Shell and Saudi Aramco are in the final stages of negotiation for the acquisition of Pavilion Energy’s liquefied natural gas (LNG) trading assets, following the completion of their due diligence, as confirmed by three sources familiar with the matter.
This development marks a significant milestone in the potential sale of the assets owned by Temasek, the Singaporean state investment firm. Having established Pavilion Energy a decade ago with a focus on LNG investments, Temasek could see the assets sell for over $2 billion, according to two sources.
While Pavilion Energy, Temasek, Shell, and Barclays (Temasek’s advisor) have chosen not to comment on the ongoing negotiations, Saudi Aramco has also remained silent, with its gas unit handling the talks.
Aramco sees this potential acquisition as a strategic move to establish itself as a significant player in the global LNG market.
The company is keen on expanding its gas production by over 60% by 2030 from its 2021 levels and has shown interest in LNG projects globally, highlighted by its recent investment in MidOcean Energy.
Shell, on the other hand, has significantly benefited from LNG trading, which contributed to nearly a third of its profits in the last quarter of the previous year.
As the leading LNG trader globally, Shell has capitalized on its extensive operations to navigate the dynamic demands and pricing in the LNG market.
The company advocates for the use of gas and LNG in the transition to cleaner energy, aiming to replace coal in power generation with less polluting alternatives.
Pavilion Energy holds a key position in Singapore’s LNG landscape, being one of the four entities authorized by the Energy Market Authority to import LNG.
It fulfills a substantial portion of Singapore’s power and industrial gas needs through LNG and piped natural gas.
Furthermore, the company’s strategic investments, including the acquisition of gas blocks in Tanzania and Iberdrola’s LNG assets, have bolstered its presence in the global LNG market.
Despite its unlisted status, Pavilion Energy reported a profit of $438 million for the year ending March 2023, a significant turnaround from the previous year’s loss.
This profitability came alongside a 38% increase in revenue, reaching $9.09 billion, and its shareholder equity value stood at $3.63 billion as of March 2023, according to Temasek’s website.