Saudi Aramco Explores New Markets for Kingdom’s Emerging Gas Surplus

Saudi Aramco is weighing export options and a potential listing of its gas business as the $100 billion Jafurah development threatens to push Saudi supply beyond domestic demand.

The decisions would reshape the kingdom’s role in gas markets while helping Aramco finance expansion and support Riyadh’s spending ambitions.

Neither an export strategy nor a listing has been finalized, according to the Financial Times.

Finding Buyers for the Surplus

Jafurah entered production last year, with its second phase expected to begin by 2030.

Aramco targets an increase of about 80% in gas output between 2021 and the end of the decade.

Saudi power plants will consume a substantial share as the kingdom replaces oil with gas for electricity generation.

That shift would free more crude for export, increasing oil revenue.

However, domestic consumption may fall short of absorbing the additional supply.

Wood Mackenzie estimates that annual Saudi gas production of 180 billion cubic meters could leave up to 50 billion cubic meters available after local needs are met.

Investment in artificial intelligence and data centers should absorb some of that volume.

Foreign customers could nevertheless become necessary, according to Neivan Boroujerdi, Wood Mackenzie’s Dubai-based director of corporate research.

“If they get close to their production target, they’re going to need some other sources of demand,” he told the FT.

LNG Plans Remain on Hold

An LNG export business would put Saudi Arabia alongside regional suppliers such as the United Arab Emirates and Oman. It would also require Aramco to build liquefaction infrastructure.

An Aramco employee said proposals for an export terminal supplied by Jafurah’s second phase were presented last year but subsequently put aside.

Meeting Saudi demand remains Riyadh’s immediate priority, the employee said.

The timing matters for a project launched in 2020 with the prospect of turning the kingdom into a gas exporter.

Six years later, the destination of a significant portion of its future output remains unsettled.

A Separate Gas Company

Aramco is preparing to place its gas operations in a separate company under an initiative known as “Project Gamma,” according to people familiar with its plans.

A stock market listing could follow.

The approach would differ from earlier transactions involving infrastructure.

Aramco sold a 49% stake in its ringfenced oil pipeline business to investors including EIG and Mubadala in 2021, then completed a gas pipeline lease-and-leaseback arrangement the following year.

The company is also examining ways to monetize real estate, power, water and oil storage assets, according to people familiar with its operations.

“The overarching theme is optimizing capital,” said an adviser who previously worked with Aramco.

Questions Over a Listing

Some industry observers doubt the case for a gas IPO. Two people familiar with the plans told the FT that Aramco’s international LNG holdings would remain outside the proposed company.

Without a firm commitment to domestic LNG export plants, they questioned the rationale for a listing.

Government-set gas prices provide predictable domestic earnings that people close to the company consider suitable for another lease-and-leaseback transaction.

The threat of further Iranian attacks on Saudi energy infrastructure would also complicate an offering. One employee said Jafurah’s full potential remained uncertain.

Competing Funding Demands

Higher crude prices during the U.S. and Israeli war against Iran have boosted Aramco’s profits.

Yet the company still faces demands to expand gas production, preserve oil capacity, develop international LNG investments and fund a growing dividend.

Riyadh’s economic diversification program adds pressure, with spending commitments spanning tourism, aviation and AI.

“Aramco doesn’t need the money, the Saudis need the money,” the former adviser said.