Shell plc is making good on ambitions to expand its global LNG business with an agreement to acquire Pavilion Energy Pte. Ltd. – and its 6.5 million metric tons/year (mmty) of contracted supply.
The transaction by Shell Eastern Trading Pte. Ltd. was reached with Carne Investments Pte. Ltd., a subsidiary of Temasek Holdings Ltd. Headquartered in Singapore, Pavilion’s global energy business encompasses liquefied natural gas trading, shipping, natural gas supply and marketing activities in Asia and Europe.
Neither Temasek nor Shell disclosed financial details.
“The acquisition of Pavilion Energy will strengthen Shell’s leadership position in LNG, bringing material volumes and additional flexibility into our global portfolio,” Shell’s Zoë Yujnovich, Integrated Gas and Upstream director, said.
“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.”
According to Temasek, Pavilion has a “diverse portfolio of LNG supply contracts” from suppliers that include BP plc, Chevron Corp. and QatarEnergy. The contracts include the LNG assets acquired in 2019 from Spain’s Iberdrola.
Pavilion also holds offtake contracts with U.S. liquefaction facilities, including Corpus Christi LNG in South Texas, Freeport LNG on the upper Texas coast and Cameron LNG in Louisiana.
Shell is aiming to expand its LNG business by 20-30% by 2030, compared with 2022. In addition, the company has set a goal to expand its purchased LNG volumes in 2030 by 15-25% also relative to 2022.
“The deal is in excess of the internal rate of return hurdle rate for Shell’s Integrated Gas business,” which would deliver on the 15-25% growth ambition for purchased volumes, Shell noted.
Integrating the portfolios would begin after the transaction is completed, now expected by early 2025.
Via its BG Group plc acquisition in 2016, Shell obtained the first LNG importing license to Singapore. It now supplies nearly one-quarter of the country’s natural gas.
In addition to the 6.5 mmty of long-term sale and supply LNG contracts, Pavilion’s portfolio includes long-term regasification capacity of 2 mmty at the UK’s Isle Grain LNG terminal and regasification access in Singapore and Spain. In addition, Pavilion has a time-charter of three M-type, electronically controlled gas injection LNG vessels and two tri-fuel diesel electric vessels. An LNG bunkering business deployed its first vessel early this year.
“Global demand for LNG is estimated to rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China, South Asian and Southeast Asian countries,” according to Shell. “These countries are expected to use more LNG to support their economic growth,” according to Shell’s LNG outlook issued earlier this year.
“Shell believes LNG will play a critical role in the energy transition, replacing coal in heavy industry. It also has a continued role in displacing coal in power generation, helping to reduce local air pollution and carbon emissions. LNG helps to provide the flexibility the power system needs, at a time when renewable generation is growing rapidly.”
Pavilion’s natural gas pipeline business is not part of the Shell transaction. That business is being transferred to Gas Supply Pte. Ltd., a Temasek subsidiary. Also not included are Pavilion’s stakes in Tanzania blocks 1 and 4.
“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,” Temasek’s Juliet Teo said. She heads the Portfolio Development Group and the Singapore Market. “We believe Shell is well-positioned to grow Pavilion Energy’s business and strengthen its global LNG hub in Singapore.”
