Shell to Buy Singapore’s Pavilion Energy

Shell has reached an agreement with Carne Investments, an indirect wholly-owned subsidiary of Temasek, to acquire 100% of the shares in Pavilion Energy, a Singapore-based global liquefied natural gas (LNG) trading business.

Pavilion Energy is an LNG business with a contracted supply volume comprising about 6.5 million tonnes per annum (mtpa).

Headquartered in Singapore, Pavilion Energy’s global energy business encompasses LNG trading, shipping, natural gas supply and marketing activities in Asia and Europe.

“The acquisition of Pavilion Energy will strengthen Shell’s leadership position in LNG, bringing material volumes and additional flexibility into our global portfolio. 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,” said Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director.

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% growth ambition for purchased volumes, relative to 2022, as outlined during the 2023 Capital Markets Day.

Integration of portfolios will commence after completion of the deal, which is expected by the first quarter of 2025, subject to regulatory approvals and fulfilment of other conditions precedent.

Pavilion Energy’s portfolio comprises about 6.5 mtpa of its long-term sale and supply LNG contracts. It also includes long-term regasification capacity of approximately 2 mtpa at the Isle Grain LNG terminal in U.K., regasification access in Singapore and Spain, as well as the time-charter of three M-type, Electronically Controlled Gas Injection (MEGI) LNG vessels and two Tri-Fuel Diesel Electric (TFDE) vessels.

It also has an LNG bunkering business with its first vessel deployed in early 2024.

Pavilion Energy’s pipeline gas business is not included as part of the transaction and will be transferred to Gas Supply Pte Ltd (GSPL), a wholly-owned subsidiary of Temasek, prior to completion.

Pavilion Energy’s 20% shareholding in block 1 and 4 in Tanzania are not included in the transaction.

Shell plans to grow its LNG business by 20-30% by 2030, compared with 2022, and purchased LNG volumes are planned to grow by 15-25%, relative to 2022, as outlined in the 2023 Capital Markets Day.

This transaction is expected to help deliver these targets.

Shell, via its BG acquisition, holds the first LNG importing license to Singapore, supplying nearly a quarter of the country’s natural gas needs.