- Shell said the acquisition would help strengthen its position in the LNG sector.
- The firm predicts that global demand for LNG will increase more than 50% by 2040
Shell plans to buy liquefied natural gas (LNG) trading company Pavilion Energy from Singapore sovereign wealth fund Temasek Holdings.
The oil major said the acquisition would help strengthen its position in the LNG sector, which it believes will play a “critical role” in the energy transition by replacing coal in heavy industry and power generation.
According to Shell, it forecasts that global LNG demand will increase by more than 50 percent by 2040, driven by decarbonization in China and increasing demand in South and Southeast Asian countries.
Acquisition: Shell plans to buy liquefied natural gas (LNG) trading business Pavilion Energy
In anticipation of this, Shell wants to expand its LNG portfolio by 20 to 30 percent more by 2030, compared to 2022 levels.
Pavilion’s portfolio amounts to approximately 6.5 million tonnes per year of long-term LNG contracts from suppliers such as BP, Chevron and QatarEnergy.
It also includes a bunkering business and terminals in Singapore, Spain and the Isle of Grain in Kent, where its facilities have an annual regasification capacity of around two million tonnes.
Regasification is the process by which heat converts LNG from liquid to gas so that it can be used as fuel and is easier to transport and distribute.
The company’s pipeline gas division and its 20 percent stake in two gas blocks in Tanzania are not part of the deal with Shell, which both plan to complete during the first quarter of 2025.
Juliet Teo, who heads Temasek’s portfolio development group and the Singapore market, said: “We believe Shell is well positioned to grow Pavilion Energy’s business and strengthen its global LNG hub in Singapore.”
Zoë Yujnovich, integrated head of gas and upstream at Shell, said: “Shell is strongly positioned to deliver value from this transaction while helping to meet the energy security needs of our customers.”
In the first quarter of 2024, Shell’s LNG production increased 7 percent from the previous three months to 7.6 million metric tons, although its LNG sales decreased by the same percentage to 16.9 million tons.
For that period, the company achieved a forecast-beating profit of £6.1 billion thanks to higher refining margins and strong oil trading results, although the figure was still below the £7.7 billion pounds obtained in the first three months of 2023.
Following the result, it announced another £2.8bn worth of share buybacks, having returned more than £18bn to shareholders last year.
shell actions They were up 0.1 per cent at £27.28 early on Tuesday afternoon, meaning they have risen around 8 per cent in the last six months.