Industry

The Aramco/Sempra signing ceremony. (Image source: Aramco)

Aramco has further strengthened its position in the LNG global market by signing a non-binding Heads of Agreement (HoA) with Sempra for a 20-year sale and purchase agreement (SPA) relating to LNG offtake of 5.0 million tonnes per annum (Mtpa) from the Port Arthur LNG Phase 2 expansion project

Aramco’s will also potentially have a 25% participation in the project-level equity of Phase 2.

Nasir K. Al-Naimi, Aramco Upstream president, said, “We are excited to take this next step into the LNG sector. As a potential strategic partner in the Port Arthur LNG Phase 2 project, Aramco is well placed to grow its gas portfolio with the aim of meeting the world’s growing need for lower-carbon sources of energy. This agreement is a major step in Aramco’s strategy to become a leading global LNG player.”

Port Arthur LNG is a natural gas liquefaction and export terminal in Southeast Texas with direct access to the Gulf of Mexico. The Port Arthur LNG Phase 1 project is currently under construction and consists of trains 1 and 2, as well as two LNG storage tanks and associated facilities. The Port Arthur LNG Phase 2 project will expand the site to include the addition of up to two trains capable of producing up to 13 Mtpa. Port Arthur LNG has potential to expand to a total of eight trains, which would make it one of the world’s most significant LNG export facilities.

LNG trade grew by 2.3% in 2023. (Image source: Adobe Stock)

The IGU's 15^th annual World LNG Report highlights the evolving role of LNG and its crucial role for the energy transition and energy security

LNG has become a critical component of the global energy mix, with its role as a flexible, highly efficient, and reliable resource continuing to grow. Several proposed projects are undertaking innovative emissions-reducing measures to decarbonise the LNG value chain by integrating renewable electricity, carbon capture and storage, partnering to develop e-methane, and grow bio-LNG, or liquefied biomethane, which is produced from capturing and upgrading biogas that would have otherwise been emitted from landfills, agricultural waste, or other feedstock.

Global LNG trade grew by 2.1% in 2023, according to the report, to more than 401 million tonnes (MT), After two years of severe instability, the LNG market reached a fragile equilibrium, given lack of spare supply in the near-term.

Supply constrained

Supply remained constrained, with just 0.8% YOY growth from Indonesia's 3.8 MTPA addition at Tangguh LNG. However, global liquefaction capacity is likely to grow to over 700 MTPA by 2030, driven by new FIDs and the start-up of projects currently under construction to support growing demand, particularly in the growing Asian markets, where environmental considerations have led to a focus on coal to gas switching.

The USA became the largest producer and exporter (84.53 MT in 2023 vs 75.63 MT in 2022), followed by Australia (79.56 MT), Qatar (78.22 MT), and Russia (31.36). 

China was the largest LNG importer at 71.19 MT, followed by Japan, Korea and India, with more demand responding to the lower spot price. Europe remained the second-largest importing region at 121.29 MT in 2023. With LNG supplying almost half of Europe's gas, the competition between Asian and European markets remains a key market dynamic.

The global LNG market continues to rapidly evolve as it responds to growing gas demand in emerging markets, the increasing number and diversification of market participants, and the acceleration of technology development and innovation.

However, several major uncertainties may have an impact on the market, such as the Biden Administration non-FTA LNG project approvals pause, which could delay over 70 MTPA of new capacity; sanctions on Russian LNG, which impact almost 20 MTPA of expected capacity; the possibility that Ukraine may not extend the Russian gas transit deal at the end of 2024; shipyard bottlenecks; the ongoing security risk in the Middle East; as well as some declining gas field supply. More than 120 MTPA of currently operational liquefaction capacity is over 20 years old, and some of these facilities are being mothballed due to insufficient upstream gas production, creating supply side risk.

IGU president, Li Yalan commented, “The LNG industry has demonstrated incredible agility and innovation through some of the toughest tests over the recent years, and this is an industry that continues to play a pivotal role to navigate through an energy crisis that has not yet been fully resolved and an energy transition that has been challenged.

“As the world moves toward a low emissions future, nations are seeking ways to achieve their climate commitments while keeping energy affordable, available, and secure. LNG is a tool that will be critical to providing greater resiliency for rapidly changing energy systems around the world, and it will have an essential role mitigating the inherent risk of uncertainty through that process.”

Nabeel Iqbal, sales manager, Cleanova (centre) with Saudi Technic Industries representatives Fawzi Aqel – general manager (left) and Fouad Qadir - business development manager (right). (Image source: Cleanova)

Filtration solutions provider Cleanova has renewed its partnership with Saudi Technic Industries (STI) as the official supplier of Dollinger filtration, Plenty process filtration and Plenty strainers, along with aftermarket services

Formed in October 2023, Cleanova provides innovative filtration solutions that improve efficiency, reduce emissions and minimise waste. They are seeing increasing demand given the growing focus on environment protection and the energy transition.

Paul Baker, sales director for Cleanova, said, “With our aligned mission to exceed the expectations of our customers and deliver high-quality products alongside ongoing aftermarket support, we look forward to continuing to partner with Saudi Technic Industries. We can continue to combine technical expertise with local knowledge and experience to provide a comprehensive service to customers in the region”

Fawzi Aqel, general manager of STI, added, "The oil and gas industry plays a pivotal role in the transformation outlined in Saudi Arabia's Vision 2030. With over four decades of experience, STI is proud to partner with Cleanova to advance this vision. Together, we will deliver cutting-edge and innovative filtration and separation solutions, setting new standards of excellence and driving progress within the industry."

Hanadi Khalife, head of Middle East, ICAEW. (Image source: ICAEW)

The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, highlights the impact of extended oil production cuts on growth in the GCC region

The GCC growth forecast has been revised down to 2.2% from 2.7% three months ago, although non-energy sectors remain resilient, according to the report.

Due to the OPEC+ group’s extension of voluntary output cuts through Q3, GCC oil output will decline by 2.6% this year, according to the report. Saudi Arabia, which is bearing the brunt of production cuts, will see oil activities contract by 5% this year, down from a predicted growth of 0.7% three months ago. However, as voluntary production cuts are reversed in 2025, energy sectors will begin making positive contributions to GCC growth.

Qatar’s GDP growth for this year is forecast at 2.2% and is expected to rise to 2.9% in 2025, as a result of its North Field gas expansion project, which is not affected by OPEC+ production quotas. Bahrain’s GDP growth is 3.1% this year, but is expected to slow to 1.4% in 2025. The country continues to diversify its economy and reduce reliance on oil revenues.

Positive outlook for non-oil sectors 

There is a positive outlook for non-energy sectors across the GCC, which will continue to grow. In Saudi Arabia, giga-projects are expected to boost investments in construction, manufacturing and transportation. Strong momentum in the sports and entertainment, hospitality and tourism sectors are expected given the Vision 2030 focus on these sectors. Tourism is a strategic sector in other countries too, and will remain a key growth driver. Tourism activity has rebounded strongly, with record visitor numbers across the GCC in 2023, extending into this year.

Saudi Arabia, Bahrain and Kuwait are likely to record see budget deficits this year and in 2025 as the current oil price level is below the fiscal breakeven point, the report forecasts. However, the overall GCC budget position will likely remain in surplus, bolstered by strong financial standings and favourable credit ratings, allowing continued access to funding from capital markets and IPOs.

Hanadi Khalife, head of Middle East, ICAEW, said, “While geopolitical risks present headwinds for the GCC and wider Middle East, we are encouraged by the ongoing commitment to diversification and sustainability targets. Qatar, for example, became the first GCC sovereign to issue green bonds despite not having explicit net-zero targets. Bahrain is also aligning its non-oil economic growth with its Economic Vision 2030 and COP28 commitments to reduce carbon emissions by 30% by 2035.”

Scott Livermore, ICAEW economic advisor, and chief economist and managing director, Oxford Economics Middle East, added, “Although the region faces escalating pressures amid slowing global economies, the GCC remains relatively positive due to strong bilateral deals and investment.”