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Russians, Saudis May Go Beyond Oil Alliance With LNG Project

Updated on
  • Novatek and Aramco have signed energy memorandum, Novak says
  • Saudis mull importing gas while also doubling their own output

Alexander Novak and Khalid Al-Falih.

Photographer: Mikhail Metzel/TASS

Russia and Saudi Arabia are seeking ways to amplify the success they’ve had working together to manage the oil market by reaching new energy deals, including one on liquefied natural gas.

Signing a memorandum, Russian gas producer Novatek PJSC and Saudi oil giant Aramco agreed to consider teaming up on Novatek’s Arctic LNG-2 project, Russian Energy Minister Alexander Novak told reporters in Sochi on Thursday. Specifics may be prepared ahead of the St. Petersburg International Economic Forum in May, he said.

President Vladimir Putin made a priority of expanding Russia’s LNG industry last year, and the country is seeking partners for projects to catch up with top producers Qatar and Australia. Meanwhile, Saudi Arabia is looking from Russia to East Africa and the U.S. for gas assets as state-held Aramco, known formally as Saudi Arabian Oil Co., hunts for ways to meet soaring domestic demand.

Aramco is “seriously” studying investing in the planned Arctic LNG plant, Saudi Energy Minister Khalid Al-Falih told reporters Wednesday in Riyadh at a joint briefing with his Russian counterpart. Saudi King Salman is keen to strengthen energy ties between the two nations following their oil-cuts collaboration that helped drive crude’s recovery, according to Al-Falih.

The $20 billion Arctic LNG-2 plant, seen starting in 2022 or 2023, will be Novatek’s second liquefied-gas project after Yamal LNG, which began output late last year. The Russian company is also interested in building a regasification terminal in Saudi Arabia, Novak said in Sochi.

Saudi Arabia is seeking to double its own gas production in the next decade, Al-Falih said in Riyadh. In an interview in December, he didn’t rule out buying LNG from Russia but said it wasn’t the most economical option. Possible LNG deliveries to Saudi Arabia from Russia aren’t linked to Aramco’s potential participation in the Arctic project, Novak said.

Other projects on the table, according to the ministers:

  • Russia has made a formal proposal to build two nuclear reactors in Saudi Arabia, according to Novak; Al-Falih said his country plans to award contracts next year.
  • The two nations are continuing talks on a rubber project in Saudi Arabia led by Aramco and Russia’s Sibur PJSC, with estimated costs of about $1 billion; Novak said France’s Total SA and the state-run Russian Direct Investment Fund may also participate.
  • Saudi Arabia will work with Russia on climate policies, according to Al-Falih.

— With assistance by Vivian Nereim

(Updates with Novak comments on energy memorandum in second paragraph.)
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