Saudi Aramco signed a 20-year agreement to buy liquefied natural gas (LNG) from a forthcoming export terminal in Texas that US-based Sempra Energy is developing, the two companies said on Wednesday.
The Saudi state oil giant plans to become a major global gas player, and this deal will provide it with access to some of the world’s cheapest and most abundant natural gas via the US shale boom.
Aramco has been developing its own gas resources and eyeing gas assets in the United States, Russia, Australia and Africa. Demand for super-cooled LNG hit a record in 2018 at 42.1 billion cubic feet per day (bcfd), according to the International Gas Union, and growth is expected to keep rising as countries wean themselves off dirtier coal. One billion cubic feet of gas is enough to supply about 5 million US homes for a day.
The sale-and-purchase agreement is for 5 million tons per annum (MTPA) of LNG, equivalent to about 0.7 bcfd of natural gas. This is Saudi Arabia’s first known non-binding agreement to buy LNG, and the largest such LNG deal since 2013, according to energy consultancy Wood Mackenzie.
Aramco will also buy a 25 percent equity stake in the first phase of the multibillion-dollar project, to be constructed in Port Arthur, Texas, about 90 miles (145 km) from Houston, the companies said.
“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 companies said.
Global LNG demand is expected to grow by about 5 percent a year through the mid-2020s, according to US Energy Information Administration (EIA) projections. Since February 2016, when the United States started exporting the fuel from the Lower 48 states, it has become the world’s fourth biggest LNG exporter.
Aramco said it plans to boost its gas production to 23 billion standard cubic feet (scf) a day from about 14 billion scf now.
