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Saudi Aramco makes LNG play with investment in US

Fri 24 May 2019 by John Snyder

Saudi Aramco makes LNG play with investment in US
Rendering of Port Arthur LNG export facility, which will have a nameplate capacity of 11 mta

A new agreement would see the Saudi-run oil company purchase 5 mta of LNG for 20 years and take a 25% stake in the Port Arthur LNG export facility

As part of its long-term strategy to become a major player in LNG, Saudi-run oil giant Saudi Aramco has inked a deal that would see it purchase 5 mta of LNG offtake for 20 years and acquire 25% equity in a new US export facility.

Under the heads of agreement (HOA) with San Diego-based Sempra Energy, Saudi Aramco would have a 20-year LNG sale-and-purchase agreement (SPA) for 5 mta of LNG offtake from Phase 1 of the Port Arthur LNG export-project under development in Jefferson County, Texas. It would also take a 25% equity investment in Phase 1 of Port Arthur LNG on Sabine-Neches waterway. The details of the HOA and equity interest are subject to negotiation and finalisation. 

“The agreement with Sempra LNG is a major step forward in Saudi Aramco’s long-term strategy to become a leading global LNG player,” said Saudi Aramco chief executive and president Amin Nasser. “With global demand for LNG expected to grow by around 4% per year, and likely to exceed 500 million metric tonnes a year by 2035, we see significant opportunities in this market and we will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG,” added Mr Nasser.

Saudi Aramco is also reportedly making a move in US shale gas, considering investing in Norway state energy company Equinor’s Marcellus shale operations. Saudi Aramco is expected to make US$150Bn in gas investments, both in conventional and unconventional plays, over the next decade.

The proposed Port Arthur LNG Phase 1 project will have two liquefaction trains, up to three LNG storage tanks and associated facilities that should enable the export of approximately 11 mta of LNG 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 mta of capacity.

Port Arthur LNG has hit a number of milestones in recent months that have advanced it towards an FID. Earlier this month, the US Department of Energy issued Port Arthur LNG’s authorisation to export domestically produced natural gas to countries that do not have US free trade agreements (FTAs). Last month, Port Arthur LNG and its affiliates received authorisation from the US Federal Energy Regulatory Commission (FERC) to site, construct and operate the liquefaction export facility and related natural gas pipelines.

In December 2018, Port Arthur LNG and the Polish Oil & Gas Company (PLNG) signed a definitive 20-year SPA for 2 mta of LNG from the Port Arthur LNG project, subject to certain conditions.

Sempra Energy also owns a 50.2% interest in Cameron LNG, which began LNG production from liquefaction train 1 this month.  Sempra’s partners in the Hackberry, Louisiana, LNG export project are France’s Total and Japan’s Mitsui & Co, Ltd, and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha (NYK).

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