Exclusive-Temasek to finalize deal with Shell to sell Pavilion Energy LNG assets, sources say

By Florence Tan, Jonathan Saul and Yantoultra Ngui

SINGAPORE/LONDON (Reuters) – Singapore’s Temasek Holdings is finalizing the sale of some assets of liquefied natural gas (LNG) trading company Pavilion Energy to Shell, with a deal expected to be completed in the coming days, they said two sources with knowledge of the subject. .

The deal will give Shell, already the world’s largest LNG trader, access to gas markets in Europe and Singapore as it aggressively expands its LNG presence after making billions in profits last year.

The value of the deal will be hundreds of millions of US dollars, one of the sources said. This would be below what Temasek was originally seeking from the sale.

Reuters reported in April that Shell and Saudi Aramco were in advanced talks to buy the assets of Temasek, which was seeking more than $2 billion from the deal.

The sources declined to be identified because they were not authorized to speak to the media.

Temasek, Pavilion Energy and Shell declined to comment.

The deal comes months after Temasek put the Singapore-based trader up for sale after Pavilion Energy made a profit in the year to March 2023 on robust LNG prices following the war in Ukraine.

Shell has been supplying a quarter of Singapore’s natural gas needs and the deal will make it the city-state’s biggest supplier.

However, Pavilion Energy’s asset sale will exclude Gas Supply Pte Ltd, which has a license to import natural gas via pipeline from Indonesia, the sources said, due to energy security concerns.

Temasek created Pavilion Energy a decade ago to focus on LNG-related investments.

Pavilion Energy invested around $1.3 billion in three gas blocks in Tanzania in 2013 and gained access to Europe with the 2019 purchase of Iberdrola’s LNG assets, including regasification capacity in the UK and Spain.

In Europe, Pavilion Energy imports about a tenth of the LNG volumes in Spain, which has become a major gas supplier in Europe by re-exporting LNG to countries such as Italy as Russia’s invasion of Ukraine led countries to reduce its dependence on Russian gas.

In Singapore, Pavilion Energy is one of four companies appointed by the Energy Market Authority to import LNG. It supplies a third of the city-state’s industrial power and gas demand with LNG and piped natural gas, according to its website.

It also supplies LNG to ships in Singapore, the world’s main fuel bunkering port.

The unlisted company reported a profit after tax of $438 million for the year ending March 2023, reversing the previous year’s loss of $666 million, while revenue rose 38% to $9.09 billion, according with the Temasek website.

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It carries a net asset value of US$3.63 billion as of March 2023, Temasek’s website showed.

(Reporting by Florence Tan and Yantoultra Ngui in Singapore, Jonathan Saul and Marwa Rashad in London; Editing by Shri Navaratnam)