Aramco ups gas game with US project in hot pursuit of shoo-in to global LNG club’s kingpins

Saudi Arabia’s energy heavyweight Aramco is taking steps to spread its liquefied natural gas (LNG) wings in the United States (U.S.) with non-binding heads of agreement (HoA) for equity and offtake from a planned expansion project related to a natural gas liquefaction and export terminal in Southeast Texas. Once formalized, the project will pave the way for the Saudi giant to come closer to joining the top ranks of the global LNG playground’s players.

After stepping into the global LNG market with a stake in MidOcean Energy, the Saudi player has worked on carving a spot for itself. To this end, the firm inked another HoA a few weeks ago to purchase 1.2 million tonnes per annum (mtpa) of LNG for 20 years on a free-on-board basis from NextDecade’s Train 4 of the Rio Grande LNG (RGLNG) project at the Port of Brownsville, Texas. 

In a bid to further boost its gas arsenal and position in the LNG arena, Aramco executed a non-binding HoA with Sempra, a North American energy infrastructure company, for a 20-year sale and purchase agreement (SPA) for LNG offtake of 5 million tonnes per annum from the Port Arthur LNG Phase 2 (PALNG2) natural gas liquefaction and export terminal expansion project in Southeast Texas with direct access to the Gulf of Mexico.

In addition, acquiring a stake in the project is not beyond the realms of possibility for the Saudi giant, as the HoA further contemplates the firm’s 25% participation in the project-level equity of Phase 2. Sempra and Aramco expect to execute a binding LNG SPA and definitive equity agreements with terms substantially equivalent to those in the HoA. However, both of these are subject to several conditions.

Nasir K. Al-Naimi, Aramco’s Upstream President, commented: “We are excited to take this next step into the LNG sector. As a potential strategic partner in the Port Arthur LNG Phase 2 project, Aramco is well placed to grow its gas portfolio with the aim of meeting the world’s growing need for lower-carbon sources of energy. This agreement is a major step in Aramco’s strategy to become a leading global LNG player.”

Following a final investment decision (FID) for Port Arthur LNG Phase 1 in March 2023, Bechtel Energy was hired to build the project, which is currently under construction and consists of trains 1 and 2, with a nameplate capacity of approximately 13 mtpa, as well as two LNG storage tanks and associated facilities. The start of commercial operations for trains 1 and 2 are expected in 2027 and 2028, respectively.

On the other hand, the Port Arthur LNG Phase 2 project is said to be a competitively positioned expansion of the site to include the addition of two trains capable of producing up to 13 mtpa. The Federal Energy Regulatory Commission (FERC) approved the permit for the expansion project with two liquefaction trains (trains 3 and 4) in September 2023. This project could lift the total liquefaction capacity of the facility to around 26 mtpa.

Jeffrey W. Martin, Sempra’s Chairman and CEO, remarked: “The planned expansion of Port Arthur LNG would help facilitate the broad distribution of U.S. natural gas across global energy markets. By expanding the global reach of the Port Arthur LNG facility, we have the opportunity to improve energy security, while providing a lower-carbon alternative to coal for electricity production.”

According to Sempra, the Port Arthur LNG project, which is expected to play an important role in enhancing global energy security and resilience, has the potential to expand to eight trains, positioning itself as one of the world’s most significant LNG export facilities.

The U.S. firm is actively advancing infrastructure projects within its flagship Port Arthur Energy Hub to address the rising demand for lower-carbon fuels and carbon intensity reduction, which includes the proposed Titan carbon sequestration project.