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Saudi Aramco to buy liquid natural gas from US company

AP  |  New York 

Saudi Arabia's state owned company will begin buying liquid from a US company under a 20 year agreement, reflecting the shifting dynamics in the world's markets.

Saudi Arabian Co., also known as Aramco, said Wednesday it would buy 5 million tons of liquid per year from Sempra Energy, based in Aramco also will make a 25% equity investment in an LNG export facility under development in Port Arthur, Texas, as part of the deal.

The agreement is a major step forward in Aramco's long-term strategy to become a global LNG player, said Amin Nasser, the company's "With global demand for LNG expected to grow by around 4% per year ... we see significant opportunities in this market and we will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG," Nasser said in a release.

The US fracking boom over the last decade led to an abundance of natural gas, and the U.S. quickly became one of the world's top exporters of liquid after it began exporting the fuel in 2016. Its exports of LNG ranked fourth largest in the world in 2018 behind Qatar, and Malaysia, according to the U.S. Information Administration.

The facility is one of Sempra's five LNG development opportunities in North America, and it received authorization from the Federal Regulatory Commission to construct and operate the facility and related pipelines last month.

"At Sempra Energy, we are developing one of the largest LNG export infrastructure portfolios in North America, with an eye towards connecting millions of consumers to cleaner, more reliable energy sources," said Jeff Martin, of Sempra, in a statement. Partnering with Aramco will help develop the facility and enable the export of American natural gas to global markets, Martin said.

The US has been a net exporter of natural gas every month for the past year, fueled by an increase in exports of The largest markets for U.S. exports of in 2018 were South Korea, and Japan, according to the E.I.A.

The purchased by will most likely be sold on the spot market in and Latin America, said Ira Joseph, at S&P Global Platts.

"This is by far and away the Saudis' largest investment ever in LNG," Joseph said. "The size of the deal, the volume of the LNG, is very out of step with size of LNG contracts that have been signed recently."

Companies such as Sempra have been looking for investors for LNG projects, but finding buyers to sign long-term deals has been difficult. Liquid natural gas is mostly used for power generation, and have made the market for for power generation more competitive, Joseph said.

burns a lot of in its electric power sector, and the move could help the country diversify its power mix and potentially export that it might have burned, said Jonathan Aronson, at

"If they want to play in the global energy markets, this is a way to get a foothold on the natural gas side, and U.S. natural gas is some of the in the world," Aronson said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, May 23 2019. 11:56 IST