Saudi Aramco and U.S. LNG Provider NextDecade Sign 20-Year LNG Supply Agreement

Key Highlights:

- Agreement Details: A 20-year LNG sale and purchase agreement (LNG SPA) for 1.2 million tons per annum (MTPA) of LNG.

- Parties Involved: Saudi Aramco and U.S. LNG provider NextDecade.

- Location: NextDecade's Rio Grande LNG Facility, Port of Brownsville, Texas.

- Pricing: LNG prices indexed to the Henry Hub natural gas benchmark.

- Condition: Subject to a positive Final Investment Decision on Train 4 at the Rio Grande LNG Facility.

In a strategic move to bolster its presence in the international energy market, Saudi Aramco has announced a significant agreement with U.S. liquefied natural gas (LNG) provider NextDecade. The subsidiaries of these two energy giants have signed a non-binding Heads of Agreement (HoA), paving the way for a 20-year LNG sale and purchase agreement (LNG SPA). This deal involves the offtake from Train 4 at NextDecade's Rio Grande LNG Facility, located at the Port of Brownsville, Texas.

Under the terms of the HoA, Saudi Aramco is set to purchase 1.2 million tons per annum (MTPA) of LNG for a duration of 20 years. The LNG will be supplied on a free-on-board basis, with pricing linked to the Henry Hub natural gas benchmark, a standard for natural gas pricing in the United States.

This agreement is currently in its negotiation phase, with both parties working towards a binding contract. The finalization of this contract is contingent upon a positive Final Investment Decision (FID) concerning the development of Train 4 at the Rio Grande LNG Facility. The expected timeline for reaching this FID is the second half of 2024, subject to the completion of an engineering procurement and construction (EPC) contract, securing appropriate commercial support, and obtaining the necessary financing.

Nasir K. Al-Naimi, Aramco Upstream President, expressed optimism about the deal, stating, "We look forward to finalizing the terms of a long-term LNG offtake agreement with NextDecade as we explore opportunities to expand our presence in international energy markets. We expect LNG to play an important role in meeting the rising demand for secure and efficient energy."

Echoing this sentiment, Matt Schatzman, Chairman and CEO of NextDecade, remarked, "We are pleased to have reached a Heads of Agreement with Aramco for LNG from Train 4 as Aramco seeks to expand its LNG portfolio. We look forward to finalizing the LNG SPA with Aramco and to pursuing other opportunities together."

This partnership comes at a critical time, with global energy markets undergoing significant transitions. The demand for LNG is surging, driven by the need for cleaner energy alternatives and the geopolitical uncertainties exacerbated by the ongoing Ukraine conflict. For Saudi Aramco, this deal represents a strategic endeavor to diversify its energy portfolio and secure a foothold in the global LNG market.

Saudi Aramco's venture into the LNG market began last autumn when the company signed a deal to purchase a minority stake in LNG company MidOcean Energy, which was acquiring interests in four Australian LNG projects. Expanding into LNG trading aligns with Aramco's broader strategy to enhance its natural gas production and trading business, capitalizing on the growing demand for LNG as Europe moves away from Russian gas and Asia shifts towards natural gas as a cleaner energy source compared to coal.

In summary, the Saudi Aramco and NextDecade agreement marks a significant milestone in the global energy landscape, promising to meet the rising demand for LNG and strengthening international energy cooperation.

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