How Shell’s Pavilion LNG acquisition will affect the Singaporean market

On 18 June, Shell signed an agreement to acquire Pavilion Energy from Temasek. The purchased company, which is headquartered in Singapore, encompasses LNG trading, shipping, and natural gas supply.  

We breakdown the acquisition and discuss what Shell is getting from this deal in terms of Singapore market access.  

1. Acquiring Pavilion’s LNG assets will solidify Shell’s leadership in the global LNG market

Through this deal, Shell will become the majority user of the Singapore LNG (SLNG) terminal.  

 In 2016, Pavilion Energy was appointed the second LNG aggregator in Singapore, following Shell Gas Marketing Pte Ltd, formerly BG Singapore. 

To our knowledge, no explicit regulation exists to limit the market share of LNG aggregators in Singapore. This is managed through the selection of the aggregators, which is the responsibility of Singapore’s Energy Market Authority (EMA). 

2. Shell will dominate the world’s largest LNG bunkering hub 

Shell is already a leading player in the LNG bunkering market and with a physical presence in the world’s largest LNG bunkering hub, Singapore. This acquisition will broaden the company’s customer base and market presence within the country and across Asia Pacific.  

Pavilion has been actively contributing to Singapore’s burgeoning LNG bunkering ecosystem. After receiving its LNG bunker supplier licence in 2016, it has since bunkered more than 280 truckloads of LNG and launched its first ship-to-ship LNG bunkering operation in February 2024. 

For Singapore, with Shell’s strong portfolio and its global reach, the integration of the LNG bunkering business will bolster Singapore’s LNG bunkering capabilities and further cement the city-state’s status as a leading LNG trading and bunkering hub. 

3. Pavilion Energy’s pipeline gas business is excluded from the deal 

Gas Supply Pte Ltd (GSPL), a subsidiary of Pavilion Energy, will continue to hold the main contract for piped gas imports from South Sumatra to Singapore. Keppel Gas, SembGas and Senoko have other agreements with Malaysia’s Petronas and Indonesia’s Natuna blocks. 

4. Pavilion will no longer be able to supply LNG to the Singapore market via long-term SPAs

In the short run, LNG term import licence holders will decrease as Pavilion’s licence transfers to Shell. This means that Pavilion will no longer be able to supply LNG to the Singapore market via long-term SPAs, and their existing downstream GSAs may also transition to Shell.  

However, if demand arises, Pavilion could continue to supply the market through spot LNG purchasing at a limited volume, around 495 kt in 2024. 

5. The deal will not directly impact gas pricing and demand 

Although we forecast gas demand in Singapore to plateau in the late 2020s as the market matures, LNG demand will continue to increase until early 2030s due to declines in piped gas supply from Indonesia and Malaysia.  

We anticipate that Singapore’s LNG demand will reach 8.3 mmtpa by 2030, with the potential for increased demand from several factors: slow progress in low-carbon electricity imports, rising electricity demand from data centres and increased electricity requirements during heatwaves. 

Final thoughts 

In summary, acquiring Pavilion’s LNG assets will solidify Shell’s leadership in the global LNG market. The deal and its recent divestment from the Energy and Chemical Park in Singapore (SECP) align with Shell’s broader business strategy to lead the transition to lower-carbon energy solutions, including its positioning of LNG as a key transition fuel in the global energy transition. 

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