Oil & Gas

Diversifying Investment Portfolios

ADNOC and Aramco are leading the charge in the Gulf's expansion into the LNG markets, aiming to diversify their investment portfolios across different geographies to hedge against volatile energy markets. The global gas sector has gained significant attention from Gulf oil companies, given its status as the least polluting fossil fuel and its potential as a transitional fuel to a low-emission world. As global LNG markets face volatility, especially after the Ukraine war, Gulf Cooperation Council (GCC) countries are poised to play an essential role in the market's future.

Strategic Moves in the LNG Sector

Led by ADNOC and Aramco, Gulf oil companies are making significant strides in the global LNG markets, recognizing the pivotal role of this fuel in the energy transition. These companies are focused on becoming diversified and integrated energy giants with assets in renewable energy, hydrogen, and commodities trading sectors. Over the past year, ADNOC and Aramco have ramped up their efforts in the LNG sector as part of a broader strategy to hedge against future energy volatility and control the entire value chain in the industry. Recently announced LNG deals are just the beginning, as both companies anticipate substantial returns from this clean fuel.

Aramco's LNG Ambitions

Aramco currently lacks domestic liquefaction capacity, with its gas resources focused on meeting domestic industrial demand. However, Aramco has long-term ambitions in the global LNG market. On June 26, 2024, Aramco unveiled an agreement with Sempra to acquire a 25% stake in the Port Arthur LNG project's second phase in Texas, securing 5 million tons per annum of LNG. This announcement followed a non-binding agreement with Next Decade to purchase 1.2 million tonnes per annum of LNG from the Rio Grande LNG project. Aramco's first investment in LNG came in September 2023, with a $500 million stake in MidOcean Energy, granting exposure to global liquefaction projects.

ADNOC's Strategic Investments

ADNOC is a prime example of Gulf oil companies' efforts to penetrate the global LNG market, investing billions in developing domestic gas resources, including unconventional and sour gas. Unlike Aramco, ADNOC has a long-standing source of LNG from its Das Island terminal, producing 6 million tonnes per annum. The company plans to increase its LNG export capacity with a new 9.6 million tonnes per annum plant in Ruwais, Abu Dhabi. In 2024, ADNOC took a significant step by acquiring an 11.7% stake in the Rio Grande LNG project, committing to purchase 1.9 million tonnes per annum over 20 years from the project's fourth production unit.