Saudi Arabia boosts its LNG clout

Saudi Aramco has moved closer to its first international LNG investment, agreeing to buy 25% of the Sempra LNG export project at Port Arthur, Texas. It will offtake 5 million tonnes per year, 45% of the first phase output. It has previously held discussions to buy 10% of Russia’s Arctic-2 LNG project, and in April started to trade LNG, delivering its first cargo, to India.

Saudi Arabia has ambitious plans for gas on a domestic and international stage. Marketed production of 11.13 billion cubic feet per day in 2017 is intended to rise to 15.5 Bcf/d in 2020 and 20 Bcf/d in 2026.Aramco CEO Amin Nasser has set a target of 3 Bcf/d of unconventional (shale and tight) gas by 2030. This compares with Aramco’s anticipation of demand of 14.6 Bcf/d by 2030, which would imply substantial potential for exports.

However, for now, it might require LNG imports to enable it to shift away from oil-burning for power generation. The country currently has no LNG import facilities, but could install them on the west (Red Sea) coast, which has little connectivity to the national gas network. There has also been recent talk of linking Saudi Arabia, the UAE and Oman with gas pipelines (it would also make sense to add Bahrain, which is about to commence LNG imports).  

To achieve its ambitions of being a peer of the international super-major oil companies, compete with regional political rival Qatar, and hedge against the possibility of declining oil demand in the longer term, Aramco needs an international gas business. The US, Russian and possible other ventures would be key to achieving that.

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