Aramco signs non-binding LNG deal with Sempra
Energy giant Saudi Aramco has signed a 20-year non-binding heads of agreement (HoA) with US-based energy company Sempra to offtake 5mn tonnes/year of LNG from the Port Arthur LNG Phase 2 expansion project, the companies announced on June 26. The HoA also contemplates Aramco's 25% participation in the project-level equity of Phase 2.
The parties aim to execute a binding LNG sales and purchase agreement (SPA) and definitive equity agreements with terms substantially equivalent to those in the HoA. These agreements will be subject to various conditions.
Nasir K. Al-Naimi, Aramco upstream president, stated, "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. This agreement is a major step in Aramco's strategy to become a leading global LNG player."
Port Arthur LNG is a natural gas liquefaction and export terminal in Southeast Texas with direct access to the Gulf of Mexico. The 13mn tonnes/year Phase 1 is already under construction following a final investment decision (FID) in March 2023. Phase 2 would also add an additional LNG storage tank to the two tanks in Phase 1 and a marine berth. The US Federal Energy Regulatory Commission (FERC) approved the second phase in September 2023.
"The planned expansion of Port Arthur LNG would help facilitate the broad distribution of US natural gas across global energy markets," Jeffrey W. Martin, Sempra CEO, commented.
This agreement marks Saudi Aramco's second LNG HoA this month. The Saudi state-backed company recently signed a non-binding agreement with another US LNG developer, NextDecade, to purchase 1.2mn tonnes/year of LNG for 20 years on a free on board basis, at a price indexed to Henry Hub.
In September of last year, Saudi Aramco bought a minority stake in MidOcean Energy, an LNG firm backed by US-based investor EIG.
State-backed Saudi Aramco is also building its own gas capabilities. In 2022, the company announced it would bring on stream the $100bn Jafurah onshore unconventional gas project in 2025. Recently, it announced an increase in reserves at the Jafurah.