By
Bloomberg News - March 4, 2019
Saudi Aramco
aims to become one of the world’s largest players in natural gas and the
company is eyeing projects in Russia, Australia, America and Africa to
kick-start a global business in the liquefied form of the fuel.
“Gas is a major market
and we want to be one of the largest players,” Amin Nasser, the chief executive
of Saudi Arabia’s state-run oil company, said in an interview in London.
“There’s appetite to invest in natural gas and LNG [liquefied natural gas].”
Asked whether the
company, formally known as Saudi Arabian Oil Co., will have made a major
overseas investment in gas in a year’s time, Nasser responded: “I hope so.”
Natural gas is turned
into a liquid by super cooling it to minus 162 degrees Celsius (minus 260
degrees Fahrenheit). After that, the LNG gets loaded onto massive ships and
transported around the world.
The liquefaction
technology, which was developed commercially in the 1960s and 1970s, gave
natural gas access to global markets, allowing it to reach countries from Japan
to Spain.
The world’s biggest oil
companies have invested heavily in natural gas and LNG, with Royal Dutch Shell
Plc. and Exxon Mobil Corp. operating large projects from Qatar to Australia.
In many ways, Western
oil companies also see natural gas as part of their energy transition strategy:
it is far less polluting than crude oil, releasing less carbon dioxide that
contributes to climate change.
Gas strategy
The push into natural
gas is a change of strategy for Aramco, which is already the world’s largest
oil exporter. The company, fully owned by the Saudi government since its
nationalization in the 1970s, has a relatively small natural gas business
today, which focuses on meeting local demand.
Nasser wants to change
that, starting gas exports both from fields in Saudi Arabia but also from
outside the kingdom.
“We are in discussions
with Russia, Australia, America and Africa,” Nasser said, declining to name any
of the companies involved in the talks.
In the past, Saudi
officials have said the kingdom is talking about taking a stake in a Russian
project known as Arctic LNG 2 controlled by Novatek PJSC.
Saudi Arabia’s efforts
to build a global natural gas business follow in the footsteps of regional
rivals, including Qatar, one of the world’s largest LNG exporters.
The US is also emerging
as a large LNG shipper, thanks to booming natural gas production from shale
fields, from Texas to Pennsylvania.
Downstream investments
The gas shift comes as
Aramco also invests heavily in oil refining and petrochemicals, in an effort to
secure long-term outlets for its crude production.
The company is mulling
over its first-ever international bond later this year to help finance the
acquisition of a majority stake in local chemical company Saudi Basic
Industries Corp.
The kingdom has promised
an initial public offering of Aramco by late 2020 or early 2021, after shelving
plans originally targeting 2018.
Aramco is also planning
to boost the kingdom’s domestic use of natural gas, aiming to replace the bulk
of the 400,000 barrels a day or so of crude oil and refined products that Saudi
Arabia burns to generate electricity. The oil freed by using gas instead for
electricity generation could be exported, earning hard currency.
At peak times during
the torrid desert summer, Riyadh burns as much as 800,000 barrels a day of
crude to produce electricity to meet peak seasonal demand for air conditioning.
“We plan to eliminate
most oil burning for electricity by 2030,” Nasser said. “As a strategy, we will
replace oil with gas.”
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