Aramco, Sempra ink non-binding Port Arthur LNG deal

Saudi Arabia’s energy behemoth Aramco has signed a non-binding deal with US LNG exporter Sempra to buy liquefied natural gas from the second phase of the latter’s Port Arthur LNG export project in Texas.

Under the heads of agreement, Aramco aims to buy 5 million tonnes per annum of LNG for 20 years from the Port Arthur LNG Phase 2 expansion project.

The HoA further contemplates Aramco’s 25 project participation in the project-level equity of the second phase, according to a joint statement.

Sempra and Aramco expect to execute a binding LNG SPA and definitive equity agreements with terms substantially equivalent to those in the HoA, with the SPA and equity agreements subject to a number of conditions, the statement said.

Port Arthur LNG

Sempra Infrastructure, a unit of Sempra, took a final investment decision in March last year for the first phase of its Port Arthur LNG export project.

The first phase of the project is fully subscribed with 10.5 Mtpa under binding long-term agreements and Sempra Infrastructure entered into long-term agreements with each of ConocoPhillips, Ineos, Engie, RWE, and PKN Orlen.

Besides a 20-year LNG SPA for 5 mtpa of LNG, US energy giant ConocoPhillips is a shareholder in the project with a 30 percent stake.

Last year, Sempra Infrastructure also completed the sale of a 42 percent non-controlling interest in its Port Arthur LNG Phase 1 project to compatriot private equity firm KKR.

Sempra Infrastructure has a controlling 28 percent indirect interest in Phase 1 at the project level.

As per the second phase, Sempra Infrastructure won approval last year from the US FERC for the proposed Phase 2 project that includes the addition of two liquefaction trains capable of producing up to 13 mtpa of LNG.

However, the Department of Energy still needs to approve Sempra Infrastructure’s non-FTA application for the second phase of the project.

The Biden administration said in January it will pause pending decisions on exports of LNG to non-FTA countries until DOE can update the underlying analyses for authorizations.

The development of the proposed project would increase the total liquefaction capacity of the facility from some 13 mtpa to about 26 mtpa.

The proposed project would also include an additional LNG storage tank and marine berth and would benefit from some of the common facilities currently under construction that were previously approved as part of the Phase 1 permitting process.

Sempra says that Port Arthur LNG has potential to expand to a total of eight trains, which would position it as one of the world’s “most significant LNG export facilities”.

Aramco’s LNG expansion

This is the second US LNG deal for Aramco this month after it signed a non-binding deal to buy LNG from NextDecade’s Rio Grande LNG export terminal in Texas.

Under the terms of this heads of agreement, Aramco expects to buy 1.2 mtpa of LNG for 20 years from the fourth Rio Grande LNG train on a free on board basis, at a price indexed to Henry Hub.

Aramco’s CEO Amin Nasser said in March that the company is in talks to further invest in LNG, including in US LNG projects.

Saudi Arabia’s Aramco made its first international investment in LNG last year to capitalize on rising LNG demand.

In September, Aramco agreed to buy a minority stake in MidOcean Energy, the LNG unit of US-based energy investor EIG for $500 million.

The agreement includes the option for Aramco to increase its shareholding and associated rights in MidOcean in the future.

MidOcean is heavily investing in LNG and it recently completed its previously announced purchase of a 20 percent stake in LNG terminal operator Peru LNG from a unit of South Korean conglomerate SK.

The completion of this transaction follows MidOcean’s announcement of a strategic investment by Japan’s Mitsubishi Corporation and the completion of its acquisition of Tokyo Gas Co’s interests in a portfolio of Australian integrated LNG projects.

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