Sempra, Saudi Aramco Have 20-Year Deal for LNG

Saudi Arabian Oil Co., better known as Saudi Aramco, on May 22 signed a 20-year agreement to buy liquefied natural gas (LNG) from a Texas export terminal being developed by California-based Sempra Energy. The two companies confirmed the deal is a sale-and-purchase agreement for 5 million tonnes per annum (MTPA) of LNG, which is equal to about 0.7 billion cubic feet per day (Bcf/d) of natural gas.

Saudi Aramco develops its own gas assets, but has been making deals for LNG that it would import from the U.S., Africa, Australia, and Russia. The expectation is that Saudi Aramco will use the LNG for power generation in Saudi Arabia, or resell it on the global market. Sources told Reuters that Aramco’s trading arm sold its first LNG cargo on the spot market in late March to a buyer from India.

‘Leading Global LNG Player’

The agreement “is a major step forward in Saudi Aramco’s long-term strategy to become a leading global LNG player,” Amin Nasser, the company’s CEO, said in a statement. “We will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG.”

Qatar Petroleum, a competitor of Saudi Aramco, in February announced it would invest in the $10 billion Golden Pass LNG export terminal in Texas in a partnership with Exxon Mobil.

Sempra, based in San Diego, is developing the Port Arthur LNG export terminal in Texas, one of about a dozen U.S. export terminals being developed as oil and gas exploration companies look for new markets for their natural gas. Sempra earlier this month began LNG production earlier at its $10 billion Cameron terminal in Louisiana. Cameron is the fourth American export facility to come online since early 2016.

Matthew Hoza, manager of energy analysis for BTU Analytics in Lakewood, Colorado, recently told POWER that “The story that we have is that from a domestic prospective for demand, there is not much growth left. The bulk of demand growth will come from exports of LNG [liquefied natural gas]—that is the biggest source of growth that we see.”

Sempra and Saudi Aramco said the Saudi group also will buy a 25% equity stake in the first phase of the multibillion-dollar Port Arthur project, sited about 90 miles from Houston, the companies said in a joint statement. “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.

The proposed first phase of the Port Arthur project will include two liquefaction trains, as well as up to three LNG storage tanks and associated facilities. The infrastructure should enable export of about 11 MTPA of LNG.

Sempra said it plans to make a final investment decision on building Port Arthur’s first phase in early 2020.

Increased Natural Gas Production

Saudi Aramco has said it plans to increase its natural gas production to 23 Bcf/d, up from its current 14 Bcf/d. Sources told Reuters that Aramco’s trading arm sold its first LNG cargo on the spot market in late March to a buyer from India.

The Riyadh-based King Abdullah Petroleum Studies and Research Center (KAPSARC) in a report earlier this year said imported LNG could displace the use of Saudi-produced crude oil in some of the kingdom’s power plants. Saudi Arabia is the largest user of crude oil in the Middle East for generating electricity. S&P Global Platts Analytics on Monday said Saudi Arabia used 363,000 barrels per day (b/d) of oil for power generation and industrial use in April, a level expected to rise to 491,000 b/d in July due to higher demand for air conditioning and saltwater desalination.

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).