Shell and Saudi Aramco Eye Pavilion Energy in Multi-Billion Dollar Bid

Shell has a substantial presence in the global LNG market, with LNG trading accounting for nearly a third of its profit in the last quarter of the previous year.

Monday, April 8, 2024 2:30 AM UTC

In a significant move within the energy sector, Shell and Saudi Aramco have entered advanced price negotiations to acquire the assets of Pavilion Energy, an LNG (liquefied natural gas) trading company owned by Temasek. According to three sources familiar with the matter, this development follows after both companies completed the due diligence process.

The Race for a Strategic Asset

Pavilion Energy, established a decade ago by Singapore's state investment firm Temasek, has grown to become a key player in the LNG market. With the assets potentially valued at over US$2 billion, this deal marks a critical juncture for the involved parties. According to insiders, neither Pavilion Energy, Temasek, Shell, nor Barclays, advising Temasek, have made official comments regarding the ongoing negotiations.

Similarly, Saudi Aramco's gas unit, which is leading the charge, has remained silent on inquiries about the deal.

Strategic Implications for Aramco and Shell

For Saudi Aramco, known primarily for its oil production, acquiring Pavilion's assets would significantly bolster its position in the global LNG market. The company is ramping up its gas exploration activities and aims to increase its gas production by over 60% from 2021 levels by 2030.

According to Business Times, this ambition is part of a broader strategy that includes investing in LNG projects worldwide—demonstrated last year through a US$500 million investment in MidOcean Energy.

On the other hand, Shell has a substantial presence in the global LNG market, with LNG trading accounting for nearly a third of its profit in the last quarter of the previous year. The company views gas and LNG as pivotal elements of the global energy transition, helping phase out coal in power generation for a cleaner, less polluting alternative.

Gulf Business noted that the acquisition of Pavilion Energy by either Shell or Saudi Aramco would reshape the LNG trading landscape and highlight the growing emphasis on cleaner energy sources in the global push for environmental sustainability.

Photo: Jethro Carullo /Unsplash