Saudis to Buy U.S. Gas in Sign of Shift In Energy Market -- WSJ
May 22 2019 - 3:02AM
Dow Jones News
By Sarah McFarlane, Summer Said and Timothy Puko
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 22, 2019).
Saudi Arabia has agreed to purchase U.S. liquefied natural gas
from Sempra Energy, a new strategic direction for the kingdom as it
seeks to establish a footprint in the growing global market for the
fuel.
Saudi Arabian Oil Co., known as Aramco, plans to purchase gas
from San Diego-based Sempra Energy's Port Arthur project in Texas,
people familiar with the matter said.
The financial terms of the deal couldn't be determined, and it
wasn't clear whether Aramco would also take an equity stake in the
project, the people said.
Aramco had been expected to close a deal to purchase LNG after
holding talks with several U.S. producers and a Russian producer in
recent months. It isn't clear whether the gas will be used to power
the kingdom's local economy, or sold on to international
buyers.
Aramco didn't immediately respond to a request for comment made
outside business hours. Sempra didn't immediately respond to
requests for comment.
The deal demonstrates how the U.S. energy boom is dramatically
changing global trade. Historically, Saudi Arabia has been a major
supplier of oil to the U.S. But with the evolution of shale
drilling in the U.S., the Energy Department predicts America will
become a net energy exporter next year.
Shale has catapulted the U.S. to being one of the top shippers
of LNG, with the Energy Information Administration forecasting it
will become the world's third-largest exporter in 2019.
Aramco has signaled that it intends to boost its gas investments
by tens of billions of dollars, both domestically and
internationally, following similar moves by energy majors.
Companies including Royal Dutch Shell PLC and BP PLC are
reorienting their energy portfolios toward gas as demand growth for
it is expected to outpace oil.
Aramco doesn't produce any oil and gas abroad, and while the
kingdom's own gas reserves are some of the largest in the world,
they are hard to extract and high in sulfur, making them more
expensive to process.
"The cheapest gas is in Russia, the U.S. and Qatar," said
Thierry Bros, senior research fellow at the Oxford Institute for
Energy Studies, adding that if it had been economic and
competitive, Saudi Arabia would have exported its own gas years
ago.
Saudi Arabia currently burns some of its oil for power
generation, reducing what could otherwise be exported, and has
plans to boost domestic gas output to address this.
"The logical economic choice would be to burn gas at home
because it is lower cost and cleaner, and export the liquids," said
Christopher Gonclaves, managing director of energy at U.S.
consulting firm Berkeley Research Group LLC.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com, Summer Said
at summer.said@wsj.com and Timothy Puko at tim.puko@wsj.com
(END) Dow Jones Newswires
May 22, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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