Saudi Aramco considers stake in foreign LNG plant

Saudi Aramco is considering investing in LNG facilities outside the kingdom as global demand for LNG surges as the Russia-Ukraine crisis continues. The state energy company is in early discussions with LNG plant developers to take a stake and secure supply through an offtake agreement, according to people familiar with the matter.

LNG consumption is set to rise sharply in the coming years as Europe scrambles to replace Russia's pipeline gas, and countries such as China and India are expected to increase imports. Global LNG trade doubled to more than $450 billion last year, according to the International Energy Agency.

A person familiar with the matter said that Aramco is studying projects in the United States and Asia. Another person said the company's first choice was a facility that could easily ship the super-refrigerated fuel to Asia, the world's largest market. The company declined to comment.

Getting a stake in an LNG plant and a supply deal would help Aramco achieve its goal of diversifying away from oil and gas production and into the lucrative energy trading sector.

Shell said in a report last month that more investment in liquefaction projects was needed to avoid a widening LNG supply gap later this decade.

Aramco previously considered a foray into LNG in 2019 and considered buying a 25% stake in Sempra Energy's Port Arthur plant in Texas, US. But the company backed off as the coronavirus pandemic weighed on energy demand and hit its finances. A 20-year non-binding agreement for Aramco to sell LNG from Port Arthur expires in 2021.

Sempra said this week that it is finalizing partial financing of the project and hopes to make a final investment decision by the end of March.

Saudi Arabia has the world's largest natural gas reserves, although they are mainly used for the domestic market. Aramco is trying to change that, with plans to spend about $100 billion over the next decade to boost Saudi gas production. But it has no intention of producing LNG domestically. Instead, it will use the extra supply to meet growing local demand and export blue hydrogen, a fuel made by converting natural gas.