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Saudi Aramco has signed an agreement to buy U.S. liquefied natural gas from San Diego-based utility Sempra Energy, advancing the state-owned oil giant’s goal of becoming a player in the growing international gas market.
Subsidiaries of the two companies, Sempra LNG and Aramco Services Company, announced on Wednesday that they’ve signed a heads of agreement, which sets up a deal that would see Sempra sell Aramco 5 million tons per year of LNG for the next 20 years. The agreement is subject to negotiation and finalization.
The supplies would come from the first phase of Sempra’s Port Arthur LNG facility in Texas, which is currently under development and would have the capacity to ship 11 million tons of LNG per year. The agreement will see Aramco make a 25% equity investment in the facility.
The agreement is a major boost for Sempra, one of several companies trying to develop U.S. facilities to export LNG, or natural gas chilled to liquid form for transport. LNG developers need to line up customers in order to finance the multi-billion dollar export terminals, so the agreement with Aramco makes it more likely that Sempra will green light the Port Arthur facility.
Aramco has been rumored to be eyeing an investment in a U.S. LNG facility. The agreement with Sempra is a step forward in its long-term strategy to become a leading LNG player globally, Aramco CEO Amin Nasser said in a press statement.
“With global demand for LNG expected to grow by around 4% per year, and likely to exceed 500 million metric tons a year by 2035, we see significant opportunities in this market and we will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG,” the CEO said.
Aramco has been exploring natural gas partnerships and assets in North America, the Russian Arctic and Africa as it aims to nearly double its total gas production to 23 billion cubic feet per day over the next 10 years.
Earlier this year, the company said it will move beyond its traditional business developing Saudi Arabia’s vast oil reserves and expand into international oil and gas exploration. That means the company will more directly compete with international energy companies like Exxon Mobil and Royal Dutch Shell.
Aramco is also expanding its business refining crude oil into fuels like gasoline and diesel. The company operates the Port Arthur refinery in eastern Texas, the largest refining facility in the United States, through its subsidiary Motiva.
Several U.S. LNG facilities are currently starting up operations as developers seek out new global markets for booming U.S. natural gas supplies. Shipping more LNG is a pillar of President Donald Trump‘s goal of making the U.S. the world’s dominant energy exporter.
“We are pleased to partner with affiliates of Saudi Aramco, the largest oil and gas company in the world, to advance the development of Sempra LNG’s natural gas liquefaction facility in Texas and enable the export of American natural gas to global markets,” Jeffrey Martin, chairman and CEO of Sempra Energy, said in a statement.
Port Arthur is one of Sempra’s five LNG development projects in North America. Sempra’s Cameron LNG facility in Hackberry, Louisiana began producing LNG earlier this year. The company ultimately hopes to ship 45 million tons of LNG per year around the world.
There are more than a dozen new LNG export facilities proposed for the U.S., but only a few terminals in this second wave of development are expected to move forward this year. The ongoing trade war between Washington and Beijing has made it difficult for LNG developers to sign long-term deals with China, the fastest growing LNG market in the world.