Saudi Arabia made investment commitments of as much as $1 trillion during the visit of Crown Prince Mohammed bin Salman in the United States. The sum is a substantial increase on an original pledge of $600 billion, but it is also a sign that the relationship between two of the world’s largest oil producers is back on track.
The relationship, dating back to the early 20th century, was rather damaged during the Biden administration, in part due to its focus on the energy transition, which put it at odds with Saudi Arabia as an economy heavily dependent on oil revenues. Another part of the reason for the worsened bilateral relations was the issue of human rights and the murder of a dissident Saudi journalist, which included President Biden at one point calling the kingdom a pariah state. On top of those complications, President Biden at one point threatened to punish Saudi Arabia if Riyadh did not ramp up oil production to lower prices. In short, the Biden administration did not play well with the Saudis.
President Trump changed all that, bringing relations back to the friend zone and extracting massive investment commitments across industries, but notably in LNG, defense, and critical minerals. The two also made progress on nuclear energy, with the U.S. agreeing to share its nuclear power technology with the Saudis on the condition that it would not be used for weapons-grade uranium enrichment.
The latter had been a thorny issue for years, ever since talks about nuclear tech sharing began during the first Trump administration. At the time, the Saudis refused to sign off on the non-enrichment clause, which delayed the deal. Now, Chris Wright and Abdulaziz bin Salman signed a preliminary deal for the tech sharing, with specific steps forward presumably to follow.
Aramco, meanwhile, announced preliminary agreements with U.S. companies worth a total $30 billion, noting the prospective deals build on earlier investment commitments made this year, with a value of up to $90 billion. The areas that the deals cover span from LNG to advanced materials manufacturing and financial services, the company said.
In liquefied gas specifically, Aramco is looking into an investment in the Lake Charles project led by Energy Transfer, and an offtake deal for Commonwealth LNG.
The Lake Charles LNG project is fully permitted, uses existing infrastructure, and benefits from an abundant natural gas supply through existing connections to the Henry Hub and connectivity to Energy Transfer’s vast network of natural gas pipelines. It will have an annual capacity of some 15 million tons of liquefied natural gas once completed. Finding equity partners for 80% of the facility is the condition Energy Transfer has set for making the final investment decision for the project.
The Commonwealth LNG facility in Cameron Parish, Louisiana, will have an annual capacity of 9.5 million tons of liquefied gas. The construction of the first phase will cost $11 billion, according to Commonwealth LNG, and generate annual export revenues of some $3.5 billion. However, the company has yet to make the final investment decision on the project, just like Energy Transfer, after revising the timeline for the project’s completion, with commissioning moved from 2027 to 2031.
Critical minerals and metals were another area of interest for both. Saudi Arabia has considerable deposits of some of these minerals and metals. The United States needs them. That one was really a no-brainer, and only a matter of time. During the Saudi visit, U.S. MP Materials announced a deal with Saudi Maaden and the U.S. federal government for the construction of a rare earths processing plant in Saudi Arabia.
Nuclear, LNG, and critical minerals—this is more or less all the priority boxes ticked, plus weapons and military equipment supply deals to cement the mended fences. Now, the only question is how many of the preliminary commitments will progress to full deals.
By Charles Kennedy for Oilprice.com
