An international natural gas empire estimated at $160bn over 10 years is to be built by Saudi Arabia.
l’Opinion French newspaper published a report on the strategic Saudi transfer under the title, “Saudi Arabia wants to build an empire of natural gas,” while the newspaper considered this transfer to stimulate Saudi Arabia’s industries, market this natural resource, and increase the revenues of the new state, which is currently dependent on oil.
Saudi Arabia’s agreement to buy the US natural gas is part of a $160bn 10-year plan to develop its gas assets and demand for new energy sources in the oil-rich kingdom is expected to increase.
Saudi Arabia plans to build a natural gas empire that will operate new future cities and contribute to the development of local industries in the manufacturing, mining, and technology sectors. Saudi Arabia produces enough crude oil to meet electricity demand; however, the government is trying to stop burning oil to produce electricity, as it reduces the most important source of income.
Saudi Arabia’s agreement to buy liquefied natural gas (LNG) from Sempra Energy, unveiled by the Wall Street Journal, marks its first step into the market by buying and selling LNG.
The 20-year deal involves Saudi Aramco’s acquisition of 5 million tons of LNG per year from the Sempra Energy’s Port Arthur LNG Export Project being developed in Texas. It is one of the largest ever LNG business transactions since 2013, according to Wood Mackenzie, an energy consultancy company.
In the north of Saudi Arabia, Aramco has launched what some analysts call its smallest and most important project at the same time. The company has successfully started producing natural gas using cracking technology, a technology that contributed to the oil shale boom in the United States, which were rarely used in Saudi Arabia. The gas is used to operate a mining facility, thus providing an overview of how this gas will provide new energy industries in the future.
Stimulating this trend towards gas, the economic plan of Vision2030 called for the construction of new industrial cities, such as NEOM. Saudi Arabia’s ambitious plan calls for the export of natural gas by 2030.
An important domestic factor is that the demand for electricity in Saudi Arabia will double by 2030 because of economic reform, according to Jadwa Investment in Riyadh. Saudi Arabia’s demand for natural gas will probably increase by 40% by 2030 and may soon exceed the company’s capacity, Aramco said in its first bond issue.
The agreement with Sempra gives the Saudis a share of natural gas without the need to find new sources of production. Saudi gas reserves are difficult to exploit and expensive compared to other key producers such as Russia.
According to the newspaper, “the Saudis have discussed in depth the other natural gas producers, and are expected to conclude soon other deals in this sector.”
“This agreement allows Saudi Arabia to enter the market,” says a smart business official in Poten & Partners, a New York-based consulting firm.