POSCO signs Aramco deal for Fadhili plant expansion

South Korea’s largest steelmaker POSCO has secured a landmark contract to supply high-performance steel to Saudi Aramco for a major gas plant expansion, breaking a long-standing European monopoly on the lucrative business.

POSCO announced on July 13 it will supply hydrogen-induced cracking (HIC)-resistant steel for Aramco’s Fadhili gas plant for the first time. The speciality material is critical for infrastructure handling sour gas and its supply has previously been sourced exclusively from European mills.

While the two companies agreed not to disclose the contract’s value, POSCO said the deal would pave the way for its expansion in the global energy steel market, forecast to be worth 21 trillion won ($15.2bn) by 2033.

The steel will be used in the Fadhili Gas Increment Programme, a significant expansion for which Aramco awarded $7.7bn in engineering, procurement and construction contracts last year to South Korean firms Samsung Engineering and GS Engineering & Construction, alongside local contractor Nesma & Partners. The project is set to boost the facility’s processing capacity by 60% to 4bn cubic feet (113mn cubic metres) per day by 2027.

The 2030 target is presumed to be around 15bcf (425 mcm) per day of natural gas. The expansion project will also increase Aramco’s sulphur production by 2,300 tonnes per day.

For POSCO, the deal provides a crucial strategic foothold. Having passed Aramco’s stringent quality tests, the company expects further orders and noted the deal would allow its Korean partners to supply associated components such as pipes and pressure vessels.

The project is a core component of Aramco’s broader energy strategy, which aims to increase gas production by more than 60% by 2030 compared with 2021 levels. This push is intended to replace crude oil currently burnt for power generation, freeing it up for export and supporting the development of a lower-carbon hydrogen business.

Wail Al Jaafari, Aramco’s executive vice president of technical services, said the expansion reflects the company’s goals. “The award of these contracts reflects Aramco’s goal to increase supplies of natural gas, help efforts to reduce greenhouse gas emissions, and free up more crude oil for value-added refining and export,” he said in a press release. “Together with leading international companies, we are advancing our goal to increase gas production.”