Marwa Rashad, Florence Tan and Yantultra Ngui
LONDON/SINGAPORE (Reuters) – Shell (LON:) and Saudi Aramco (TADAWUL:), which are competing to buy the assets of Temasek-owned liquefied natural gas (LNG) trading company Pavilion Energy, are currently negotiating the price after completing due diligence, three sources familiar with the matter said.
The potential sale comes a decade after Singapore’s state-owned investment firm created Pavilion Energy to focus on LNG-related investments. The assets could be worth more than $2 billion, two sources said.
Pavilion Energy, Temasek, Shell and Barclays, which advises Temasek, declined to comment. Saudi Aramco, whose gas division is overseeing the negotiations, did not respond to requests for comment.
Aramco believes the deal will allow it to become a global player in the LNG market. The company is accelerating gas exploration and aims to increase production by more than 60% by 2030 compared to 2021 levels. The company is also considering investing in liquefied natural gas (LNG) projects overseas after buying a minority stake in MidOcean Energy for $500 last year. million.
LNG trading accounted for almost a third of Shell’s profit in the fourth quarter of last year. The company, the world’s largest LNG trader, has operations around the world, allowing it to benefit from regional changes in demand and prices.
Shell said it believes gas and LNG will play a critical role in the energy transition, replacing more polluting coal in power plants.
Pavilion Energy, one of four firms designated by the Energy Market Authority of Singapore to import LNG, supplies one-third of the city’s electricity and industrial gas needs from LNG and pipeline natural gas, according to the company’s website. It also supplies LNG to ships in Singapore, the world’s largest bunkering port.
The company invested around $1.3 billion in three gas blocks in Tanzania in 2013, shortly after its inception, and gained access to Europe through the 2019 purchase of Iberdrola’s (OTC:) LNG assets, including regasification capacity in the United Kingdom and Spain.
The unlisted company reported a profit after tax of $438 million for the year to March 2023, offsetting a year earlier loss of $666 million, Temasek’s website showed, while revenue rose 38% to $9.09 billion. According to the site, the value of share capital as of March 2023 was $3.63 billion.