Shell to Acquire Pavilion Energy, Enhancing LNG Portfolio

Singapore, (Natural Energy News): Shell Eastern Trading Pte. Ltd., a subsidiary of Shell plc, has entered into an agreement with Carne Investments Pte. Ltd., an indirect wholly-owned subsidiary of Temasek, to acquire 100% of Pavilion Energy Pte. Ltd. Pavilion Energy's portfolio includes a global liquefied natural gas (LNG) trading business with a contracted supply volume of approximately 6.5 million tonnes per annum (mtpa).

Shell to acquire Pavilion Energy, enhancing its global LNG portfolio with significant supply and market access in Asia and Europe.

Based in Singapore, Pavilion Energy's operations span LNG trading, shipping, and natural gas supply and marketing activities across Asia and Europe.

ZoĆ« Yujnovich, Shell’s Integrated Gas and Upstream Director, commented, “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 integrate Pavilion’s LNG offtake and supply contracts, enhancing our access to strategic gas markets in Asia and Europe. This transaction aligns with Shell’s strategy to deliver value and meet the energy security needs of our customers.”

The acquisition will be managed within Shell’s existing cash capital expenditure guidance, without changes. The deal surpasses Shell’s internal rate of return (IRR) hurdle rate for its Integrated Gas business, supporting its growth ambition of 15-25% for purchased volumes by 2025 compared to 2022, as outlined during the 2023 Capital Markets Day.

The integration process is set to commence post-completion of the deal, anticipated by Q1 2025, pending regulatory approvals and other conditions.

Key Points of the Acquisition:

  • Pavilion Energy’s portfolio includes 6.5 mtpa of long-term LNG sale and supply contracts.
  • The portfolio also features long-term regasification capacity of approximately 2 mtpa at the Isle of Grain LNG terminal in the UK, and regasification access in Singapore and Spain.
  • Pavilion Energy’s fleet includes three MEGI LNG vessels and two TFDE vessels.
  • An LNG bunkering business, with its first vessel operational since early 2024, is also part of the portfolio.
  • Pavilion Energy’s pipeline gas business will be transferred to Gas Supply Pte Ltd (GSPL), a wholly-owned subsidiary of Temasek, prior to completion.
  • Pavilion Energy’s shareholding in blocks 1 and 4 in Tanzania is excluded from the transaction.

Market Context: Global LNG demand is projected to rise by over 50% by 2040, driven by industrial coal-to-gas switching in China, South Asia, and Southeast Asia. Shell’s LNG Outlook 2024 highlights the critical role of LNG in the energy transition, replacing coal in heavy industry and power generation, reducing air pollution and carbon emissions.

Shell plans to expand its LNG business by 20-30% by 2030 compared to 2022. This acquisition is expected to contribute significantly to these targets, enhancing Shell’s capacity to support the growing demand for cleaner energy sources.

Background: Shell, through its BG acquisition, holds the first LNG importing license to Singapore, supplying nearly a quarter of the country’s natural gas needs. Shell has a longstanding presence in the Asian market, actively contributing to the region’s energy security and developing LNG as a marine fuel for bunkering in Singapore.

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