Page 4 - EurOil Week 25

EurOil COMMENTARY EurOil
executed or under construction.
e shi will manifest in a move to regulated
or long-term activities, it said, while maintaining currency diversi cation – with a slight shi from British pounds into euros. In particular, invest- ments are going into networks, renewable ener- gies and contracted generation capacity.
In addition to reducing its LNG exposure, Iberdrola is also cutting coal capacity, aiming to have reduced this to zero by 2030.
e company sold o €1.2bn ($1.34bn) of assets in 2018, with the largest share coming from the sale of its conventional UK generation.
Iberdrola has a number of supply and demand contracts in the LNG space. Iberdola has, for instance, signed a supply agreement with Dong Energy – now known as Orsted – in 2010 on the supply of 1 billion cubic meters (bcm) per year of LNG for 10 years, starting in late 2011. Deliveries are to Orsted’s Gate terminal, in the port of Rotterdam. It also has an agreement to supply volumes to BP, with both of these due to end in 2021.
e Spanish utility has a supply contract for 1 bcm per year of LNG with the US’ Cheniere Energy, running for 20 years. is involves sup- plies from the Corpus Christi liquefaction plant. e price of the contract was linked to Henry Hub and was provided to Iberdrola on a free on board (FOB) basis. It also has a deal with Nige- ria LNG (NLNG) and with Norway’s Equinor – expiring in the mid-2020s – while a contract with Eni was due to end in 2018.
Strategic drivers
Pavilion, and Singapore, have been making steps to scale up their involvement in the LNG space. Pavilion is ultimately owned by Temasek Hold- ings, Singapore’s sovereign wealth fund, and as such their strategic plans are in close alignment.
Pavilion supplies around one third of Singa- pore’s downstream gas demand. e company said the deal with Iberdrola would allow it “to play a greater role in energy transition as well as to o er competitive solutions to our customers and suppliers”.
e Singaporean company had struck a deal
in September 2017 with German power com- pany, Uniper. Under this agreement, the two sides agreed to provide access to infrastructure. Uniper was to allow Pavilion into its terminals in the UK and Netherlands, while the German company gained access to Singaporean storage and reloading facilities.
Pavilion, which was set up in 2013, received a licence from Singapore’s Energy Market Author- ity (EMA) to import LNG in October 2017. is gave it the right to bring in LNG for three years, or up to 1mn tpy, whichever came rst. Its rst cargo was imported in April 2018, from Qatargas.
Progress has been accelerating. In May this year, Pavilion carried out its rst commercial ship-to-ship bunkering operation in the Port of Singapore. Earlier this year it ordered an LNG bunkering vessel, which is due to be delivered in 2021.
Increasing its scope in Europe demonstrates Pavilion’s plans for expansion, which should provide it with knowledge about the sector in addition to revenues. e company has major ambitions, in November 2018 it signed an agree- ment with Russia’s gas independent Novatek, sig- nalling a potential interest in taking a stake in the proposed Arctic LNG 2 project.
Change
The energy transition discussed by Iberdrola clearly has a number of aspects. One of these is that both Iberdrola and Pavilion can both describe this deal as transition. The Spanish company is reorienting itself to be more focused on core assets and the changing face of Euro- pean power. at its deals with Pavilion include an arrangement for LNG to be supplied to Spain demonstrate that the feedstock still has a future in Europe.
Pavilion meanwhile does have some work ahead of it in managing the portfolio. e BP and Orsted demand deals are both coming to an end fairly shortly. e supply deals are also coming towards an end. Pavilion has some time to consider how best to maximise its new assets but the clock is ticking.™
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w w w . N E W S B A S E . c o m Week 25 27•June•2019