May 02 2022
French utility Engie has agreed to a 15-year deal to buy 1.75 million mt/year of supply on a free-on-board basis from NextDecade's proposed Rio Grande LNG export facility in Texas, while Swiss commodity trader Gunvor has agreed to a 20-year FOB deal to buy 2 million mt/year of supply from Energy Transfer's proposed Lake Charles LNG export facility in Louisiana.
The two separate agreements were announced May 2, reflecting renewed interest in relatively cheap US LNG supplies amid a surge in spot end-user prices since 2021. There has been a flurry of commercial activity in 2021 and during the first several months of 2022 tied to current and proposed US LNG export terminals, which offer fixed fees and destination flexibility.
More than half of the supply from Rio Grande LNG's first phase is now covered under long-term agreements that are either firm or preliminary. An offtake deal between Engie and NextDecade fell through in November 2020 amid Engie's environmental concerns about expanding its commitment to US shale gas. The turnabout in the market shifted the dynamics, as has Europe's efforts to wean itself off Russian pipeline gas in the wake of the war in Ukraine.
In a statement announcing its deal with Engie, NextDecade said it aims to reduce CO2 emissions from its facility in Brownsville by more than 90%. NextDecade has proposed a carbon capture and storage project that it would launch after making a final investment decision on the liquefaction terminal. Its current FID target on a minimum of two trains is the second half of 2022, with commercial operations expected to start as early as 2026.
With the Engie sale and purchase agreement, under which LNG would be lifted from Rio Grande LNG's first two trains, NextDecade has now secured long-term agreements covering 6.75 million mt/year of supply that would be produced by the terminal. The project's first phase is expected to account for around 11 million mt/year of capacity. Ultimately, NextDecade has proposed building five trains with total capacity of 27 million mt/year. NextDecade's other customers are European energy major Shell and China's Guangdong Energy and ENN.
Energy Transfer's deal calls for the LNG it will supply to Gunvor to be indexed to the US Henry Hub benchmark plus a fixed liquefaction charge. First deliveries are expected as early as 2026. The deal will become fully effective upon the satisfaction of certain conditions, including Energy Transfer taking final investment decision on the Lake Charles project, the companies said in a joint statement.
In March, ENN and affiliates agreed to 20-year FOB deals to buy 2.7 million mt/year of supply from Lake Charles LNG. Those were the first firm offtake deals announced for the US facility. The purchase price of those deals also will be indexed to the US Henry Hub, plus a fixed liquefaction charge. Energy Transfer, which lost Shell as a joint venture partner in 2020, has proceeded with the development of Lake Charles LNG. Energy Transfer may reduce the size of the project to two trains with 11 million mt/year of LNG capacity, from three trains with 16.45 million mt/year of capacity, the company said in a US regulatory filing in February.
Engie said in November 2020 it halted talks over a potential long-term supply agreement with NextDecade amid pressure that European utilities faced from environmental interests to refrain from signing new long-term deals for importing US shale gas.
Platts DES Northwest Europe for June was assessed at $22.464/MMBtu April 29. NWE is the delivered price of LNG into Northwest Europe. Platts JKM, the spot-delivered price of LNG into Northeast Asia, was assessed at $21.900/MMBtu. The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $21/MMBtu. The LNG markets were closed May 2.
Engie agreed in June 2021 to an 11-year deal with Cheniere Energy tied to the US LNG exporter's Corpus Christi Liquefaction terminal in Texas. Under the original agreement, a range of about 400,000 to 1.2 million mt/year of LNG was to be delivered to Engie free on board from the Cheniere terminal. The Engie-Cheniere deal was amended in March, with the term extended to around 20 years and the volume adjusted to include a higher average of about 900,000 mt/year over the life of the deal.