Based in Singapore, David Phua has been practising law in the energy, power and infrastructure sector in Asia for over 10 years, in particular advising Asian and international clients on oil and gas (including LNG), power, mining and other natural resources projects and transactions. In this interview with Asia Law Portal, he details his practice, what inspired this focus, and what led to his decision to join King & Wood Mallesons as well as his experience since coming onboard with the firm. He also details current opportunities and challenges which exist in Asia for clients in the energy, power and infrastructure markets, and discusses the practical concerns and considerations arising from the current commercial environment.
You’ve been practicing law in the Asian market for over ten years, with a focus on energy, power and infrastructure (in particular LNG). Tell us more about your practice.
As a projects lawyer, my practice seeks to integrate legal practice with a commercial understanding of the industry dynamics and issues. Often, the issues we encounter are not “cut and dried” questions of black letter law, and they require a nuanced application of legal principles with appreciation of the client’s overall business motivations and environment. As always, clients are looking for practical solutions to real-life commercial problems. I find that only by being closely involved in the industry, and understanding the commercial context and interests, can you effectively position yourself as a lawyer to meet your clients’ needs.
Being based in Singapore, most of my projects have a strong Asian connection. The projects I typically work on are being developed either in Asia or elsewhere by Asian sponsors. On a daily basis, I deal with the clients across the energy and infrastructure sector. The core of my work involves reviewing, negotiating and advising on the structuring, development, acquisition, disposal or operation of large-scale, complex projects as well as related supply and offtake contracts. I work regularly with local and international energy players, and increasingly, Chinese state-owned and private energy companies (in no small part due to the heritage and network of KWM). Outside of Asia, I have also advised on projects in North America, Europe, Middle-East and Australia. Keeping an international perspective I find is key to offering real value-add services and coming up with innovative commercial solutions.
LNG has been a significant part of my practice, and I have been involved in Singapore related LNG project work since the inception of the framework for LNG importation and terminalling in Singapore. For a country that imported its first LNG cargo less than a decade ago, LNG activity in Singapore has grown by leaps and bounds, and the country is now a leading LNG trading hub in Asia. Apart from advising on LNG trading matters, my practice covers the full LNG value chain including export project development, shipping, long-term sale and purchase, terminalling and the downstream distribution of LNG / regasified LNG. The understanding of the larger industry picture and broader considerations (beyond the immediate contract or issue at hand) is immensely helpful in being able to offer pragmatic and commercially sound advice to clients.
What inspired this legal specialization?
Often it is not easy to plan your legal career from day one, and very few lawyers (including myself) have charted out their course from the very beginning. In the early days, my practice started off in the construction field. Being attracted to a broader range and variety of practice, I subsequently branched off into the energy and infrastructure sector. Since then, the choice to remain in, and develop this practice area has certainly been a conscious (and rewarding) decision. In modern society, energy and infrastructure is at the heart of everything we do, and it is satisfying to know that the projects I work upon can have a significant beneficial impact on the world around us. I particularly like that the projects – things like the development of a new power project, cross-border gas pipeline, or an LNG terminal – and their impacts are tangible and long lasting.
Asia is home to some of the largest consumers of energy in the world. Given the expected trajectory of our regional economic development and population growth, energy consumption in this part of the world is set to continue to grow while, at the same time, slowly shifting to less carbon intensive sources. Historically, energy and infrastructure has been closely associated with economic and industrial development, and my energy practice has also allowed me (in a small but meaningful manner) to be part of the larger trend of the economic rise of Asian companies and economies, and the participation by our broader set of international clients in this regional development.
Energy and infrastructure deals are often high value and complex, and many of the contracts are drafted in a bespoke manner with very few relying solely on template documents. This requires me as a lawyer to constantly hone and refine my legal skills and there is a consistent sense of growth and learning throughout the career. Certainly, knotty issues are encountered, but it keeps life interesting and project lawyers like me on our toes.
You were with several elite law firms before joining King & Wood Mallesons just over two years ago. Explain what led you to your current role with King & Wood Mallesons and what has been your experience so far in the firm.
Having worked on Asian deals and projects for over a decade, it was important to me that any firm I joined would have the same level of commitment and focus on the region. As the only top tier international law firm headquartered in Asia, KWM offered a unique proposition and it is evident that Asia is front and centre of its future growth vision and strategy. The opportunity to join a global team working to develop a leading legal brand based in Asia held a strong appeal for me (which very few other firms could match).
A key part of that future growth strategy, the KWM Singapore office was established about six years ago. While fully expecting that a new set-up would have its own set of challenges and teething issues, I also saw an opportunity to contribute in shaping and developing the future practice for the office and KWM’s regional presence. Since joining, the Singapore office has more than doubled in size in terms of lawyers and number of different practices, and there has been a steady growth in deal flow and clients. In no small part this has been due to the strong support from the broader network, whether in Australia, China or further afield. Where there has been the need to bolster the offering for clients or provide greater geographical support, our office has always been readily able to call upon the expertise and experience across the other KWM offices.
Since coming on board with KWM, what has struck me in particular is the considerable (and continuing) effort to integrate the firm’s practice and offices. Within the first year alone of joining the firm, I travelled to around 10 offices across China, Australia and Japan. Having been able to meet my colleagues and to put a face to their names has proved immensely helpful in fostering cooperation and the sense of being part of a broader global network. Obviously, the travel restrictions have made it more difficult to meet in person, but through collaboration on common projects (and not to mention a constant stream of video-conference calls), I remain in close contact with colleagues around the global network.
What current opportunities and challenges exist for clients in the energy, power and infrastructure markets at present
In light of the COVID-19 pandemic and the consequential economic and social fallout, the recent 12 months have been immensely challenging for clients from all industry sectors. Certainly for the energy, power and infrastructure markets the economic uncertainty has led to certain projects been delayed or placed on the back-burner. There is also less of an appetite for riskier and more speculative investments. Funding for high value energy/infrastructure projects can potentially be more difficult to secure and sponsors may encounter a need to inject greater equity in place of external financing. In the current environment, financial prudence and risk management are headline themes. Any project of scale will likely be subject to rigorous risk assessment and analysis from a legal, financial and commercial perspective. At a practical level, physical due diligence and negotiation of projects and deals has been hampered by measures such as border closures and domestic restrictions on movement in a majority of jurisdictions.
No one can reliably predict how soon the world might emerge from the shadow of the current pandemic. However, despite the challenges it presents, we have certainly seen significant continued activity on the energy front and there are no immediate indications that this will cease. Potentially, distressed assets provide attractive opportunities for clients looking to acquire assets at an undervalue. Clients with stronger balance sheets and the ability to self-finance to a greater degree will be best placed to take advantage of these opportunities. In a number of cases, government backed and nationally strategic projects will also continue to have the momentum to push ahead. Due to the nature of such projects, the sponsors tend to take a long-term view and look beyond the immediate uncertainties on the horizon. On the commodity front, fluctuations in energy pricing also offer interesting trading and arbitrage opportunities, and for some commodities, the depressed prices may attract buyers to commit to off-take arrangements.
To seize opportunities in the present market, the importance of well-crafted documents and comprehensive legal risk assessment cannot be overemphasised. Apart from the broader economic and commercial risks, the ability to meet and execute under tight commercial timelines has also been increasingly tested given the practical difficulties of carrying out on the ground assessments of projects and face to face meetings with counterparties. For energy and infrastructure clients, having an experienced lawyer on their side who understands the industry environment, and who can identify potential pitfalls and suggest practical workarounds, will be a critical component to successful project execution under this unique and challenging set of market conditions.