Shell buys Pavilion Energy to bolster LNG business

By Editor


Shell Eastern Trading, a subsidiary of Shell plc, has reached an agreement with Carne Investments, a subsidiary of Temasek, to acquire Pavilion Energy. Shell did not reveal financial details of the deal.

Singapore-based Pavilion Energy has a liquefied natural gas (LNG) trading business with a contracted supply volume comprising about 6.5 million tonnes per annum (mtpa). Pavilion Energy’s 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,” said Zoe Yujnovich, Shell’s Integrated Gas and Upstream Director.

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

Pavilion Energy’s portfolio comprises 6.5 mtpa of its sale and supply LNG contracts. It also includes regasification capacity of approximately 2 mtpa at the Isle Grain LNG terminal (United Kingdom), 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 a 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, a subsidiary of Temasek, prior to completion.

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

Global demand for LNG is estimated to rise by more than 50 percent by 2040, as industrial coal-to-gas switching gathers pace in China, South Asian and South-east Asian countries. These countries are expected to use more LNG to support their economic growth, according to Shell’s LNG Outlook 2024.

Shell plans to grow its LNG business by 20-30 percent by 2030, compared with 2022, and purchased LNG volumes are planned to grow by 15-25 percent, relative to 2022.

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