Saudi Arabia Negotiating to Buy U.S. Natural Gas From Sempra Energy – Smart Media Magazine

Saudi Arabia Negotiating to Buy U.S. Natural Gas From Sempra Energy

Saudi Arabia is planning to buy large volumes of American natural gas for the first time, signaling a new strategy for its state-owned company Saudi Aramco and the growing importance of the United States as an energy exporter.

Saudi Aramco has reached a preliminary agreement with Sempra Energy to buy five million metric tons of liquefied natural gas a year for 20 years, the companies said on Wednesday. The gas will be shipped from an export terminal that Sempra plans to build in Port Arthur, Tex.

The Saudi energy giant has previously indicated that it wants to make large investments in the United States, where the shale-drilling boom has produced a glut of cheap natural gas over the last decade. The United States has become one of the major exporters of natural gas in recent years, along with Qatar, Australia and Russia. Gas is increasingly replacing coal as a fuel for power plants around the world.

Qatar Petroleum, a competitor of Saudi Aramco’s, said in February that it was investing in a gas export terminal in Texas with Exxon Mobil.

Already a major oil exporter, Saudi Arabia appears to believe that investing in natural gas would strengthen its international clout and could help the kingdom move away from burning oil to generate electricity. That would allow the country to export more oil.

President Trump’s tariffs on Chinese imports have recently cast a pall over investments in new gas export terminals in the United States because China is a major importer of the fuel. Saudi Arabia’s interest in American gas could help ease some of those concerns.

“This is a signal of Aramco’s intent to become a global gas player,” said Giles Farrer, a research director at Wood Mackenzie, an energy consulting firm.

Noting Saudi Aramco’s considerable marketing operation, Mr. Farrer said the company could use Saudi Arabia’s diplomatic relationships to foster deals to resell some of the gas. Saudi Aramco recently began trading liquefied natural gas, selling its first cargo to India last month, and energy experts say the company is interested in buying gas in Russia and Australia. Purchasing gas in the United States would offer Saudi Aramco greater potential to sell to growing Latin American markets.

“We see significant opportunities in this market and we will continue to pursue strategic partnerships,” Amin Nasser, Saudi Aramco’s chief executive, said in a statement.

Saudi Arabia, which has the world’s sixth largest gas reserves, does not currently import or export gas. Gas bubbles up with Saudi oil and has typically been injected into oil fields to increase underground pressure and expand oil production.

But last year Saudi Aramco entered a deal with Halliburton to drill through shale to produce gas, which could be used to fuel Saudi electricity and as an input for its growing petrochemical industry.

Details of the agreement with Sempra still need to be negotiated, but the initial deal makes it more likely that Sempra will complete investment plans to build the terminal. Saudi Aramco intends to own a 25 percent equity stake.

The deal was first reported by The Wall Street Journal.

Sempra received final approval for the Port Arthur project from the Federal Energy Regulatory Commission last month.

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