As part of its efforts to expand its presence in international energy markets, Aramco has signed agreements with U.S. energy companies Sempra and NextDecade to tap into the growing U.S. LNG sector.
On June 13, Reuters reported that Aramco signed a non-binding agreement with U.S. liquefied natural gas (LNG) provider NextDecade to supply 1.2 million tonnes per annum of LNG for 20 years. Under the terms, LNG will be supplied from the fourth liquefaction train at NextDecade’s Rio Grande facility at the Port of Brownsville, Texas. Aramco and NextDecade said they were in the process of negotiating a binding agreement subject to a positive final investment decision on Train 4, which NextDecade said it expects in the second half of 2024.
On June 26, it was announced that Aramco and Sempra , one of North America’s leading energy infrastructure companies, had executed a non-binding Heads of Agreement for a 20-year sale and purchase agreement LNG offtake of 5.0 million tonnes per annum from the Port Arthur LNG Phase 2 expansion project. The agreement further contemplates Aramco’s 25% participation in the project-level equity of Phase 2.
Writing for The National, John Benny notes that, “Global trade in LNG reached 404 million tonnes last year – up from 397 million tonnes in 2022 – with tight supplies constraining growth, according to Shell’s 2024 LNG outlook. Global LNG demand is estimated to rise by more than 50 per cent by 2040, driven by increasing industrial coal-to-gas switching in China and the use of more LNG in South Asian and South-East Asian countries to support economic growth, the February report said.”
The United States is at the heart of this growth having surpassed Qatar as the world’s leading LNG exporter in 2023. The deals come at a time when Aramco is seeking to strengthen its position in the LNG market, which is set to grow globally by 50% by 2030, especially in the United States, where LNG capacity is set to almost double over the next four years.
At the Sempra signing Nasir K. Al-Naimi, Aramco Upstream President, said, “We are excited to take this next step into the LNG sector. As a potential strategic partner in the Port Arthur LNG Phase 2 project, Aramco is well placed to grow its gas portfolio with the aim of meeting the world’s growing need for lower-carbon sources of energy. This agreement is a major step in Aramco’s strategy to become a leading global LNG player.”
LNG also has growing strategic value as Simon Watkins notes in Oilprice.com, “Unlike oil or gas that is transported through pipelines, LNG does not require years and vast expense to build a complex infrastructure before it is ready to transport anywhere. LNG can be shipped and moved anywhere within a matter of days and bought reliably either through short- or long-term contracts or immediately in the spot market. Consequently, it now has a massive geopolitical importance as well, which is only set to increase as global demand for it is estimated to rise by more than 50 percent by 2040, according to energy industry forecasts.”
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