Saudis to Buy U.S. Gas in Sign of Shift In Energy Market -- WSJ

Date : 05/22/2019 @ 8:02AM
Source : Dow Jones News
Stock : Sempra Energy (SRE)
Quote : 139.595  -0.975 (-0.69%) @ 5:50PM

Saudis to Buy U.S. Gas in Sign of Shift In Energy Market -- WSJ

Sempra Energy (NYSE:SRE)
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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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