Saudi Aramco in Talks With Tellurian and NextDecade for LNG Projects

Reuters, June 4, 2024

Oil giant Aramco (2222.SE) is in talks with U.S. firms Tellurian (TELL.A) and NextDecade (NEXT.O) on two separate liquefied natural gas (LNG) projects as the Saudi firm seeks to boost its gas trading and production, three sources close to the talks told Reuters.

U.S. gas production has boomed over the past decade with oil majors and Aramco's rivals such as Qatar Energy competing to build several projects to export gas to Europe and Asia.

The state energy firm is in talks with Tellurian (TELL.A) tab to buy a stake in its 27.6 million metric ton per annum (mtpa) Driftwood LNG plant near Lake Charles, Louisiana.

Aramco officials visited the site three times this year - including together with executives from Australia's Woodside on one of those occasions, said the sources who declined to be identified as talks are not public.

Aramco is also in talks with U.S. LNG firm NextDecade (NEXT.O) for a long-term gas purchase agreement from a proposed fifth processing unit at its $18 billion Rio Grande facility.

Aramco declined to comment. Tellurian said it does not comment on market speculation. Woodside said it continuously assesses organic and inorganic growth opportunities but declined further comment. NextDecade did not immediately respond to Reuters' request for comment.

Aramco is seeking to strengthen its position in the LNG market, which is set to grow globally by 50% by 2030, especially in the United States, where LNG capacity is set to almost double over the next four years.

Tellurian has spent years and hundreds of millions of dollars trying to finance and build the Driftwood plant.

Last fall, Tellurian warned investors that within a year the company might not be able to cover operating and debt costs due to continued losses and dwindling cash reserves.

An Aramco investment could provide the turnaround that Driftwood LNG needs, said Kaushal Ramesh, Rystad Energy's vice president for LNG research.

Driftwood is not affected by President Biden's pause on LNG export projects as it already has a Department of Energy permit to export the proposed plant's super-chilled gas to countries that do not have free-trade agreements with the U.S.

In February, the U.S. Federal Energy Regulatory Commission gave Tellurian a three-year permit extension to complete construction of Driftwood.

Aramco is one of the world's largest oil producers and the top exporter, pumping nearly 10% of the world's crude supply.

However, its presence in the LNG market is dwarfed by neighbouring Qatar. UAE's ADNOC (ADNOC.UL) also has a bigger presence.

Aramco made its first LNG investment abroad when it bought a stake in U.S.-based MidOcean Energy for $500 million last year.

In March, Reuters reported that Aramco was in talks to invest in Sempra Infrastructure's Port Arthur project in Texas.

It is also competing with Shell (SHEL.L) to buy the assets of Temasek-owned LNG trading firm Pavilion Energy.

(Reporting by Marwa Rashad; Additional reporting by Yousef Saba and Curtis Williams; Editing by Dmitry Zhdannikov, David Evans, and Rod Nickel)

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