Shell beats Aramco in race to buy LNG business

Alamy/Piero Cruciatti

• Pavilion Energy acquired from Temasek
• No financial details disclosed
• Aramco keen to build LNG export business

Saudi Aramco, the world’s biggest oil exporter, has lost out to UK rival Shell in its bid to buy Pavilion Energy, a Singapore trader of liquefied natural gas (LNG), from Temasek, the Asian island nation’s sovereign investment fund.

Both companies were shortlisted for a potential acquisition worth billions of dollars. No financial details of Shell’s successful offer have been disclosed, however.

Pavilion Energy’s business includes LNG trading, natural gas supply, bunkering, shipping, re-gasification and marketing – and includes access to the crucial Pacific Basin.

It has several long-term natural gas contracts to receive around 6.5 million tonnes per annum from producers including Chevron, BP and QatarEnergy.

The deal excludes Pavilion’s stake in a gas project in Tanzania.

---

---

Aramco hoped to advance its ambitions as a global LNG player, providing access to gas markets in Europe and Asia. The Saudi giant is striving to build an LNG business, to compete with regional rivals QatarEnergy and Adnoc.

Aramco aims to invest in LNG projects abroad after last year’s $500 million acquisition of a minority stake in a US-based MidOcean Energy.

Some analysts are optimistic on the outlook for LNG – although others are not. Shell expects global demand to rise by more than 50 percent by 2040, driven by demand mainly from Asia.

But Robin Mills of Qamar Energy believes: “the market is likely to be over-supplied in the late 2020s because of massive expansions in Qatar and the US”.

• Early demand is strong for Aramco’s $13bn share sale
• Robin Mills: Abu Dhabi bets big on LNG
• Aramco signs 20-year LNG supply deal with NextDecade

Aramco wants to build its natural gas production by more than 60 percent above 2021 levels by the end of the decade. This would be export driven, as its gas output is likely to exceed domestic needs. 

CEO Amin Nasser announced the new production target in March, during Aramco’s 2023 earning call.

To bolster its overseas expansion strategy, Aramco initiated talks in June with Tellurian and NextDecade, two US LNG producers.

It signed a non-binding heads of agreement with NextDecade for a 20-year LNG offtake deal from its Rio Grande facility.

Shell, the world’s leading LNG trader, sold 67 million tonnes last year, according to earnings statements. It plans to increase its purchases by 20 to 30 percent by 2030 compared with 2022 levels, as it believes natural gas will play a critical role in energy transition.