Saudi Aramco signs 20-year LNG supply deal with US energy firm Sempra

The agreement is a 'major step in Aramco’s strategy to become a leading global LNG player', executive says

An oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. Reuters

Top crude exporting company, Saudi Aramco, has signed a non-binding agreement with US energy company Sempra for 5 million tonnes per annum of liquefied natural gas from the Port Arthur LNG Phase two expansion project for a period of 20 years.

The deal contemplates Aramco's 25 per cent participation in the project-level equity of the second phase, the companies said in a statement on Wednesday.

Port Arthur LNG is a facility in south-east Texas for liquefying and exporting natural gas, with direct access to the Gulf of Mexico.

The first phase of the project, currently under construction, includes two trains, along with LNG storage tanks and related infrastructure. The second phase involves the addition of two more trains capable of producing up to 13 million tonnes per annum of LNG.

Trains are the liquefaction units that convert natural gas into LNG. Each train consists of equipment and processes that cool and condense natural gas into its liquid form for storage and transport.

“As a potential strategic partner in the Port Arthur LNG Phase 2 project, Aramco is well placed to grow its gas portfolio with the aim of meeting the world’s growing need for lower-carbon sources of energy,” said Nasir Al Naimi, Aramco's upstream president.

“This agreement is a major step in Aramco’s strategy to become a leading global LNG player.”

The US has quickly become the world's leading LNG exporter, surpassing Qatar in 2023, fuelled by the abundance of shale gas reserves unlocked by advancements in hydraulic fracturing, known as fracking.

“The planned expansion of Port Arthur LNG would help facilitate the broad distribution of US natural gas across global energy markets,” said Jeffrey Martin, Sempra chairman and chief executive.

Saudi Aramco's venture into LNG aligns with Asian emerging economies' efforts to boost natural gas usage while reducing reliance on heavily polluting coal amid an expected rise in electricity demand.

Earlier this month, Aramco signed an initial agreement to offtake 1.2 million tonnes per year of LNG for 20 years from NextDecade’s Rio Grande LNG export project in Texas.

Global trade in LNG reached 404 million tonnes last year – up from 397 million tonnes in 2022 – with tight supplies constraining growth, according to Shell's 2024 LNG outlook.

Global LNG demand is estimated to rise by more than 50 per cent by 2040, driven by increasing industrial coal-to-gas switching in China and the use of more LNG in South Asian and South-East Asian countries to support economic growth, the February report said.