20-year gas supply deal brings US LNG terminal’s import-to-export conversion closer to reality

Energy Transfer LNG Export, a subsidiary of U.S.-based Energy Transfer, has entered into a multi-year sale and purchase agreement (SPA) with Japan’s Kyushu Electric Power Company for the delivery of liquefied natural gas (LNG) volumes from the former‘s proposed export project on Louisiana’s Gulf Coast.

Under the deal, Energy Transfer LNG is set to supply up to 1 million tonnes per annum (mtpa) of LNG to Kyushu on a free-on-board (FOB) basis for 20 years. This is conditional upon the U.S. player taking a positive final investment decision (FID) on the Lake Charles LNG project and satisfying other conditions precedent.

“We are proud to be selected as an LNG supplier by Kyushu, one of Japan’s leading energy companies,” said Tom Mason, President of Energy Transfer LNG. “Kyushu has been supportive of Lake Charles LNG for a long time and we appreciate their loyalty. We are also pleased that Lake Charles LNG continues to make strong strides toward full commercialization.”

An agreement with similar terms–a 20-year supply deal, but for 2 mtpa of LNG from Lake Charles on a free-on-board (FOB)–was inked with Chevron last December. This deal was also subject to a positive FID being taken for the project.

As for Kyushu, the agreement is said to mark its first long-term LNG procurement contract from the U.S. The Japanese player expects it to further diversify its procurement sources.

Since the deal has no destination restrictions, Kyushu says it can flexibly procure electricity in response to fluctuations in supply and demand. For example, the timing of receipt can be adjusted, or electricity can be sold to other companies when demand is low.

The Lake Charles project envisages converting the existing Lake Charles LNG import and regasification terminal into an export one. Energy Transfer’s four existing LNG storage tanks, two deep water berths, and other infrastructure would be repurposed for this.

According to the U.S. player, the terminal would benefit from direct connection to its existing Trunkline natural gas pipeline system. This is connected to multiple intrastate and interstate pipelines, providing access to producing basins such as the Haynesville, the Permian, and the Marcellus Shale.

Last September, Technip Energies and KBR were put in charge of the engineering, procurement, manufacturing, and construction (EPFC) portion for the future export terminal. After repurposing, the terminal will have a capacity of 16.45 mtpa.

More recently, MidOcean entered into a heads of agreement (HOA) with Energy Transfer LNG Export to cover 30% of the construction costs for the development of the export facility in exchange for 30% of the LNG production, or approximately 5 mtpa.