Page 7 - MEOG Week 37

MEOG CommentaRy MEOG
could become one of the largest LNG export ter- minals in North America, with potential expan- sion capabilities of up to eight liquefaction trains or around 45mn tpy of capacity, according to its backers. Aramco’s CEO, Amin Nasser, said at the time that the deal marked “a major step forward in Saudi Aramco’s long-term strategy to become aleadingglobalLNGplayer”.
And according to Wood Mackenzie’s research director for global gas and LNG supply, Giles Farrer, a number of international trading houses also used their oil market knowledge to become some of the world’s largest LNG traders.
These include Vitol Group, Trafigura Group, Glencore and Gunvor Group, and their success suggests that the strategy Aramco is following may yet turn out to be a successful one.
Until Aramco has LNG production of its own, it will have to compete for cargoes on the spot market.
Aramco has also expressed an interest in buy-
ingintoLNGprojectsinRussia. “Aramcoisjuststartingtogetintothemarket
however, the company missed out on buying a stake in the Arctic LNG-2 project, which has just reached FiD. instead, operator Novatek sold minority stakes to Chinese and Japanese inves- tors, as well as to France’s Total.
Limited success
Aramco’s strategy for selling LNG cargoes, how- ever, has had limited success thus far.
“They are making lots of noise about LNG, but [it] seems more politically driven. So far no concrete action; no clear strategy,” a trader based in the Middle East was quoted by Reuters as say- ing in May.
At the time, Aramco had only sold one cargo, to iOC. Since news emerged of the second cargo to be sold, as well as of the ongoing talks, Aram- co’s strategy has become more defined, having thus far focused on selling to Asia.
“They’re going to friends first,” researcher FGE’s managing director for the Middle East, iman Nasseri, was quoted by Bloomberg as say- ing. “it will be a buyers’ market for the next cou- ple of years, so it’s a good time for traders to get into the market.”
to understand its dynamics and build a portfolio of supply in small steps,” Farrer told Bloomberg. “There are advantages to having multiple sources of supply, which provide opportunities for arbi- trage and the possibility to sell into different markets. Aramco isn’t there yet.”
What next?
Saudi is working on enhancing its relations with Pakistan, including in the energy space, which could make reaching a term deal more likely. But until Aramco has LNG production of its own, it will have to compete for cargoes on the spot mar- ket. Port Arthur LNG would only enter service in 2023 if it goes ahead, and the company needs to buy into more advanced projects if it wishes to be producing LNG earlier than this.
Nonetheless, Aramco’s deep pockets put it at an advantage when it comes to needing more time to familiarise itself with LNG trading. Com- petition is intensifying in the global LNG mar- ket, and this could squeeze trading margins, but demand is set to keep growing. And with more and more countries looking to LNG imports – and exports – Saudi is joining a growing club.™
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