Saudi Aramco inks 20-year US LNG accord with Sempra Energy

Aramco Services Company would take gas from Port Arthur and is in discussions to take a 25% stake in project

An employee works on the production line of tanks for liquefied natural gas (LNG) at an energy equipment company in Nantong, Jiangsu province, China March 14, 2019. REUTERS/Stringer  ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. CHINA OUT. TPX IMAGES OF THE DAY

A subsidiary of Saudi Arabia’s state oil firm Aramco signed a 20-year deal with a unit of Sempra Energy to take five million tonnes per annum (mtpa) of liquefied natural gas (LNG) from the Port Arthur gas project in the US, the companies said on Wednesday without disclosing the value of the accord.

Aramco Services Company and Sempra LNG said they would hold discussions on Aramco taking a 25 per cent stake in the Port Arthur LNG export project.

“The agreement with Sempra LNG is a major step forward in Saudi Aramco’s long term strategy to become a leading global LNG player,” Amin Nasser, president and chief executive of Saudi Aramco, said in a statement on Wednesday.

“With global demand for LNG expected to grow by around 4 per cent per year and likely to exceed 500 million metric tons a year by 2035, we see significant opportunities in this market and will continue to pursue strategic partnerships which enable us to meet rising global demand.”

The US has been eyeing opportunities to sell LNG to Saudi Arabia and the UAE, as its shale gas boom creates export opportunities and Arabian Gulf countries seek to meet rising domestic gas needs. Saudi Arabia, the world's biggest oil exporter, is exploring for new gas supplies which are needed for power generation, industrial use and as feedstock for petrochemical projects.

Under the 20-year sale-and-purchase agreement, Aramco's unit would take five million tonnes per year of LNG off-take from Phase 1 of the Port Arthur LNG export project currently under development in the US state of Texas. Aramco would also take a 25 per cent equity investment in the first phase of the project, under the deal once finalised.

Port Arthur LNG is one of Sempra LNG’s five key LNG developments in North America and integral to the company’s plans to ramp up its delivery of clean natural gas to the global LNG market.

Earlier this month, the US Department of Energy authorised Port Arthur LNG to export domestically produced natural gas to countries that do not have a free trade agreement with the US.

Last month, Port Arthur LNG and its affiliates also received authorisation from the US Federal Energy Regulatory Commission to site, construct and operate the liquefaction export facility and related natural gas pipelines.

Once complete, Port Arthur LNG is expected to become one of the largest LNG export projects in North America, with two liquefaction trains, up to three LNG storage tanks and associated facilities aimed at enabling the export of approximately 11 mtpa of LNG over the long term, according to the statement.