2024-04-05 04:03:04
※[김리안의 에네르기파WAR]Covers news in the energy sector from the perspective of national security and the climate crisis.
Saudi Arabia’s ‘change of heart’ lies behind the success of Korean companies in winning record-breaking orders totaling $7.2 billion (approximately 9.6 trillion won) from Saudi Arabia. Although Saudi Arabia possesses enormous oil and natural gas fields, it has traditionally focused only on oil exports.
Things changed drastically following the Russian War. Countries around the world have praised natural gas as a ‘bridge fuel’ that can achieve energy transition and security simultaneously. Accordingly, Saudi Arabia, which needs to diversify its economic structure focused on oil exports, began betting on natural gas in earnest last year.
On the 3rd, Samsung E&A (formerly Samsung Engineering) and GS E&C announced that they had won the $7.2 billion ‘Fadili Gas Plant Expansion Program’ project ordered by Saudi Arabia. It is the largest Saudi construction project ever won by a Korean company. Samsung E&A decided to build a gas processing facility and auxiliary facilities. The amount of orders won by this company amounts to $6 billion. GS E&C will be in charge of construction of a sulfur recovery treatment facility worth $1.2 billion. A sulfur recovery treatment facility is a facility that collects and recycles sulfur generated during the gas purification process. The Fadhili gas plant, owned by Saudi state-run oil company Aramco, is a key facility in Saudi Arabia’s natural gas expansion plan. It is Saudi Arabia’s first gas plant that processes and refines natural gas coming from ‘unconnected gas fields’ on the sea (Hasba) and on land (Khursaniya). Non-linked gas fields refer to gas fields extracted from independent gas deposits that are not produced at the same time as oil, and require advanced technology in the gas extraction and processing process.
The possibility of additional orders from Korean plant companies is expected to increase further. This is because Saudi Arabia is increasing its bets on the natural gas market. Aramco invested $110 billion in the development of the Zapura gas field in 2020, setting a goal of “more than doubling natural gas production within the next 10 years and making Saudi Arabia a natural gas exporter for the first time in history.” Zapura gas field is also a ‘non-traditional (shale gas, etc.) non-linked gas field’ that requires advanced technology in the extraction and processing process.
A plan to export the extracted gas in the form of liquefied natural gas (LNG) is being considered. Aramco’s acquisition of a stake in the Australian LNG project promoted by Midocean Energy in October last year also attracted attention as Saudi Arabia’s first ever investment in the global LNG industry. According to Reuters last month, Saudi Aramco and Adnoc, the state-run oil company of Abu Dhabi in the United Arab Emirates (UAE), were reportedly in talks to invest in a U.S. LNG project. Aramco is considering investing in the second phase of Texas-based Sempra Infrastructure’s Port Arthur LNG project. This is to secure a portion of Port Arthur’s LNG production, which is expected to reach 13.5 million tons per year. Abu Dhabi Adnoc is contemplating an investment in the $18 billion Rio Grande LNG export terminal in partnership with the U.S. company Next Decade. Reuters reported, “Middle Eastern oil-producing countries, a key axis of the Organization of the Petroleum Exporting Countries (OPEC), are expanding their natural gas business, which has become the third generation fossil fuel following coal and oil in the energy transition phase.” It is expected that there will be a series of orders for LNG plants and carriers from the Middle East.
LNG demand is predicted to increase by more than 50% by 2030. Accordingly, LNG production in the United States is expected to nearly double over the next four years, but U.S. LNG companies are having difficulty financing projects due to pressure from environmental groups and the recent measure by the Joe Biden administration to suspend new exports. Kaushal Ramesh, vice president of LNG at Rystad Energy, said, “Oil money from the Middle East is replacing the capital of U.S. banks that are reluctant to invest in LNG due to ESG trends and U.S. government measures.” Aramco recently participated in the acquisition of Singapore LNG company Pavilion Energy and was named as a final candidate.
Reporter Kim Rian knra@hankyung.com
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