Shell acquiring LNG trading business

Shell will acquire Pavilion Energy, which includes a global liquefied natural gas (LNG) trading business with a contracted supply volume comprising about 6.5 million tonnes per annum (mtpa).

Headquartered in Singapore, Pavilion Energy’s global energy business encompasses LNG trading, shipping, natural gas supply and marketing activities in Asia and Europe.

Pavilion Energy and CNOOC Gas and Power Group concluded their inaugural Ship-to-Ship (STS) LNG bunkering operation to Maran Dione last year. Pavilion Energy is being acquired by Shell.

“The acquisition of Pavilion Energy will strengthen Shell’s leadership position in LNG, bringing material volumes and additional flexibility into our global portfolio,” said Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director. “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.”

Completion of the deal is expected by the first quarter of 2025, subject to regulatory approvals and fulfilment of other conditions precedent.

Pavilion Energy’s portfolio comprises about 6.5 mtpa of its long-term sale and supply LNG contracts. It also includes long-term 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 Pte Ltd (GSPL), a wholly-owned subsidiary of Temasek, prior to completion.

Pavilion Energy’s 20% 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% by 2040, as industrial coal-to-gas switching gathers pace in China, South Asian and South-east Asian countries, Shell said. These countries are expected to use more LNG to support their economic growth, according to Shell’s LNG Outlook 2024.

Shell believes LNG will play a critical role in the energy transition, replacing coal in heavy industry. It also has a continued role in displacing coal in power generation, helping to reduce local air pollution and carbon emissions. LNG helps to provide the flexibility the power system needs, at a time when renewable generation is growing rapidly. Find out more in Shell’s Energy Transition Strategy 2024.

Shell plans to grow its LNG business by 20-30% by 2030, compared with 2022, and purchased LNG volumes are planned to grow by 15-25%, relative to 2022, as outlined in the 2023 Capital Markets Day. This transaction is expected to help deliver these targets.