Saudi Arabia has set up a deal to purchase U.S. liquefied natural gas from Sempra Energy, a new strategic direction for Riyadh, as the country seeks to establish a footprint in the growing global market for the fuel, the Wall Street Journal reported.
Saudi Arabian Oil Co., known as Aramco, plans to purchase gas from San Diego-based Sempra Energy’s Port Arthur project in Texas, the companies said Wednesday, confirming an earlier Wall Street Journal report.
The two companies said their respective subsidiaries, Aramco Services and Sempra LNG, have signed a “heads of agreement,” which anticipates the negotiation and finalization of a definitive 20-year sale-and-purchase agreement covering 5 million metric tons each year from the Port Arthur LNG export project under development.
The agreement also includes the planned negotiation and finalization of a 25 percent equity investment in Phase 1 of the Port Arthur project, Aramco and Sempra said in a news release.
Aramco had been expected to close a deal to purchase LNG after holding talks with several U.S. producers and a Russian producer in recent months. However, it isn’t clear whether the gas will be used to power the kingdom’s local economy, or sold on to international buyers.
The deal demonstrates how the U.S. energy boom is dramatically changing global trade. Historically, Saudi Arabia has been a major supplier of oil to the U.S. But with the evolution of shale drilling in the U.S., the Energy Department predicts America will become a net energy exporter next year.
Shale has catapulted the U.S. to being one of the top shippers of LNG, with the Energy Information Administration forecasting it will become the world’s third-largest exporter this year.
Aramco has signaled that it intends to boost its gas investments by tens of billions of dollars, domestically and internationally, following similar moves by major energy companies. Royal Dutch Shell PLC and BP PLC are reorienting their energy portfolios toward gas as demand growth for it is expected to outpace oil.
Saudi Arabia, the world’s largest oil exporter, is expanding beyond crude as it prepares for a time when demand stagnates as the world shifts towards cleaner fuels, the Financial Times adds.
Aramco is already planning billions of dollars worth of investments in its Port Arthur refinery, the largest in the U.S.
The kingdom is boosting domestic exploration and production of both conventional gas resources and those from shale fields, to feed into power generation as well as to fuel the petrochemicals sector.