Aramco considers LNG exports as reserves grow

Aramco

• 15 Tcf of LNG added to reserves
• Blue hydrogen plans on back burner
• Gas production growth target raised

Saudi Aramco is looking at building a liquefied natural gas (LNG) export business, as its growing natural gas production looks likely to exceed its domestic needs.

The energy giant is optimistic about its gas output. In the first quarter of the year, it announced the addition of 15 trillion cubic feet (Tcf) to its proven raw gas reserves in the Jafurah basin unconventional development, the kingdom’s biggest gas source.

The $100 billion-plus project is scheduled to start operations in 2025.

---

---

The amount of gas Aramco is finding and developing domestically “gives us optionality going forward” to start exports, the company’s chief finance officer, Zaid Al Murshed, told investors this month during the company’s first-quarter results presentation.

He added that LNG may replace blue hydrogen and ammonia development plans, which remain the country’s priority.

“We consider LNG. It depends on offtake availability, which we continue to work on,” Al Murshed said. “If it doesn’t happen, LNG is an option.”

The company has raised its natural gas production growth target by 2030 to more than 60 percent over 2021 levels.

• Aramco increases dividend payouts despite falling profit

• Aramco to focus all LNG efforts on overseas projects

• Aramco and Adnoc to invest in US LNG projects

Aramco awarded engineering, procurement, and construction contracts this year for its Fadhili gas plant expansion in the Eastern Province. The project will boost the plant’s processing capacity by 1.5 billion cubic feet per day, taking it to 4 billion cubic feet per day by 2027.

Other projects include expanding the Hawiyah gas plant and commissioning plants at Tanajib and Khursaniyah.

Alexandre Araman, principal analyst for Middle East upstream at Wood Mackenzie, told AGBI that after domestic gas demand is fully met, there is scope for additional gas to be exported.

He also believed that Aramco would not commit to major blue hydrogen investments without firm contracts with buyers for a set volume of gas at an agreed price, arrangements known as offtake agreements, and may consider LNG exports as an alternative.

In the first quarter of 2023 results, the company estimated the cost of blue hydrogen – hydrogen manufactured by natural gas reforming coupled with carbon capture and storage – delivered into end-markets at $250 per barrel of oil equivalent, making LNG a more attractive option.

Aramco completed this year the $500 million acquisition of a minority stake in MidOcean Energy, an LNG company in the US formed by EIG Global Energy Partners, the American investment firm.

“It will give us exposure to selected LNG projects,” Al Murshed said.

The company is holding discussions about investing in the second phase of Sempra Infrastructure’s Port Arthur LNG project in Texas

Aramco’s president of upstream, Nasir Al-Naim said on the company’s website: “The LNG market is positioned for structural, long-term growth, and MidOcean Energy is well equipped to capitalise on rising LNG demand, particularly in Asia and Europe, where LNG import infrastructure continues to expand .

 Al Murshed told investors: “Globally, we are interested in offtake and trading. We would like to build this portfolio gradually because we are more focussed on the quality of the investments. We are proceeding carefully.”