Qatar Petroleum, Saudi Aramco address supply, demand
Some Gulf Coast projects have faced commercial challenges
Houston — Qatar Petroleum's confidence in long-term contracts and Saudi Aramco's robust demand outlook expressed March 2 were positive signs for US LNG producers that have struggled to build sufficient commercial support to sanction the addition of new liquefaction capacity.
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Register NowThe comments from a major LNG exporter and an oil giant with big gas import ambitions during the annual CERAWeek by IHS Markit conference reflect the impact that supply disruptions and extreme price volatility had on the global market in 2020.
There was also a renewed sense of optimism from executives for both companies about the role that natural gas will play in the global energy transition, even amid concerns about shale emissions. Several US Gulf Coast LNG export terminal developers are either working with or courting QP and Aramco to get their projects off the ground.
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"I don't think that in the conventional way of thinking about commodities that LNG today can be considered a commodity," Saad al-Kaab i, the CEO of Qatar Petroleum and the minister of state for energy affairs for Qatar, said at the conference.
With oil, he said, storage is easy, spot deliveries are abundant, and the product doesn't need to be refrigerated. LNG markets showed in recent months how impactful a couple of trains shutting down can have on global supplies and prices.
Most new liquefaction projects cannot go forward without long-term contracts. Even QP has signed a few long-term contracts recently to support its export expansion plans, and it is talking to counterparties about more, al-Kaabi said.
"It's a more difficult market, a more expensive market," he said. "It's sort of a big boy game."
Qatar Petroleum is the majority owner of the Golden Pass LNG terminal in Texas with partner ExxonMobil. The site has an authorized export capacity of up to 18.1 million mt/year. The $10 billion project is expected to start up in 2024.
While al-Kaabi didn't address Golden Pass or any other interest in US LNG development, he did say that globally more gas is "needed and it is needed for a much longer period."
After Saudi Aramco's IPO in late 2019, US LNG export developers stepped up their courtship of the state-owned oil giant as a coveted potential investor in their projects. Among them: Sempra Energy, which is seeking commercial support for its proposed Port Arthur LNG project in Texas, and Tellurian, which has proposed the Driftwood LNG project in Louisiana.
Talks with the Saudis largely stalled after the coronavirus pandemic took hold in early 2020.
The hope for US developers is that talks will pick up in the months ahead. Saudi Aramco has yet to finalize a preliminary agreement to take a 25% stake in Port Arthur LNG. Tellurian has also had talks with Aramco about a potential equity partnership in Driftwood LNG.
During a panel discussion at CERAWeek, Saudi Aramco CEO Amin Nasser reiterated that gas is a major part of his company's growth strategy.
"Our view is that gas still has better credentials over other fuels, and it will grow significantly in a number of sectors, especially for power generation and for industrial and commercial use," Nasser said.
Growth ambitions
Aramco had vowed to invest as much as $160 billion into growth in the global natural gas sector over the next decade, with a significant portion to be devoted for LNG projects outside of the Middle East.
Aramco sees natural gas as an important baseload power source to support a broader deployment of renewables, and as a potential resource for hydrogen production. By 2030, Saudi Arabia expects natural gas-fired power to account for half of its electricity grid and renewables to account for the other half, Nasser said.
At the time that Sempra and Aramco announced their preliminary deal, Nasser described it as part of Aramco's plan to become a leading global LNG player. Market observers saw the deal as an effort by Saudi Arabia to use the volume to help establish a global gas portfolio but also said the kingdom could import LNG for power generation.
Importing LNG would enable Saudi Arabia to free up hundreds of thousands of barrels of crude per day for exports that the country instead burns for electricity. Saudi Arabia could also see a Port Arthur investment as a way to strengthen ties with America.
Saudi Arabia's diplomatic rivalry with Qatar could also fuel the kingdom's interest in Port Arthur LNG.
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