Shell and Temasek did not disclose financial details of the sale in their statements.
The deal will provide Shell, already the world's top LNG trader, with access to gas markets in Europe and Singapore as it aggressively expands its LNG footprint after raking in billions in profits last year.
It includes Pavilion Energy's 6.5 million metric tons per annum (mtpa) of LNG supply contracts from suppliers such as Chevron (CVX.N), BP (BP.L) and QatarEnergy sourced from U.S. liquefaction facilities such as the Corpus Christi Liquefaction, Freeport LNG and Cameron LNG.
Pavilion's long-term regasification capacity of approximately 2 mtpa at UK's Isle Grain LNG terminal, its regasification access in Singapore and Spain, and its LNG bunkering business in Singapore, the world's largest ship refuelling port, are also included in the deal, Shell said.
Zoë Yujnovich, Shell's integrated gas and upstream director, said that the purchase will bring material volumes and additional flexibility to its global portfolio.
Shell said the acquisition will be absorbed within its cash capital expenditure guidance, which remains unchanged.
"The deal is in excess of the internal rate of return hurdle rate for Shell's integrated gas business, delivering on its 15-25% growth ambition for purchased volumes, relative to 2022," Shell said in its statement.
Shell planned to expand its LNG business by 20% to 30% by 2030, compared with 2022, and this deal is expected to help deliver these targets, it added.
Shell expects global demand for LNG to rise by more than 50% by 2040 as coal-to-gas switching gathers pace in China, South Asian and Southeast Asian countries.
The deal came just over a decade after Temasek established Pavilion Energy to address the growing demand for energy in Asia and support the energy transition.
"We believe Shell is well positioned to grow Pavilion Energy's business and strengthen its global LNG hub in Singapore," Juliet Teo, Temasek's head of portfolio development group and head of Singapore market, said in its statement.
Temasek will retain its wholly owned unit Gas Supply Pte Ltd (GSPL), which imports piped natural gas from South Sumatra in Indonesia, Temasek's statement showed.
Pavilion Energy's pipeline gas contracts with customers in the power sector are also not part of the transaction and will be novated to GSPL, prior to completion, according to both statements.
Moreover, Pavilion Energy's 20% interest in Blocks 1 and 4 in Tanzania will not be included in the deal.
The transaction is expected to complete by first quarter of next year, subject to regulatory approvals, according to both statements.
Pavilion will continue to operate as a separate and independent business until the transaction is completed, according to a Temasek spokesperson.
