Cheniere gas supply deal with Canada's Tourmaline lifts LNG expansion in Texas

Cheniere has reached a 15-year supply deal with Canadian oil and gas producer Tourmaline that is tied to a proposed expansion at the US LNG exporter's Corpus Christi Liquefaction terminal in Texas, the companies said July 15.

Under the deal, Tourmaline will sell 140,000 MMBtu/d of natural gas to Cheniere, beginning in 2023. The LNG associated with this gas supply, approximately 850,000 mt/year, will be marketed by Cheniere.

The deal is similar to agreements tied to the Corpus Christi Stage 3 expansion that Cheniere previously reached with US gas producers Apache and EOG Resources. Together, the three agreements combined total 2.55 million mt/year of the facility's expected capacity of 10 million mt/year.

The model of the gas agreements allows the upstream producers to access a global price by selling their gas to world markets through Cheniere 's LNG export terminal. It exposes the exploration and production companies to greater price risk, though robust prices in Asia in recent months make the economics attractive. In return for marketing the gas to world buyers, Cheniere gets an undisclosed fee that covers liquefaction and other costs.

Cheniere will pay Tourmaline an LNG-linked price for its gas, based on the Platts JKM – the benchmark for spot-delivered LNG delivered to Northeast Asia -- after deductions for fixed LNG shipping costs and a fixed liquefaction fee.

Cheniere has not yet made a final investment decision on the mid-scale liquefaction expansion it has proposed to build at its Texas facility. The project would have up to seven trains. Cheniere has said that it would sanction the expansion only after signing additional commercial agreements and obtaining adequate financing.

Cheniere currently operates three traditional size liquefaction trains at Corpus Christi Liquefaction and five trains at Sabine Pass Liquefaction in Louisiana. A sixth train at Sabine Pass could begin producing LNG later this year.