Energy giants Saudi Aramco and Shell are locked in final negotiations to acquire Singapore-based liquefied natural gas (LNG) trader Pavilion Energy, according to informed sources. The potential acquisition marks a significant move for both companies, with Aramco aiming to solidify its position as a global LNG player and Shell seeking to bolster its dominant market share.
The talks come after Temasek, Singapore's state investment firm, decided to sell Pavilion Energy, a company it established a decade ago to focus on LNG-related investments. The sources familiar with the discussions revealed that the deal could fetch over $2 billion, reflecting the strategic importance of Pavilion Energy's assets.
For Aramco, acquiring Pavilion Energy presents a golden opportunity to expand its reach in the global LNG market. The Saudi Arabian oil giant has been ramping up its gas exploration activities with the ambitious goal of increasing production by more than 60% by 2030 compared to 2021 levels. On top of domestic exploration, Aramco has also shown interest in investing in international LNG projects, as evidenced by its recent acquisition of a minority stake in MidOcean Energy last year.
On the other hand, Shell, currently the world's largest LNG trader, seeks to solidify its leading position through the potential acquisition. Pavilion Energy's well-established infrastructure, including a strong foothold in Singapore, the world's top bunkering port, would significantly enhance Shell's trading capabilities. LNG trading plays a critical role in Shell's bottom line, contributing nearly a third of its profits in the last quarter of 2023. Additionally, Shell sees LNG as a crucial fuel during the energy transition, acting as a cleaner alternative to coal in power generation.
Pavilion Energy's significance extends beyond its trading expertise. As one of the four entities appointed by Singapore's Energy Market Authority to import LNG, the company plays a vital role in fulfilling a significant portion of the city-state's energy needs. It supplies roughly one-third of Singapore's power and industrial gas demand through LNG and piped natural gas, according to information on Pavilion Energy's website.
The acquisition of Pavilion Energy is expected to have a ripple effect across the global LNG market. With two industry leaders vying for control, the final price tag could climb even higher. The outcome of the negotiations will be closely watched by industry analysts and stakeholders eager to see how the deal will reshape the LNG landscape.