Temasek to finalise sale of Pavilion Energy LNG asset to Shell: sources

Temasek Holdings Nears Sale of Pavilion Energy Assets to Shell

Temasek Holdings of Singapore is on the verge of finalizing the sale of certain assets from its liquefied natural gas (LNG) trading firm, Pavilion Energy, to Shell. The deal, anticipated to be concluded in the upcoming days, will significantly bolster Shell’s presence in gas markets across Europe and Singapore. Shell, already the world’s leading LNG trader, aims to further expand its LNG portfolio following substantial profits in the past year.

Details of the Transaction

Insiders have revealed that the agreement is valued in the hundreds of millions of U.S. dollars, a figure that falls short of the over $2 billion Temasek initially hoped to achieve. Previously in April, it was reported that Shell and Saudi Aramco were in the advanced stages of negotiation for these assets. Neither Temasek, Pavilion Energy, nor Shell have commented on this transaction.

This sale follows Pavilion Energy’s profitable performance in the fiscal year ending March 2023, which was driven by strong LNG prices influenced by the ongoing conflict in Ukraine. With this deal, Shell will become the largest supplier of natural gas to Singapore, enhancing its significant role in the region’s energy sector. However, assets related to Gas Supply Pte Ltd, which has the pipeline import license from Indonesia, are excluded from the deal due to energy security concerns.

Pavilion Energy’s Background and Investments

Pavilion Energy, established by Temasek a decade ago to invest in LNG ventures, made a notable investment of approximately $1.3 billion in Tanzanian gas blocks in 2013. The company's 2019 acquisition of Iberdrola’s LNG assets granted it vital regasification capacity in the UK and Spain, further penetrating the European market. Pavilion Energy plays a crucial role in Spain, importing about a tenth of its LNG volumes and serving as a key gas supplier within Europe, especially after nations sought alternatives to Russian gas post-Ukraine invasion.

Role in Singapore’s Energy Sector

In Singapore, Pavilion Energy is among the four companies authorized by the Energy Market Authority to import LNG. It caters to a significant portion of the country’s energy needs, supplying one-third of its power and industrial gas requirements with LNG and piped natural gas. Additionally, Pavilion Energy is a major provider of LNG for marine vessels in Singapore, which holds the status of the world’s top bunkering hub.

The company showed a remarkable turnaround with a $438 million profit after tax in the year extending to March 2023, recovering from a previous loss of $666 million. Revenue saw a 38% increase, reaching $9.09 billion, with shareholders' equity valued at $3.63 billion as of the end of March 2023, according to Temasek’s website.