Saudi Aramco inks 20-year deal with Sempra for LNG supply

By Asma Alsharif and Scott DiSavino DUBAI/NEW YORK (Reuters) - Saudi Aramco signed a 20-year agreement to buy liquefied natural gas (LNG) from a forthcoming export terminal in Texas that U.S.-based Sempra Energy is developing, the two companies said on Wednesday.

Reuters May 23, 2019 00:05:53 IST
Saudi Aramco inks 20-year deal with Sempra for LNG supply

Saudi Aramco inks 20year deal with Sempra for LNG supply

By Asma Alsharif and Scott DiSavino

DUBAI/NEW YORK (Reuters) - Saudi Aramco signed a 20-year agreement to buy liquefied natural gas (LNG) from a forthcoming export terminal in Texas that U.S.-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 U.S. 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 U.S. homes for a day.

The sale-and-purchase agreement is for 5 million tonnes 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% 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 U.S. 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.

"It's unclear what the final destination of Saudi Aramco's LNG will be. There continues to be a long-term expectation that, in time, Saudi Arabia will import LNG to be used for power generation," said Giles Farrer, Wood Mackenzie Research Director.

"We expect that Saudi Aramco will use this volume to establish a global portfolio as it seeks to become a global gas player," Farrer said.

ARAMCO PLANS FOR LNG

Aramco’s trading arm sold its first LNG cargo on the spot market in late March to an Indian buyer, according to sources familiar with the matter.

A senior Middle Eastern-based trader said Saudi’s LNG trading arm has yet to get off the ground, despite the sale of an LNG cargo last month. The trader said Aramco has hired an LNG originator in Singapore to develop the business but is still looking for LNG traders.

“They are making lots of noise about LNG but (it) seems more politically driven. So far no concrete action; no clear strategy,” the trader said.

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

Sempra said it plans to make a final investment decision to build the first phase of Port Arthur in the first quarter of 2020.

(Reporting by Asma Alsharif in Dubai and and Scott DiSavino in New York; Writing by Nafisa Eltahir and Rania El Gamal and Scott DiSavino; additional reporting by Sabina Zawadzki in London; editing by Saeed Azhar, Jason Neely, David Gaffen and David Gregorio)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.