Saudi Aramco considers stake in foreign LNG plant amidst soaring global demand

William Mathis and Stephen Stapczynski, Bloomberg March 01, 2023

(Bloomberg) – Saudi Arabia’s Aramco is considering an investment in a liquefied natural gas (LNG) facility outside the kingdom, as global demand for the fuel soars following Russia’s invasion of Ukraine.

The state energy company is in early discussions with LNG plant developers to procure a stake and secure supplies through an off-take agreement, according to people with knowledge of the matter.

LNG consumption is set to surge in the coming years as Europe rushes to replace piped gas from Russia and with nations such as China and India expected to increase imports. The value of global LNG trade doubled last year to more than $450 billion, according to the International Energy Agency.

Aramco is looking at projects in the U.S. and Asia, one of the people said. Its preference would be for a facility that can easily ship the super-chilled fuel to Asia, the world’s biggest market, another person said.

The company declined to comment.

LNG investment needed to close supply gap

Getting a stake in an LNG plant and a supply deal would help Aramco with its aim of diversifying beyond oil and gas production into the lucrative world of energy trading.

More investment in liquefaction projects is needed to avoid a widening LNG supply gap later this decade, Shell Plc said in a report last month.

Aramco previously considered venturing into LNG in 2019 and looked at buying 25% of Sempra Energy’s Port Arthur facility in Texas. But it pulled back as the coronavirus pandemic weighed on energy demand and hammered its finances. A non-binding 20-year agreement for Aramco to sell LNG from Port Arthur expired in 2021.

Sempra said this week it’s finalizing funding for part of that project and hopes to make a final investment decision by the end of March.

Large gas reserves in Saudi Arabia

Saudi Arabia has some of the world’s biggest gas reserves, though they’ve mainly been used for the domestic market.

Aramco is trying to change that and plans to spend around $100 billion in the coming decade to boost gas production in the kingdom. But it has no intention to make LNG at home. Instead, it’ll use the extra supplies to meet rising local demand and to export blue hydrogen, a fuel made by converting gas.

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