Singapore’s investment firm Temasek said it had agreed to sell 100 percent of its shares in Pavilion Energy to a unit of UK-based LNG giant Shell.
State-owned Temasek said in a statement issued on Tuesday that the deal with Shell Eastern Trading is expected to be completed by the first quarter of 2025, subject to regulatory approvals.
The firm did not provide the price tag of the transaction.
Temasek said it will retain its unit Gas Supply (GSPL), which imports piped natural gas from South Sumatra in Indonesia.
Also, Pavilion’s pipeline gas contracts with customers in the power sector are not part of the transaction and will be novated to GSPL, prior to completion, while Pavilion’s 20 percent interest in blocks 1 and 4 in Tanzania will not be included in the transaction.
Pavilion’s LNG portfolio
Established in 2013 by Temasek, Pavilion is a Singapore-based LNG player that has operations in Singapore and Europe and it markets and trades LNG in Europe and Asia to a wide range of customers and counterparties.
It has built a diverse portfolio of about 6.5 mtpa of LNG supply contracts from suppliers like Chevron, BP, and QatarEnergy.
The contracts also include Iberdrola’s LNG asset portfolio from Pavilion’s 2019 acquisition.
In addition, Pavilion has offtake contracts from US liquefaction facilities at Corpus Christi, Freeport LNG, and Cameron LNG.
Pavilion’s portfolio also compromises long-term regasification capacity of about 2 mtpa at the Isle of Grain LNG terminal in the UK, regasification access in Singapore and Spain, marine bunkering business as well as the time-charter of three ME-GI LNG vessels, two TFDE vessels, and one LNG bunkering vessel, according to Temasek.
Earlier this year, Pavilion completed the first LNG bunkering operation with MOL’s LNG bunkering vessel, Brassavola.
The newbuild is on charter to Pavilion LNG Bunker I, a wholly-owned subsidiary of Pavilion.
This ship joined Singapore’s first LNG bunkering vessel, the 7,500-cbm FueLNG Bellina, owned by Seatrium and Shell, and FueLNG’s second vessel, the 18,000-cbm FueLNG Venosa, owned by Korea Line LNG.
“In the last 10 years, Pavilion Energy has grown from its Singapore beginnings into an international energy business marketing and trading LNG in key markets across Europe and Asia to help meet rising energy demand,” said Juliet Teo, head, portfolio development group and head, Singapore market of Temasek.
“We believe Shell is well positioned to grow Pavilion Energy’s business and strengthen its global LNG hub in Singapore,” Teo said.
Shell says acquisition to strengthen its leadership position in LNG
Shell said in a separate statement that the acquisition will be absorbed within Shell’s cash capital expenditure guidance, which remains unchanged.
The deal is in excess of the internal rate of return (IRR) hurdle rate for Shell’s integrated gas business, delivering on its 15-25 percent growth ambition for purchased volumes, relative to 2022, as outlined during the 2023 capital markets day, it said.
Shell, via its BG acquisition, holds the first LNG importing license to Singapore, supplying nearly a quarter of the country’s natural gas needs.
The company plans to grow its LNG business by 20-30 percent by 2030, compared with 2022, and purchased LNG volumes are planned to grow by 15-25 percent, relative to 2022.
This transaction is expected to help deliver these targets, Shell said.
Shell sold 67.09 million tonnes of LNG during 2023, a rise of 2 percent compared to 65.98 million tonnes in 2022. During the January-December period, liquefaction volumes dropped 5 percent to 28.29 million tonnes.
The company sold 16.87 million tonnes of LNG in the January-March period this year, slightly down compared to 16.97 million tonnes in the same period last year, while liquefaction volumes rose 5.4 percent year-on-year to 7.58 million tonnes in the first quarter.
“The acquisition of Pavilion Energy will strengthen Shell’s leadership position in LNG, bringing material volumes and additional flexibility into our global portfolio,” said Zoë Yujnovich, Shell’s integrated gas and upstream director.
“We will acquire Pavilion’s portfolio of LNG offtake and supply contracts, which includes additional access to strategic gas markets in Asia and Europe. By integrating these into Shell’s global LNG portfolio, Shell is strongly positioned to deliver value from this transaction while helping to meet the energy security needs of our customers,” Yujnovich said.