Shale Revolution 3.0: Saudi Arabia Edges Toward Buying Into Booming U.S. Shale LNG Sector

  • Date: 10/01/19
  • The Wall Street Journal

Saudi Arabia is nearing a deal to invest in U.S. liquefied natural gas, a landmark decision for the kingdom, which in the past had been a huge supplier of energy to America. America’s shale revolution has broken years of dependence on Middle Eastern oil, to the extent that the International Energy Agency expects the U.S. to become a net energy exporter by 2023.

Saudi Arabian Oil Co., known as Aramco, has narrowed its focus to a shortlist of at least four U.S. LNG projects and intends to announce a deal in the first half of this year, people familiar with the matter said.

Companies with projects being considered include Tellurian Inc., a Houston-based LNG developer known for its intention to ship gas from its planned Driftwood terminal in Louisiana, the people said. In addition, San Diego-based Sempra Energy, which is developing five LNG projects between the U.S. and Mexico, has had discussions with Aramco concerning its Port Arthur project in Texas, the people said. Aramco is considering equity stakes in the projects, the people added. It wasn’t clear what the value of the potential investments was.

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Aramco didn’t immediately respond to requests for comment. A representative for Tellurian said the company doesn’t comment on commercial dealings. A representative for Sempra Energy said, “We’ve had strong interest in Port Arthur LNG from global LNG buyers and investors but can’t comment on any commercial discussions.”

Any such investment would mark a sea change in the energy flows between the U.S. and Saudi Arabia. America’s shale revolution has broken years of dependence on Middle Eastern oil, to the extent that the International Energy Agency expects the U.S. to become a net energy exporter by 2023.

For Saudi Arabia, the interest in U.S. LNG is twofold, said Jason Feer, head of business intelligence at New York-based consulting firm Poten & Partners.

“One reason is the geopolitical aspect of how to keep the U.S. close and maintain the strategic relationship, and secondly they see LNG as diversifying, investing in a fuel that would have perhaps more of a lifespan than a straight crude oil play.”

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