Saudi Arabia and US cooperate in liquefied natural gas market
Saudi Arabia and the United States, two allied partners in both political and economic matters for decades, continue to deepen their collaboration.
In this case, the advance is in cooperation in the liquefied natural gas (LNG) market. In this regard, the Arab state oil company Saudi Aramco and the US energy company Sempra have signed an agreement to supply 5 million tonnes of LNG per year to the Port Arthur LNG Phase expansion project for a period of 20 years.
Port Arthur LNG is a facility in southeast Texas, United States, to liquefy and export natural gas, with direct access to the Gulf of Mexico.
The agreement includes Aramco's 25% equity stake in the second phase project, the two companies said in an official statement.
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 trains with a capacity of up to 13 million tonnes of LNG per year.
The trains are the liquefaction units that convert natural gas into LNG. Each train consists of equipment and processes that cool and condense the natural gas into its liquid form for storage and transportation.
"As a potential strategic partner in the Port Arthur LNG Phase 2 project, Aramco is well positioned to grow its gas portfolio to meet the growing global need for low-carbon energy sources," said Nasir Al Naimi, president of Aramco Upstream.
"This agreement is an important step in Aramco's strategy to become a leading global player in LNG," he said.
The US has suddenly become the world's leading LNG exporter, overtaking Qatar in 2023, driven by the abundance of shale gas reserves accessed through the fracking process.
"The planned expansion of Port Arthur LNG would help facilitate the broad distribution of US natural gas into global energy markets," said Jeffrey Martin, president and CEO of Sempra, as reported by The National.
Importance of the LNG market
Global LNG trade reached 404 million tonnes last year, up from 397 million tonnes in 2022, with supply shortages limiting growth, according to Shell's 2024 LNG outlook. It now aims to boost that supply capacity.
Global LNG demand is estimated to increase by more than 50% by 2040, driven by a growing shift from industrial coal to gas in China and the use of more LNG in South and Southeast Asian countries to support economic growth, experts say.
Liquefied natural gas (LNG) is natural gas that has been processed to be transported in liquid form. It is used to extract economic benefits from remote and isolated reserves, from which it is not economical to bring the gas to market directly either by pipeline or electricity generation. Natural gas is transported in a liquid state; this makes it cost-effective to transport, as the volume occupied under these conditions is much smaller than the volume it will occupy at the time of consumption. The form of transport is usually by means of specially adapted ships called LNG carriers.
Vision 2030 Programme
Saudi Arabia's commitment to liquefied natural gas has to do with its global strategy of the Vision 2030 programme, a plan focused on reducing national dependence on hydrocarbons, the most polluting source of energy and one with an expiry date according to various experts, through economic diversification.
This diversification has to do with investment in different sectors to generate profits and wealth outside the oil and coal markets. The Saudi kingdom intends to promote other sectors such as technology, tourism, finance, culture, etc., with a view to having an economy that does not depend solely on oil, the great source of national income for decades.