Saudi Aramco signs LNG deal with US developer

Stay informed with free updates

Saudi Aramco has signed its first deal to purchase liquefied natural gas, stepping up investment in a fuel set to be in high demand from developing countries as they shift away from coal power.

Aramco has signed a non-binding deal with US LNG developer NextDecade to purchase 1.2mn tonnes of LNG per annum for 20 years, according to a statement from both companies on Thursday.

Aramco will buy the fuel from NextDecade’s yet-to-be-built facility, which is expected to come online by 2030. The two groups are in the process of negotiating a binding agreement.

The world’s largest oil exporter is expanding its investment in LNG as it seeks to diversify its revenue streams amid the global energy transition. Last year Aramco invested in small LNG company MidOcean Energy and has publicly stated it plans to invest more in the sector.

Nasir K. Al-Naimi, Aramco’s president of upstream, said the company was “looking forward” to finalising the deal as “we explore opportunities to expand our presence in international energy markets”. He added that Aramco expected LNG “to play an important role in meeting the rising demand for secure and efficient energy.”

Aramco’s agreement follows deals by other Middle Eastern energy companies to expand their footprint in LNG, which is natural gas liquefied by cooling it to minus 162C. Abu Dhabi National Oil Company signed two LNG deals — in the US and Mozambique — in May, and gave the green light for a massive domestic export project on Wednesday.

QatarEnergy is also expanding its LNG capacity, and is targeting an export capacity of 142mn tonnes per year by 2030.

“This move demonstrates Aramco’s strategic interest in building an LNG portfolio and willingness to venture overseas” for deals, said Felix Booth, head of LNG at data company Vortexa. He added that “scale is critical in LNG trading”, adding that he sees further deals from Aramco in the sector.

The importance of LNG has grown since Russia’s full-scale invasion of Ukraine, as the Kremlin slashed its pipeline gas supplies to Europe, prompting the region to secure the supercooled fuel to replace the lost volumes.

The industry expects global demand for LNG to surge 50 per cent by 2040, led by China and developing Asian nations switching over from dirtier coal to the comparatively cleaner fuel.

Natural gas is cleaner than other fossil fuel alternatives, however it still releases substantial amounts of carbon dioxide when burnt. Natural gas is also mostly composed of methane, which generates more warming than carbon dioxide but is shorter-lived.

The US LNG industry, which was the biggest supplier last year, has increasingly come under pressure from environmental groups due to its emissions.


Business Asia
the authorBusiness Asia

Leave a Reply