SINGAPORE/LONDON - Singapore's Temasek Holdings has shortlisted energy giants Shell and Saudi Aramco among a handful of companies to purchase most of the assets of liquefied natural gas (LNG) trading firm Pavilion Energy, sources with knowledge of the matter said.

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.

Unlisted Pavilion Energy had profit after tax of $438 million in the fiscal year ended March 2023, after a loss of $666 million a year earlier, Temasek's website showed, while revenue rose 38% to $9.09 billion.

Pavilion Energy's shareholder equity value was $3.63 billion by March 2023, the website showed.

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 with LNG and piped natural gas (PNG), 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.

For Shell, 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.

For Aramco, the acquisition would help kickstart its LNG business, one of the sources said, as it races with Middle Eastern rivals QatarEnergy and Abu Dhabi National Oil Co (ADNOC) to grab a share of the superchilled fuel market.

"Aramco is late to the LNG party, but they have the money to catch up," the source added.

(Reporting by Florence Tan in Singapore and Marwa Rashad in London; additional reporting by Yantoultra Ngui in Singapore and Yuka Obayashi in Tokyo; Editing by Tony Munroe and Clarence Fernandez)