Major Deals Impacting the Global LNG Market

The latest agreements and regulatory decisions in the LNG sector are set to reshape the global energy landscape. Key players like Saudi Aramco, Sempra, and the U.S. government are at the forefront of these developments.

Published June 28, 2024 - 00:06am

5 minutes read
Saudi Arabia
United States
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Energy regulators voted Thursday to approve construction of a massive liquified natural gas (LNG) export terminal in Louisiana, paving the way for a larger fight between environmental advocates and fossil fuel groups as the project makes its way to the Energy Department for a final decision.

Members of the three-person Federal Energy Regulatory Commission (FERC) voted 2-1 Thursday to approve the Calcasieu Pass 2 LNG export terminal on Louisiana's Gulf Coast. The project, though, is still in regulatory limbo because of the Biden administration's pause on new DOE authorizations for LNG exports.

The $10 billion LNG terminal is owned by Venture Global and is expected to have an expected export capacity of 20 million tons per year -- giving the U.S. a major boost as it looks to help the European Union reduce its reliance on Russian fossil fuels.

The company said it has already inked LNG supply deals with buyers in the EU and in Ukraine.

The FERC vote comes as CP2 has also become central to the broader fight over energy policy. The U.S. has risen to become the world's No. 1 exporter of LNG, with its capacity projected to double by the end of the decade, according to estimates from the Energy Information Administration.

The Energy Department made waves when in January when it announced it would temporarily pause approval of new LNG export terminals, which it said will allow it to consider the environmental and climate effects of the facilities, along with economic and national security considerations.

Democrats had long pushed for the pause, and in November, a group of 60 lawmakers led by Sen. Jeff Merkley (D-OR) urged DOE to update how it determines whether LNG export projects are in the public interest, voicing concerns that the current method of approval does not fully or accurately consider how LNG exports negatively impact the climate, environmental justice communities, or increase domestic energy prices.

Biden administration officials have indicated the pause will end in the beginning of 2025.

Meanwhile, Saudi Aramco has agreed with US energy company Sempra to purchase 5 million tons of liquefied natural gas (LNG) annually. The negotiation covers a binding purchase and sale agreement as well as a definitive equity participation agreement on substantially equivalent terms.

Subsidiaries of Saudi Aramco and Sempra signed a non-binding agreement. Under this agreement, the Saudi company will receive 5 million tons of LNG annually for 20 years from the second phase of the Port Arthur LNG project in Texas. The agreement also provides for Saudi Aramco to participate in the equity capital of the second phase of the project in the amount of 25%.

The Port Arthur LNG project is one of the largest LNG export facilities in North America. It includes natural gas liquefaction facilities and an export terminal on the Gulf Coast. The second phase is designed to produce approximately 13 million tons of LNG per year.

Saudi Aramco had earlier signed a non-binding agreement to enter into a 20-year LNG sales and purchase agreement with US corporation NextDecade. Saudi Aramco is expected to receive 1.2 million tons of LNG per year from the fourth production train of the Rio Grande LNG project in Texas.

Additionally, subsidiaries of Saudi Arabian Oil Company (Aramco) and Sempra have implemented a non-binding heads of agreement (HoA). The HoA covers a 20-year sale and purchase agreement (SPA) for LNG offtake of five million tonnes per annum (MTPA) from the Port Arthur LNG Phase 2 expansion project.

The agreement also includes Aramco's intention to acquire a 25% stake in the equity of Phase 2 of the project. The parties anticipate finalizing a binding LNG sale and purchase agreement (SPA) and definitive equity agreements that mirror the terms outlined in the HoA.

Nasir K. Al-Naimi, Upstream President at Aramco, said that 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. Jeffrey W. Martin, Chairman and CEO of Sempra, stated that the planned expansion of Port Arthur LNG would help facilitate the broad distribution of US natural gas across global energy markets. By expanding the global reach of the Port Arthur LNG facility, we have the opportunity to improve energy security, while providing a lower-carbon alternative to coal for electricity production, Martin added.

Port Arthur LNG, an export terminal in Southeast Texas, is constructing Phase 1 with two trains and two storage tanks. Phase 2 will add up to two more trains, increasing capacity to 13 million tonnes per year. As part of Sempra Infrastructure's Port Arthur Energy Hub, the facility could expand to eight trains, enhancing global energy security.

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