Saudi Aramco and Abu Dhabi National Oil Company (ADNOC), prominent Gulf oil giants, are currently engaged in negotiations to invest in U.S. liquefied natural gas (LNG) projects, positioning themselves in the competitive super-chilled gas market alongside oil majors and regional competitor Qatar, according to informed sources.
With the global demand for LNG projected to surge by 50% by 2030, both energy behemoths are leveraging their fossil fuel reserves and eyeing opportunities in the United States, which has emerged as the leading LNG exporter globally, particularly to European markets.
Sources revealed that Saudi Aramco is exploring investment prospects in phase 2 of Sempra Infrastructure’s Port Arthur LNG project in Texas, a proposed expansion beyond the existing operational first phase. Meanwhile, state-owned ADNOC is in discussions with U.S. LNG firm NextDecade regarding offtake arrangements from a planned fourth processing unit at the $18 billion Rio Grande LNG export facility.
When approached for comments, Aramco and ADNOC refrained from providing official statements. Sempra Infrastructure stated its policy of not commenting on commercial matters related to projects under development, while NextDecade declined to address market speculations.
The U.S. LNG capacity is poised to nearly double over the next four years; however, several U.S. LNG project developers have encountered financial challenges in advancing their proposed export terminals due to heightened investor expectations and escalating regulatory pressures emphasizing environmental, social, and governance (ESG) considerations.
Kaushal Ramesh, Vice President for LNG Research at Rystad Energy, emphasized the importance of alternative financing avenues for U.S. projects if ESG-focused banks are reluctant to provide funding.
Amid mounting pressure from climate activists, U.S. President Joe Biden implemented a pause on approvals for pending and future applications to export LNG from new projects in January.
The nature of discussions between the Gulf oil giants and U.S. LNG projects remains unclear, whether they involve equity stakes, sale and purchase agreements (SPA), or a combination of both.
Sources indicated that Aramco is exploring the acquisition of a portion or all volumes from one of the two liquefaction units at Port Arthur’s second phase, each capable of producing up to 13.5 million tonnes per annum (mtpa).
While Saudi Aramco is striving to expand its global LNG presence, ADNOC already has a foothold in the LNG market, positioning both companies in competition with Qatar, a key global exporter of LNG.
QatarEnergy recently unveiled expansion plans aiming to secure a substantial share of the global LNG market by 2030, further intensifying competition in the sector.
Ramesh highlighted the potential for Aramco and ADNOC to increase their involvement in the LNG market, emphasizing their capacity to invest in promising projects.
In a separate development on Tuesday, sources disclosed that Aramco, along with Shell and other companies, has been shortlisted for the potential acquisition of most assets of LNG trading firm Pavilion Energy, signaling a strategic move to bolster its LNG business.
Felix Booth, Head of LNG at energy intelligence firm Vortexa, emphasized the significance of such transactions in building a comprehensive global LNG portfolio, potentially linked to procurement from U.S. Gulf Coast suppliers in the near future.