Is Aramco Shopping For U.S. Shale?

Saudi Aramco has held early talks to buy a stake in a U.S. company and has inquired about potentially acquiring assets in the two biggest U.S. oil and gas shale basins, the Permian and the Eagle Ford, The Wall Street Journal reported on Wednesday, citing people familiar with the matter.

While the Saudi state-held oil giant owns refineries throughout the world-including the biggest U.S. refinery, the 600,000-bpd Port Arthur via its now 100-percent held unit Motiva-Aramco is not producing oil or gas outside of Saudi Arabia.

A possible deal to buy oil and gas assets in the U.S. would be a huge moment for Saudi Arabia, and for the U.S.

According to WSJ's sources, Aramco has held initial talks to either buy a stake in Houston-based liquefied natural gas (LNG) developer Tellurian, or to buy some of its gas in the future.

The Saudis have also talked to other U.S. companies about potential natural gas export deals. In addition, Aramco has inquired about possibly buying producing assets in the Permian and the Eagle Ford, the WSJ said.

Last week, Saudi Aramco said it would spend US$40 billion annually through 2027, a 25-percent increase on its previous ten-year investment program that was made public last year. The total figure for the ten-year period stands at US$414 billion. Of this, US$134 billion will go towards drilling new wells and servicing them, while US$78 billion will be used to maintain production potential. Over US$120 billion will go into offshore field development and a lot will be spent on downstream projects as the Kingdom eagerly diversifies into refining and petrochemicals-not just at home but abroad as well-to reduce its reliance on crude oil exports.

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Aramco's new spending plans come as the oil market and investors are waiting for more details on the much-hyped sale of 5 percent of the Saudi oil firm via an initial public offering that is expected to be the world's biggest IPO ever.

Tellurian, on the other hand, earlier this week proposed to develop the Tellurian Pipeline Network, which would include the previously announced Driftwood Pipeline (DWPL) and two additional pipelines that would expand supply alternatives for the growing natural gas demand in Southwest Louisiana. DWPL is anticipated to be in service in the middle of 2021 and the additional two pipelines are expected to be in service by the end of 2022, subject to commercialization, Tellurian said.

By Tsvetana Paraskova for Oilprice.com

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