July 21, 2024
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Shell to Acquire Singapore’s Pavilion Energy

Shell has agreed to acquire Singaporean liquefied natural gas (LNG) company Pavilion Energy from global investment firm Temasek.

This move aims to strengthen Shell’s leadership position in the LNG market, according to statements released on Tuesday.

The deal was confirmed by both companies but without financial details. However, Reuters says it is worth hundreds of millions of U.S. dollars.

Shell, already the world’s top LNG trader, will gain access to Pavilion Energy’s 6.5 million metric tons per annum (mtpa) of LNG supply contracts.

These contracts involve suppliers like Chevron, BP, and QatarEnergy, and sources from U.S. liquefaction facilities such as Corpus Christi Liquefaction, Freeport LNG, and Cameron LNG.

The acquisition also includes Pavilion’s long-term regasification capacity at the UK’s Isle of Grain LNG terminal, regasification access in Singapore and Spain, and its LNG bunkering business in Singapore.

Zoë Yujnovich, Shell’s integrated gas and upstream director, stated that the acquisition will provide significant volumes and additional flexibility to Shell’s global portfolio.

“The deal is in excess of the internal rate of return hurdle rate for Shell’s integrated gas business, delivering on its 15-25% growth ambition for purchased volumes, relative to 2022,” Yujnovich added.

Shell plans to expand its LNG business by 20% to 30% by 2030, compared with 2022, and this deal is expected to help deliver these targets.

Shell expects global LNG demand to rise by more than 50% by 2040 as coal-to-gas switching accelerates in China, South Asian, and Southeast Asian countries.

Temasek established Pavilion Energy to address Asia’s growing energy demand and support the energy transition.

Juliet Teo, Temasek’s head of portfolio development group, expressed confidence that Shell is well-positioned to grow Pavilion Energy’s business and strengthen Singapore’s LNG hub.

The transaction is expected to complete by the first quarter of next year, pending regulatory approvals.

Pavilion will continue to operate independently until the transaction is completed.

Pavilion’s pipeline gas contracts with customers in the power sector will transfer to Temasek’s Gas Supply Pte Ltd (GSPL), and its 20% interest in Blocks 1 and 4 in Tanzania is excluded from the deal.

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