Saudi Aramco, the world’s largest oil exporting company, has signed an initial agreement to offtake liquefied natural gas from NextDecade’s Rio Grande LNG export project in Texas.
Aramco expects to purchase 1.2 million tonnes a year of the supercooled fuel for 20 years on a free on-board basis at a price indexed to the Henry Hub benchmark, the company said on Thursday.
The LNG will be sourced from Train 4 at the complex, which is expected to produce 27 million tonnes of the fuel annually at full capacity and begin operations in 2027.
Trains are the liquefaction units that convert natural gas into LNG. Each train consists of equipment and processes that cool and condense natural gas into its liquid form for storage and transport.
Aramco and NextDecade are currently negotiating a binding agreement, the effectiveness of which will be subject to a positive final investment decision on Train 4, Aramco said.
“We look forward to finalising the terms of a long-term LNG offtake agreement with NextDecade, as we explore opportunities to expand our presence in international energy markets,” said Aramco upstream president Nasir Al Naimi.
“We expect LNG to play an important role in meeting the rising demand for secure and efficient energy.”
The deal comes less than a month after Adnoc said it acquired a 11.7 per cent stake in phase one of the Rio Grande project, marking its first investment in the US.
The equity stake was acquired by the Abu Dhabi energy company through an investment vehicle of Global Infrastructure Partners.
The agreement with the infrastructure investor also secured an option for equity participation in the future Train 4 and Train 5 of the project.
Adnoc also entered a 20-year LNG offtake agreement with NextDecade for 1.9 million tonnes a year.
The US became the world’s largest LNG exporter last year amid growing demand from Europe, which is looking to end its reliance on Russian gas imports.
For companies, the US offers a strategic location with access to major markets in Asia and Europe.
US and Mexican LNG project export capacity is expected to reach 238 million metric tonnes a year by 2050, accounting for 30 per cent of global supply, according to Wood Mackenzie.
“We are pleased to have reached a heads of agreement with Aramco for LNG from Train 4, as Aramco seeks to expand its LNG portfolio,” said Matt Schatzman, NextDecade’s chairman and chief executive.
Last year, the Dhahran-based energy company signed agreements to acquire a minority stake in LNG business MidOcean Energy for $500 million, marking its first international investment in the commodity, seen as a low-carbon alternative to coal and crude oil.
