June 22, 2024
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OIL & GAS

Aramco in Talks with U.S. Firms for Major LNG Projects

Saudi Arabia’s state-owned oil giant, Aramco is in advanced discussions with U.S. firms Tellurian and NextDecade regarding two significant liquefied natural gas (LNG) projects.

These talks are part of Aramco’s strategic plan to expand its gas trading and production capabilities, as revealed by Reuters.

Aramco is negotiating with Tellurian to acquire a stake in its 27.6 million metric ton per annum (mtpa) Driftwood LNG plant located near Lake Charles, Louisiana.

This project has seen multiple site visits by Aramco officials this year, including one alongside executives from Australia’s Woodside, indicating serious interest and potential collaboration.

In parallel, Aramco is in talks with NextDecade for a long-term gas purchase agreement from the proposed fifth processing unit at its $18 billion Rio Grande facility. This partnership would further cement Aramco’s presence in the U.S. LNG market, which is poised for significant growth.

The U.S. has experienced a substantial boom in gas production over the past decade, with several major projects aiming to supply gas to Europe and Asia.

Competitors such as Qatar Energy have already made significant strides, making it imperative for Aramco to solidify its foothold in the global LNG market, projected to grow by 50% by 2030.

Aramco’s investment in the Driftwood plant could be pivotal for Tellurian, which has faced financial challenges, including a warning last fall about potential inability to cover operational and debt costs due to ongoing losses and dwindling cash reserves.

An Aramco investment could provide the necessary financial stability and momentum for the Driftwood project to proceed.

According to Reuters, Driftwood LNG project is exempt from President Biden’s pause on new LNG export projects as it already holds a Department of Energy permit to export to non-free-trade agreement countries.

Additionally, the U.S. Federal Energy Regulatory Commission recently granted Tellurian a three-year extension to complete construction of Driftwood.

Aramco’s ambition extends beyond these two projects. Last year, it made its first LNG investment abroad by purchasing a stake in U.S.-based MidOcean Energy for $500 million.

In March, reports indicated that Aramco was in discussions to invest in Sempra Infrastructure’s Port Arthur project in Texas. It is also competing with Shell to acquire assets from Temasek-owned LNG trading firm Pavilion Energy.

While Aramco is one of the world’s largest oil producers, its presence in the LNG market lags behind competitors like Qatar and the UAE’s ADNOC.

Expanding its LNG portfolio through strategic investments in the U.S. represents a significant opportunity to enhance its market position and leverage the anticipated growth in global LNG demand. Aramco, Tellurian, Woodside, and NextDecade have declined to comment on the ongoing discussions.

However, industry experts like Kaushal Ramesh, Rystad Energy’s vice president for LNG research, believe that an Aramco investment could be transformative for projects like Driftwood LNG.

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