Adnoc said on Monday that it had taken a 11.7 per cent stake in the first phase of the US LNG developer NextDecade’s Rio Grande project. It added that it had also agreed a 20-year LNG supply deal with the US company from the project’s second phase, which is pending a final investment decision.
Adnoc bought the stake from US investment group Global Infrastructure Partners, and has also secured the option for an equity participation in the second phase of the project, it said. Adnoc declined to comment on the value of the transaction.
The deal is Adnoc’s first foray into global LNG, having outlined a strategy to focus on gas, LNG, petrochemicals and renewables for its international growth.
It already exports LNG from a domestic project but is set to expand the volume it ships to the world by developing a project in Ruwais.
Musabbeh Al Kaabi, executive director for low carbon solutions and international growth at Adnoc, told the Financial Times that natural gas would be important in the energy transition. “If you look at the climate targets, I don’t see [how to achieve those] without embracing nuclear, carbon capture, renewables, hydrogen and more natural gas,” he said, adding that Adnoc was looking for more opportunities in the sector.
The deal is the latest example of how Gulf countries, which have prioritised managing their own huge oil and gas reserves until now, are starting to look overseas for opportunities, particularly in gas. One veteran energy banker in London said it was a trend that “we spend a lot of time thinking about”.
Saudi Aramco, the world’s biggest oil exporter, has also made forays into global LNG, investing in a small LNG company MidOcean Energy and is looking for more deals.
There are two options for Adnoc and Saudi Aramco as they look for scale in gas: one is to go to the US and the other is [to buy stakes in assets from] the majors. They are not likely to operate them themselves. I would not be surprised to see Adnoc doing LNG deals in the US to understand the market better,” the banker said.
Energy majors around the world are increasing their investment in LNG — natural gas liquefied by cooling it to minus 160C — which is being sold as a key fuel for transitioning to cleaner energy and is increasingly in demand.
Shell, the largest private LNG trader, said in its global outlook in February that demand for LNG was forecast to rise 50 per cent by 2040, with demand growing in China and developing Asian nations as they switch from dirtier coal to the comparatively cleaner fuel.
Although natural gas is cleaner than other fossil fuel alternatives, it still releases substantial amounts of carbon dioxide when burnt. Natural gas is also mostly composed of methane, which generates more warming than carbon dioxide when released into the atmosphere but is shorter-lived.
(Financial Times, May 20, 2024)