Tellurian, Vitol ink 15-year LNG supply MoU

US LNG export project developer, Tellurian, through its unit Tellurian Trading UK, entered into a 15-year LNG supply memorandum of understanding with trading house Vitol.

Under the agreement, Tellurian would supply 1.5 million tonnes per annum of liquefied natural gas from the proposed 27.6 mtpa Driftwood LNG export terminal on the west bank of the Calcasieu River, south of Lake Charles, Louisiana.

The transaction price is based on the Platts Japan Korea Marker (JKM) and is for a minimum term of 15 years, Tellurian said in a statement on Thursday.

Under the MOU, Tellurian and Vitol have agreed to negotiate an LNG sale and purchase agreement (SPA) under which Vitol will purchase LNG free on board (FOB).

The SPA will contain certain conditions precedent, including Tellurian’s receipt of regulatory approvals and a final investment decision to construct the Driftwood LNG export terminal.

In addition, Vitol is evaluating a potential equity investment in the Driftwood Holdings partnership.

Commenting on the MoU, Tellurian’s president and CEO Meg Gentle said, “The LNG business is evolving into a true commodity market, which includes LNG purchases and sales based on actual LNG prices rather than indexing to other energy products. JKM has emerged as the most liquid and transparent pricing mechanism for LNG.”