LONDON/SINGAPORE (Reuters) - Shell and Saudi Aramco, which are competing to buy the assets of Temasek-owned liquefied natural gas (LNG) trading firm Pavilion Energy, are now locked in price negotiations after completing the due diligence process, three sources with knowledge of the matter said.

The potential sale comes a decade after the Singapore state investment firm set up Pavilion Energy to focus on LNG-related investments. The assets could fetch more than $2 billion, two of the sources said.

Pavilion Energy, Temasek, Shell and Barclays, which is advising Temasek, all declined to comment. Saudi Aramco, whose gas unit is overseeing its negotiations, did not respond to a request for comment.

Aramco believes the deal would position it as a global LNG player. It is accelerating its gas exploration and aims to boost production by more than 60% from 2021 levels by 2030. It is also looking at investing in liquefied natural gas (LNG) projects abroad, after last year buying a minority stake in MidOcean Energy for $500 million.

LNG trading accounted for nearly a third of Shell's profit in the fourth quarter of last year, The company, the world's largest LNG trader, has operations worldwide that allow it to benefit from regional shifts in demand and pricing.

Shell has said it believes gas and LNG will play a critical role in the energy transition by replacing more polluting coal in power plants.

As one of four firms appointed by Singapore's Energy Market Authority to import LNG, Pavilion Energy supplies one-third of the city state's power and industrial gas demand with LNG and piped natural gas, according to its website. It also supplies LNG to ships in Singapore, the world's top bunkering port.

The company invested about $1.3 billion in three gas blocks in Tanzania in 2013, soon after it was set up, and gained access to Europe with its 2019 purchase of Iberdrola's LNG assets, including regasification capacity in the United Kingdom and Spain.

The unlisted company posted profit after tax of $438 million for the year to March 2023, reversing a year earlier loss of $666 million, Temasek's website showed, while revenue rose 38% to $9.09 billion. Shareholder equity value was $3.63 billion as of March 2023, the website showed.