Pitts: LNG Sector, Beware! Aramco is Coming

For 91 years, Saudi Arabia’s Aramco has best been known as an oil producer. But changing times and energy priorities—let’s collectively call them the energy transition—have prompted Aramco to venture into new spaces. That as the energy giant stays true to its first calling: oil.

It’s no secret that Saudi Arabia is home to at least 297.5 Bbbl of proved reserves, second only to Venezuela with 303.8 Bbbl, according to the most recent data from the Statistical Review of World Energy.

But don’t confuse the Kingdom’s Aramco with socialist Venezuela’s Petróleos de Venezuela (PDVSA). The state-owned companies are at the opposite ends of the production and financial spectrums, to say the least. Aramco continues to push its weight around inside and outside OPEC, and is one the world’s most profitable companies.

Aramco’s corporate strategy supports the energy trilemma—security, sustainability and affordability—as well as an orderly and balanced energy transition.

To that end, Aramco has set an ambition to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions (GHG) across its wholly owned operated assets by 2050. Aramco’s plan to get there will include technological innovation and the addition of lower-carbon energy to its portfolio.

Enter LNG.

On a mission

In September 2023, Aramco made its initial foray into the LNG space with its $500 million acquisition of a strategic minority stake in MidOcean Energy, a company formed and managed by EIG Global Energy Partners. MidOcean is in the process of buying interests in four Australian LNG projects as part of its strategy to create a diversified global LNG business.

Aramco President and CEO Amin H. Nasser said in the company’s 2023 annual report that the acquisition gave the company a strategic position in a commodity that it anticipated “will experience strong demand-led growth as the global energy transition plays out.” Nasser said Aramco viewed LNG as a complementary asset to its portfolio since gas is also “a vital fuel and feedstock for various industries.”

Since the MidOcean acquisition, Aramco has been on a mission to develop an integrated global LNG business, which it will pursue either through direct investments, joint venture opportunities or both.

In June 2024, Aramco signed non-binding Heads of Agreement (HOA) deals related to two U.S. LNG projects located in Texas: Port Arthur LNG Phase 2 and Rio Grande LNG.

Aramco and Sempra signed an HOA for a 20-year sale and purchase agreement for LNG offtake of 5 million tonnes per annum (mtpa) from Port Arthur LNG Phase 2. Importantly, the HOA further contemplates Aramco’s 25% participation in the project-level equity of Phase 2.

Aramco and NextDecade signed an HOA for 20-year sale and purchase agreement for offtake of 1.2 mtpa from Train 4 of Rio Grande LNG in Brownsville, Texas.

And those are the small deals.

Broad ambition, deep pockets

Aramco has reportedly been in talks with NextDecade regarding its 27 mtpa Rio Grande project as well as Tellurian, which continues efforts to develop its 27.6 mtpa Driftwood LNG project.

Reuters, citing unidentified sources, reported Aramco has visited the Driftwood site in Lake Charles, Louisiana, three times this year including one trip with executives from Australia’s Woodside Energy.

Aramco was reportedly competing with Shell to acquire the assets of Temasek-owned LNG trading firm Pavilion Energy, according to Reuters. But this time Shell came out on top.

Aramco’s ambition to grow within the LNG space isn’t far-fetched. The company’s significant cash flow ($22.8 billion in the first quarter) is available to invest in LNG projects. And with some $65.1 billion in cash and cash equivalents at the end of first-quarter 2024, Aramco is a company to watch in the global LNG space in general and the U.S. in particular, with its long list of LNG projects waiting to move forward.

It might be time for international oil companies active in LNG, such as TotalEnergies and Shell, to look over their shoulders. A bigger spender has entered the space.