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Saudi Arabia backs out of major Russian LNG project

Christian Fernsby |
After a year and a half of negotiations, the Saudi Arabian national oil and gas company Saudi Aramco has decided not to buy a share in Novatek’s Arctic LNG-2 project, four informed sources told the Vedomosti news agency.

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Saudi Aramco, which was expected to invest around $5 billion in the project, was unhappy with the terms offered by Novatek.

In addition, the Saudis were concerned by the risk of sanctions against the liquefied natural gas (LNG) plant, which would have been the largest in Russia with a capacity of 20 million tons per year.

With Moscow and Riyadh having signed the first joint output limitation agreement in 20 years, many people expected Saudi Arabia to invest more actively in Russian projects, observes Dmitry Marinchenko, senior division director at Fitch.

“But for some reason this is not happening,” he notes.

Instead of investing in a Russian LNG plant, Saudi Arabia has decided to go with an American one.

On 22 May, Saudi Aramco announced that it had signed a 20-year contract with the American company Sempra LNG to buy 5 million tons of LNG per year during the first phase of the Port Arthur LNG project and to acquire a 25% share in it.


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