Saudi oil giant Aramco is engaged in talks with two U.S. firms, Tellurian and NextDecade, regarding separate liquefied natural gas (LNG) projects as the Saudi company aims to bolster its gas trading and production capabilities, according to three sources familiar with the discussions.
In the booming U.S. gas production landscape, where oil majors and Aramco’s rivals like Qatar Energy are vying to establish multiple projects to export gas to Europe and Asia, Aramco is exploring opportunities to strengthen its position.
The state energy firm is in negotiations with Tellurian to acquire a stake in its 27.6 million metric ton per annum (mtpa) Driftwood LNG plant near Lake Charles, Louisiana. Aramco officials have visited the site three times this year, with one of those visits including executives from Australia’s Woodside, as per the sources who requested anonymity due to the confidential nature of the talks.
Aramco is in discussions with U.S. LNG firm NextDecade for a long-term gas purchase agreement from a proposed fifth processing unit at its USD18 billion Rio Grande facility.
While Aramco declined to comment, Tellurian stated that it does not comment on market speculation. Woodside acknowledged its continuous assessment of organic and inorganic growth opportunities but refrained from further comment. NextDecade did not immediately respond to Reuters’ request for comment.
Aramco’s pursuit of these opportunities aligns with its strategy to strengthen its position in the LNG market, which is projected to grow globally by 50 per cent by 2030, with a particular focus on the United States, where LNG capacity is expected to nearly double over the next four years.
Tellurian has invested significant resources, spanning years and hundreds of millions of dollars, in its efforts to finance and construct the Driftwood plant. Last fall, the company warned investors about potential challenges in covering operating and debt costs within a year due to continued losses and dwindling cash reserves.
According to Kaushal Ramesh, Rystad Energy’s vice president for LNG research, an Aramco investment could provide the much-needed turnaround for the Driftwood LNG project.
The Driftwood project is not affected by President Biden’s pause on LNG export projects, as it already holds a Department of Energy permit to export the proposed plant’s super-chilled gas to countries without free-trade agreements with the U.S.
In February, the U.S. Federal Energy Regulatory Commission granted Tellurian a three-year permit extension to complete the construction of Driftwood.
Aramco, one of the world’s largest oil producers and the top exporter, pumps nearly 10 per cent of the global crude supply, highlighting the significance of its potential involvement in these LNG projects.
Despite its status as a major oil producer, Aramco’s presence in the LNG market is relatively small compared to its neighboring country Qatar. The United Arab Emirates’ national oil company, ADNOC, has a more significant presence in the LNG sector.
Aramco made its first foray into the global LNG market last year when it acquired a stake in U.S.-based MidOcean Energy for USD 500 million, marking its initial investment in the LNG industry abroad.
In March, Reuters reported that Aramco was engaged in negotiations to invest in Sempra Infrastructure’s Port Arthur project in Texas, further expanding its LNG portfolio.
Aramco is actively competing with Shell to acquire the assets of Pavilion Energy, an LNG trading firm owned by Singapore’s Temasek Holdings, as it seeks to strengthen its position in the rapidly growing LNG market.
While Aramco is a dominant player in the oil industry, these recent developments and negotiations highlight the company’s strategic efforts to diversify its energy portfolio and establish a more substantial presence in the LNG sector, both domestically and internationally.