The sale process comes a decade after the state investment firm set up Pavilion Energy to focus on LNG-related investments, and takes place as spot Asian LNG prices have fallen more than 40% since mid-August, potentially weighing on the deal's valuation.
Temasek is evaluating bids for the sale of Pavilion Energy's assets, excluding its gas pipeline business, one of the sources said, adding that a final bidding round was likely in coming weeks, before a winner is announced if the price is right.
It was not immediately clear how many bids Temasek had received, or their financial terms.
Bloomberg first reported on the sale process in August.
Pavilion Energy directed enquiries to Temasek, which declined to comment. Shell declined to comment and Saudi Aramco did not respond to a request for comment.
Barclays, which is advising Temasek on the sale, declined comment.
"Pavilion Energy has a decent portfolio from a long-term volumes perspective, so it would be a good opportunity for Aramco to enter the LNG business. For Shell, it would further expand their massive portfolio," an industry source said.
Saudi Aramco (2222.SE), opens new tab, which trades in LNG, is seeking to become a leader in the market as it competes with Middle East rivals QatarEnergy and Abu Dhabi National Oil Co (ADNOC).
It has been exploring different opportunities globally and the acquisition would help kickstart its LNG business, one of the sources said, adding: "Aramco is late to the LNG party, but they have the money to catch up.".
Felix Booth, head of LNG at energy intelligence firm Vortexa, said: "This move demonstrates Aramco strategic interest in building an LNG portfolio and willingness to venture overseas for supply and import infrastructure. Scale is critical in LNG trading, hence other transactions are needed to complement Pavilions positions."
For Shell (SHEL.L), opens new tab, the world's top LNG trader by volume and the only other LNG importer in Singapore, the acquisition would expand its market share in the city state. Shell, which raked in $2.4 billion in LNG trading in the fourth quarter of 2023, has been importing LNG into Singapore since 2013, supplying a quarter of the country's natural gas needs.
Pavilion Energy invested about $1.3 billion in three gas blocks in Tanzania in 2013, soon after it was set up.
As one of four firms appointed by Singapore's Energy Market Authority to import LNG, Pavilion supplies one-third of the city state's power and industrial gas demand with LNG and piped natural gas, its website says. It also supplies LNG to ships in Singapore, the world's top bunkering port.
In Europe, Pavilion Energy imports about a tenth of LNG volumes in Spain.
It gained access to Europe with its 2019 purchase of Spanish energy company Iberdrola's LNG assets, including long-term regasification capacity of about 2 million metric tons a year (tpy) at Britain's Grain LNG terminal, access to regasification capacity in Spain and on a pipeline between Spain and France.
Unlisted Pavilion Energy posted a profit after tax of $438 million for the year to March 2023 following a loss of $666 million, Temasek's website showed, while revenue rose 38% to $9.09 billion.
Pavilion Energy's shareholder equity value was $3.63 billion as of March 2023, the website showed.
