Illustration; Source: Pavilion Energy

Shell broadens its LNG horizons by taking over Singapore player active in Europe and Asia

Shell Eastern Trading, a subsidiary of the UK-headquartered energy giant Shell, has set the wheels in motion to scale up its liquefied natural gas (LNG) portfolio with the acquisition of Singapore-based Pavilion Energy from Carne Investments, an indirect wholly-owned subsidiary of Temasek.

Illustration; Source: Pavilion Energy

The UK energy heavyweight believes LNG will play a critical role in the energy transition, replacing coal in heavy industry and displacing coal in power generation to reduce local air pollution and carbon emissions while helping to provide the flexibility the power system needs, at a time when renewable generation is experienced a growth spurt.

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While no financial details of the acquisition have been disclosed, it will enable Shell to get its hands on 100% of the shares in Pavilion Energy, which markets and trades LNG in Europe and Asia to a wide range of customers and counterparties, thanks to a diverse portfolio of approximately 6.5 mtpa of long-term LNG supply contracts with companies like Chevron, BP, and QatarEnergy.

These contracts entail Iberdrola’s LNG asset portfolio from the Singapore player’s 2019 acquisition, alongside offtake deals with U.S. liquefaction facilities at Corpus Christi Liquefaction, Freeport LNG, and Cameron LNG. The acquisition is expected to be completed by Q1 2025, subject to regulatory approvals.

Aside from the 6.5 mtpa LNG contracts, the firm’s portfolio also encompasses long-term regasification capacity of approximately 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 M-type, electronically controlled gas injection (MEGI) LNG vessels, two tri-fuel diesel electric (TFDE) vessels, and one LNG bunkering vessel.

Juliet Teo, Temasek’s Head of Portfolio Development Group and Head of Singapore Market, commented: “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. We believe Shell is well positioned to grow Pavilion Energy’s business and strengthen its global LNG hub in Singapore.”

Moreover, Temasek will retain Gas Supply (GSPL), its wholly-owned subsidiary, which imports piped natural gas from South Sumatra in Indonesia. As Pavilion Energy’s pipeline gas contracts with customers in the power sector are not part of the transaction, these will be novated to GSPL before the completion of the divestment. In addition, the Singapore-based firm’s 20% interest in Blocks 1 and 4 in Tanzania will not be included in the sale.

With plans to grow its LNG business by 20-30% by 2030, compared with 2022, Shell’s purchase LNG volumes are planned to rise by 15-25%, relative to 2022. The expansion of the UK firm’s LNG portion is aligned with its ‘LNG Outlook 2024,’ forecasting a rise in global demand for LNG of more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China, South Asia, and Southeast Asia, which are expected to use more LNG to support their economic growth.                                 

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Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, highlighted:  “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.”