Aramco is looking to invest in U.S. natural gas and is prepared to spend "billions" on acquisitions in the segment, the company's chief executive Amin Nasser told Reuters on the sidelines of the World Economic Forum in Davos.
Aramco's international gas team has been given an open platform to look at gas acquisitions along the whole supply chain. They have been given significant financial firepower - in the billions of dollars," Nasser said after he noted Aramco will pour US$10 billion in fresh investments into its U.S. refinery, Motiva, which is the largest in the country.
The asset acquisition push into the United States is part of am ambitious US$150-billion natural gas expansion strategy over a period of ten years to 2030. As a result of the strategy, Aramco plans to become a net gas exporter.
It makes perfect sense to look for expansion opportunities in the United States in light of this strategy, and Nasser told Reuters as much, noting that the country had abundant ethane resources that made investments in the industry "very lucrative", Reuters quotes him as saying. Related: Energy Transition Will Upend Geopolitics
Aramco currently produces 14 billion cu ft of natural gas daily and is the ninth largest producer of the fuel globally, behind the Netherlands and ahead of Algeria at number ten. However, most of this is consumed domestically, so there isn't much left for exports. Aramco plans to change this by boosting local production to 23 billion cu ft daily by 2030. To this end, it will also boost its gas production capacity to 70 percent of the total, from 50 percent now.
Along with natural gas, Aramco is expanding into petrochemicals as well, committing tens of billions of dollars to various oil refining and petrochemicals production ventures around the world. As part of this drive, the company also plans to buy a 70-percent stake in Saudi petrochemicals major Sabic. To this end, it would need to borrow on international bond markets. Saudi Arabia's energy minister, Khalid al-Falih earlier this year said it is preparing for the issuance of a US$10-billion bond.
By Irina Slav for Oilprice.com
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Comments
Any Saudi investments in the United States could potentially face risks from US litigation and potential threats from a bill called “No Oil Producing and Exporting Cartels Act,” or NOPEC, which if passed would let the US to sue OPEC and its members for an alleged oil price fixing. Even if not implemented, these two bills could be like the sword of Democles hanging over Saudi Arabia. Moreover, investing in the US for the purpose of currying favour with the United States wouldn’t stop the US blackmailing Saudi Arabia anytime it wishes.
Any Saudi investment in the US could be at risk by the legislation passed by the US Senate and the US House of Representatives in May 2016 that would allow families of September 11 victims to sue the Saudi government for damages. The law removes the sovereign immunity, preventing lawsuits against countries whose citizens were found to be involved in the attacks. The minute one law case is launched by an American citizen against the Saudi government, all Saudi assets in the US will be frozen.
If Saudi Arabia is keen on investing in natural gas around the world, then why not consider investing in three major gas countries with the largest proven gas reserves in the world, namely, Russia, Iran and Qatar.
Russia is investing heavily in expanding its LNG production capacity by tapping its vast gas resources in the Arctic following the successful launch of the Arctic-based Yamal LNG plant, controlled by Novatek in December 2017. Russia would very much welcome Saudi investments in its gas industry.
Currently it sounds heretic to talk about Saudi investment in either Iran or Qatar but Saudi Arabia’s disputes with these two countries who between them sit on 2052.9 trillion cubic feet (tcf) or 30% of the World’s total proven natural gas reserves will not last forever. Eventual Saudi investments in these two gas titans is anything but heretic.
I sincerely hope that the Saudi decision makers will heed my advice. It will prove immensely beneficial to them economically and geopolitically.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London