Total, Singapore's Pavilion Energy Sign LNG Ship Fuel Supply Chain Deal

Total and Singapore's Pavilion Energy have signed a non-binding deal through their subsidiaries to develop a liquefied natural gas (LNG) bunker supply chain in the port of Singapore, the companies said in a joint statement on Tuesday.

Total Marine Fuels Global Solutions, the French oil major's affiliate in charge of worldwide ship fuelling, or bunkering, activities, and Pavilion Gas signed a heads of agreement which covers the shared long-term time charter of a new generation LNG bunker vessel to be commissioned by Pavilion Gas by 2020, they said.

It also includes an LNG supply arrangement between the two companies for Total to deliver LNG bunker fuel to its customers, they added.

The agreement follows a memorandum of understanding between both companies in April 2017 on LNG bunkering co-operation in Singapore. It is also a significant step in contributing to the development of Singapore as an LNG bunkering hub, they said.

Singapore aims to position itself as an LNG trading hub for Asia to capitalise on an expected rise in LNG imports in the region driven by depleting gas production and growing electricity demand.

Shipowners are looking at fuelling vessels with LNG as part of a number of options to comply with new rules by the International Maritime Organization that will go into effect in 2020. The new regulations slash the amount of sulphur allowed in the fuel that ships burn.

"The development of infrastructure is one of the key drivers for the take-off of LNG as a marine fuel," said Patrick Pouyanne, Total's chairman and chief executive, in the statement.

"For the past few months, Total has been very active in that direction."

Pavilion Gas and Shell Eastern Trading, a unit of Royal Dutch Shell PLC (RYDAF), are the country's approved LNG importers.

Total and Pavilion Energy have an existing LNG supply deal for 700,000 tonnes per year to Asia, including Singapore, from 2018.

Reporting by Jessica Jaganathan