiterating a call he made in September for more collaboration between the public and private sectors to realise the potential of the LNG sector in South-east Asia.

Mr Seah also said that the region can accommodate more than one LNG hub, a view increasingly shared by industry players.

"We envisage a scenario where LNG trade flows within Asia are supported by several hubs within the region," he said, adding that he was heartened by the partnership announced earlier this week between the Singapore Exchange and Tokyo Commodity Exchange.

The exchanges will work together on product initiatives such as the co-listing of LNG derivatives, creating synergies between the two market distribution networks and on promotion and development activities; they will also share their experience of developing the electricity market in their respective jurisdictions.

"With such collaboration, in the near future, Asia LNG hubs can be a key benchmark for transparent and fair LNG pricing in the region," he said.

Under the memorandum of undertanding signed among Pavilion Energy, Harley Marine, Mitsui OSK Lines and Mitsui & Co to take part in the LNG bunkering pilot, Harley Marine will build two dual-fuelled conventional bunker tankers with funding assistance from the Maritime and Port Authority of Singapore (MPA).

Pavilion Energy will supply LNG bunkers to these tankers, and the other two Japanese companies will be part of the LNG supply chain.

Pavilion Energy had earlier tied up with ExxonMobil, which owns the largest refinery in Singapore, to develop solutions for LNG bunkering and downstream developments in the country.

Separately, the International Energy Agency (IEA) warned that LNG markets - now struggling with a supply glut - are less flexible than commonly believed, which could affect global gas security. The watchdog for OECD nations said in a report released in Tokyo that its member countries have therefore tasked the group to add gas security to its mandate.

The growth in the global gas trade and diversification of supply sources bring important security benefits to consumers, but the flipside of this is that demand and supply shocks once confined to single regions could now have repercussions in more places, said IEA executive director Fatih Birol.

The IEA report noted that a growing share of LNG capacity is offline because of a lack of feedstock gas and also security and technical problems.

About 65 billion cu m of the gas - equal to the combined exports of Malaysia and Indonesia, the world's third and fifth largest gas exporters - has been affected by a doubling in the level of unusable export capacity between 2011 and 2016, said the IEA; that oil and gas prices are low could just worsen the situation. Nevertheless, as LNG contract structures become less rigid, market liquidity will be improved, which helps with gas security. About 40 per cent of LNG contracts had fixed-destination clauses last year, down from 60 per cent in 2014.

More flexible contracts will improve the ability of the global gas system to react to potential demand or supply shocks by making it easier to shift volumes from one destination to another, said the IEA.

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