Under the deal, Aramco will buy 5 million tons of liquid natural gas per year from Sempra Energy, based in San Diego

New York: Saudi Arabia's state-owned oil company, Aramco, has signed a 20-year agreement under which it will buy liquid natural gas from a US company and make a 25 percent equity investment in an LNG export facility under development in Port Arthur, Texas. The move reflects that the country is taking cognisance of the shifting dynamics in the world's energy markets.

Under the deal, Aramco will buy 5 million tons of liquid natural gas per year from Sempra Energy, based in San Diego.

Aramco looks to become a global LNG player

Amin Nasser, the company's CEO, said that the agreement is part of Aramco's long-term strategy to emerge as a global LNG player. "With global demand for LNG expected to grow by around 4% per year … we see significant opportunities in this market and we will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG," Nasser said in a press release.

The LNG procured by Saudi Aramco will likely be sold on the spot market in Europe and Latin America, said Ira Joseph, head of gas and power analytics at S&P Global Platts. "This is by far and away the Saudis' largest investment ever in LNG," Joseph said. "The size of the deal, the volume of the LNG, is very out of step with size of LNG contracts that have been signed recently."

The backdrop

A fracking boom in the US led to an abundance of natural gas, which quickly catapulted the country among the world's top exporters of liquid natural gas after it began exporting the fuel in 2016. In 2018, US' LNG exports ranked fourth largest in the world behind Qatar, Australia and Malaysia, according to the U.S. Energy Information Administration.