DUBAI: Saudi Aramco has entered into a 20-year agreement with US-based Sempra Energy to purchase liquefied natural gas (LNG) from its subsidiary Sempra LNG, the two companies said on Wednesday.
The Saudi state oil giant plans to become a major global gas player while the US market is undergoing a shale boom.
Aramco has been developing its own gas resources and eyeing gas assets in the United States, Russia, Australia and Africa.
The two companies are also finalizing a 25 percent equity investment in the phase 1 of Port Arthur LNG, they said in a joint statement.
The sale-and-purchase agreement is for 5 million tons per annum (mtpa) of LNG from phase 1 of the Port Arthur LNG export project under development, the firms said.
The proposed Port Arthur LNG Phase 1 project is expected to include two liquefaction trains, up to three LNG storage tanks and associated facilities which should enable the export of about 11 mtpa on a long-term basis.
“Port Arthur LNG could be one of the largest LNG export projects in North America, with potential expansion capabilities of up to eight liquefaction trains or approximately 45 mtpa of capacity,” the statement said.
Aramco’s trading arm sold its first LNG cargo on the spot market in late March to an Indian buyer, according to sources familiar with the matter.
Aramco plans to boost its gas production to 23 billion standard cubic feet (scf) a day from about 14 billion scf now.
ANALYSIS
If converted to a sales and purchase agreement, (the Aramco-Sempra deal) will be one of the largest LNG deals ever signed and the largest deal signed since 2013. This is a signal of Aramco’s intent to become a global gas player and develop a broad LNG portfolio.
As the energy transition intensifies, we are seeing oil-focussed national oil companies following major international oil companies by diversifying their exposure away from oil and into gas and LNG.
Further moves into other major LNG provinces by Aramco are likely, with the company rumored to be interested in LNG-focussed acquisitions in Arctic Russia, Australia and other markets. It is unclear what the final destination of Saudi Aramco's LNG will be.
There continues to be a long-term expectation that, in time, Saudi Arabia will import LNG to be used for power generation. However, we expect that Saudi Aramco will use this volume to establish a global portfolio as it seeks to become a global gas player.
— Giles Farrer, Wood Mackenzie Research Director
