Californian natural gas company Sempra Energy and Saudi Aramco have drawn up an Interim Project Participation Agreement (IPPA), outlining their intention to partner up for the new liquefied natural gas (LNG) export terminal project at Port Arthur, Texas.
The development follows on from a heads of agreement (HOA) between the two companies in May 2019 to purchase 5 million metric tonnes (MMt) of LNG per annum from the port’s Phase 1 LNG project. It also includes a 25% equity investment in Phase I.
Despite the lack of a definite cost for the project, Sempra Energy CEO Jeffrey Martin has described it as a “multibillion-dollar initiative”.
Work began in the fourth quarter of 2019 to re-route the Texas State Highway 87 over a stretch of roughly 5.6 km in order to create a space for the new LNG export terminal.
Initially, the proposed Port Arthur LNG project was to comprise two LNG liquefaction trains and three large storage tanks. However, Sempra Energy has filed with the Federal Energy Regulatory Commission to add two more liquefaction trains. The proposed additions would double the facility’s output to 22 MMt per year.
Glenrock Associates analyst Paul Patterson, in an interview with regional news outlet Beaumont Enterprise, indicated that much would still have to fall into place if Saudi Aramco is to go ahead with the deal and the new terminal is to be realised.
“It is a step in the right direction,” he told the paper. “It is good to see some progress, but it is never a sure thing until you have the deal.”
However, the port’s location would be encouraging for an operator such as Aramco, Patterson continued, which would be eager to diversify away from OPEC member states, given the US government’s trade policies.
The ongoing crisis in Iran – following the death of Iranian military commander Qassem Soleimani and retaliatory missile strikes on two Iraqi bases housing US forces – provides a convincing case for diversifying into US domestic oil production.
In December 2019, Saudi Aramco shipping arm Bahri had expressed interest in chartering up to 12 LNG carriers from 2025.
“Everything has changed with fracking,” Patterson told Beaumont Enterprise. “What is going on in the Middle East is hard to say … but when you look at the parts of the world, some have less risk than others. The US is viewed as a less risky investment.”