Aramco Follows UAE Into Rio Grande LNG Project in Texas

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Saudi Arabia sees liquefied natural gas (LNG) as an integral component of a cleaner and more secure energy future, an Aramco (Dhahran, Saudi Arabia) representative said after inking a supply deal for U.S. supplies.

Saudi Aramco on Thursday executed a non-binding heads of agreement for a 20-year sale and purchase agreement for the LNG that would come from the fourth train at the Rio Grande facility planned by NextDecade (NASDAQ:NEXT) (Houston) .

Both sides are working toward a binding agreement, which would hinge on a positive investment decision (FID) on Train 4.

"We expect LNG to play an important role in meeting the rising demand for secure and efficient energy," said Nasir al-Naimi, the president of upstream operations at Aramco.

Aramco would purchase 1.2 million metric tons per annum (mtpa), indexed to Henry Hub, the U.S. benchmark for the price of natural gas, assuming FID is realized. The Saudi giant is looking to increase its own natural gas production by 60% by 2030 as it shifts its focus away from crude oil.

The company has already awarded multiple contracts under its Master Gas System Phase III Expansion, which involves the installation of thousands of miles of natural gas pipelines across the country.

NextDecade, for its part, is building its Rio Grande facility near the Brownsville shipping channel on the Texas Gulf Coast. Moving ahead before U.S. President Joe Biden enacted a pause on new LNG facilities, it's already permitted for as much as 1.3 billion cubic feet (Bcf) of LNG exports per year.

NextDecade is planning FID on the fourth train at Rio Grande by the second half of the year. Engineering, procurement and construction contracts for a fifth train would follow the FID.

TotalEnergies SE (NYSE:TTE) (Courbevoie, France) already has offtake agreements associated with the volumes expected from the fourth train. The Aramco decision, meanwhile, follows the acquisition by the Abu Dhabi National Oil Company (ADNOC) of an 11.7% equity stake in the first liquefaction facility, or train, planned for Rio Grande.

That was ADNOC's first-ever investment in the United States.

Trains 1 and 2 are about 18% complete, in line with contractual guidelines. Of that, about 55% of the engineering work is finished, though only about 2% of actual construction is complete.

The United States is the world's leading exporter of LNG, a commodity that's seen a swell in interest since the outbreak of war in Ukraine in early 2022. Ukraine was once a key transit hub for Russian gas bound for Europe, but regional importers have turned to LNG to avoid the geopolitical risk associated with piped products.

Low natural gas prices in the U.S. market are expected to keep a lid on production gains, though the government is expecting exports of LNG to increase by about 16% next year to average 14 billion cubic feet--around 330 million metric tons--per day.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project and Plant databases can learn more from a detailed plant profile for Rio Grande, and click here for a list of related project reports.

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