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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently he works as a Senior Researcher at Hill Tower Resource Advisors. Next…

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Aramco Looks To Expand Position In LNG With New Deal

  • Aramco to acquire minority stake in U.S. company MidOcean Energy.
  • Presently, MidOcean Energy is securing interests in four Australian LNG projects, with indications that further acquisitions are on the horizon.
  • Aramco is looking to play a more prominent role in global LNG markets.

Saudi Aramco, the world's foremost national oil and gas company, has boosted its investment activity with the announcement of the acquisition of a minority stake in U.S.-based MidOcean Energy, owned by EIG, a prominent institutional investor in energy and infrastructure sectors. This development has taken many by surprise, considering Aramco's historical focus on oil, despite its substantial reserves of natural and associated gas in Saudi Arabia. Aramco has been actively positioning itself as a prominent International National Oil Company (INOC), expanding its footprint in both upstream and downstream sectors worldwide.

The acquisition, estimated to be valued at $500 million, involves a minority stake, and the exact percentage remains undisclosed pending a comprehensive report. Presently, MidOcean Energy is securing interests in four Australian LNG projects, with indications that further acquisitions are on the horizon. Given that EIG, the owner of MidOcean Energy, has already invested a substantial $45.1 billion in the energy sector across 400 projects or companies in 42 countries spanning six continents, such expansion plans are entirely plausible. EIG's primary financial supporters include sovereign wealth funds, international banks, and pension funds.

Notably, Aramco and EIG are not newcomers to collaboration, having been part of a consortium that acquired a 49% stake in Aramco Oil Pipelines Company, a subsidiary of Aramco, in 2021. This investment in global LNG marks Aramco's foray into non-oil-related sectors, reflecting the company's ambition to diversify its portfolio. Additionally, Aramco holds an option to increase its overall shareholding in MidOcean Energy in the future. Related: IEA Faces Backlash Over Bold 2030 Oil Demand Forecast

Aramco's CEO, Amin Nasser, emphasized the strategic importance of this acquisition, stating, "We anticipate strong demand-led growth for LNG as the world continues on its energy transition journey, with gas being a vital fuel and feedstock in various industries. We believe that gas will be important in meeting the world's rising need for secure, accessible, and more sustainable energy."

Furthermore, Aramco's Upstream President, Nasir Al Naimi, indicated that this acquisition is just the initial step in Aramco's pursuit of a prominent global role in the LNG sector. This suggests the possibility of Aramco expanding its equity stake in MidOcean Energy and exploring new opportunities worldwide. Collaboration with EIG, a well-entrenched player in the sector with experience in dealing with Arab sovereign wealth funds and NOCs, is conceivable.

EIG's CEO and Chairman, Blair Thomas, reaffirmed their commitment to the energy transition, highlighting the LNG industry's readiness for change and the potential role of agile, specialized companies like MidOcean Energy. MidOcean Energy's CEO, De la Rey Venter, also expressed confidence in Aramco's long-term commitment to exploring new opportunities.

In parallel developments, Aramco has initiated discussions for a multibillion-dollar investment in China's refining sector. Talks are underway with Jiangsu Eastern Shenghong Co., with both parties signing a cooperation framework agreement. This agreement paves the way for Aramco to potentially acquire a 10% strategic equity interest in Jiangsu Shenghong Petrochemical Industry Group (Shenghong Petrochemical), a wholly-owned subsidiary of Eastern Shenghong. The transaction is subject to due diligence and regulatory approvals. Shenghong Petrochemical owns and operates a 320,000 barrels per day integrated refinery and petrochemicals complex, a methanol-to-olefins and derivatives complex, and a purified terephthalic acid production facility through its wholly-owned subsidiaries. Aramco's intention is to supply crude oil and potentially other feedstocks to Shenghong Petrochemical while exploring participation in a large expansion project.

While Asia, and especially China, remains a focal point for Aramco's expansion plans, as evidenced by the ongoing discussions and the acquisition of MidOcean Energy stakes, the company's outward vision extends to other regions as well. Expect more news to emerge in the near future, possibly involving European or African investments. Egypt is on the radar, and an Aramco stake in the East Med LNG project might also be on the horizon.

By Cyril Widdershoven for Oilprice.com

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