Norton Rose Fulbright advises Pavilion Energy on world’s first LNG sale & purchase agreement with carbon neutral ambitions

Global law firm Norton Rose Fulbright has advised Pavilion Energy Trading & Supply Pte. Ltd. (“Pavilion Energy”), a wholly-owned subsidiary of Pavilion Energy Pte. Ltd., on the world’s first LNG sale & purchase agreement (“SPA”) with carbon neutral ambitions.

Pavilion Energy and QP Trading LLC (“Qatar Petroleum”) announced yesterday a 10-year LNG SPA for the supply of up to 1.8 million tonnes of LNG per year to Singapore from 2023. Each LNG cargo delivered under this agreement will be accompanied by a statement of its greenhouse gas (“GHG”) emissions measured from well to discharge port.

Pavilion Energy Pte. Ltd. is a wholly-owned subsidiary of Temasek. Headquartered in Singapore, its fully-integrated energy business encompasses a downstream & marine business, global LNG trading, shipping & optimisation, upstream investments and energy hedging and financial solutions. Pavilion Energy supplies a third of Singapore’s industrial natural gas demand and is a licensed LNG importer and LNG bunker supplier for Singapore. In 2019, Norton Rose Fulbright advised Pavilion on its acquisition of Iberdrola’s LNG and natural assets.

Norton Rose Fulbright partners Ben Smith (Singapore) and Andrew Hedges (London) led the team advising Pavilion Energy and were supported in Singapore by associate William Holmden and the firm’s legal process and technology team in Newcastle.

The firm provided advice on the structuring and terms of the procurement exercise and supported the negotiation of the LNG SPA once Qatar Petroleum was shortlisted. The procurement process utilised an innovative online IT platform through which potential bidders were asked to bid on a termsheet, noting the key terms of their bid and any divergences from the bid documentation online. The platform kept all bidders’ submissions secure, and kept a full record of all documentation that was submitted, and any access to that documentation was similarly secured, giving greater integrity to the procurement process.  It also enabled Norton Rose Fulbright to provide Pavilion Energy with analysis of bidders’ proposals in a more efficient and data-led way.

Ben Smith, who led the team, commented: “At a time when the global pandemic was causing many to rethink long term projections, Pavilion Energy was looking for a new way to procure LNG that accurately accounted for GHG emissions associated with the production of the LNG and its delivery to Pavilion Energy. We were happy to support this innovation with a new way of managing the bid process online.”

Andrew Hedges, a climate change and clean energy lawyer, commented: “We are pleased to have assisted Pavilion Energy on this landmark agreement. Working on this complex transaction required us to work with the parties to develop new methodologies to measure, report and offset carbon emissions. As the low carbon LNG market evolves, it is hoped that the emissions accounting structures that have been developed for this deal may become a widely accepted industry standard, enabling a liquid trading market to develop in the future.”

Norton Rose Fulbright’s global co-head of energy Anne Lapierre commented: “Building a sustainable energy future requires more transparency of emissions across the board including in the gas value chain. Green LNG has the potential to play an integral role in the transition to a low carbon future.”