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Poland's PKN agrees 1 million mt/year US LNG offtake deal with Sempra


To take LNG from phase 1 of Port Arthur project

Follows heads of agreement in May 2022

Sempra says Port Arthur phase 1 now fully subscribed

  • Author
  • Stuart Elliott
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  • Jonathan Fox
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  • United States

Poland's PKN Orlen -- owner of gas importer PGNiG -- has agreed a 1 million mt/year US LNG purchase deal with Sempra Infrastructure for volumes from Phase 1 of the planned Port Arthur export facility in Texas, the companies said Jan. 25.

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Under the sale and purchase agreement, PKN Orlen agreed to purchase the LNG on a free-on-board basis for 20 years, the companies said, with first cargo deliveries expected in 2027.

Sempra said that with the agreement with PKN, the projected LNG offtake capacity for Port Arthur Phase 1 was now fully subscribed under binding long-term agreements.

"We are excited to partner with PKN Orlen, Central Europe's largest energy group, as they continue to look for long-term, diverse supplies of secure energy sources," Sempra Infrastructure CEO Justin Bird said. "With the long-term offtake capacity for Phase 1 now sold under binding agreements, we expect to reach FID later this quarter."

PGNiG and Sempra signed a heads of agreement in May 2022 for the potential supply of 3 million mt/year of US LNG -- 1 million mt/year from Port Arthur and 2 million mt/year from the Cameron LNG Phase 2 project.

PGNiG has built out a significant US LNG import portfolio in recent years, having already agreed supply of 7 million mt/year, including 5.5 million mt/year with supplier Venture Global.

PKN CEO Daniel Obajtek said the deal with Sempra was an "important step" toward strengthening PKN's position as a cornerstone of crude and fuel supply security in Central and Eastern Europe.

"Already last year, during a very tense situation on the EU energy market, the US became one of the main suppliers of gas to Poland," Obajtek said.

"By establishing a partnership with Sempra Infrastructure, we are increasing the diversification of our import portfolio and we are securing additional volumes of gas," he said.

Previous deals

US LNG developers benefitted from a wave of commercial activity in 2022 as supply concerns mounted over Russia's war in Ukraine, having signed firm long-term deals covering more than 50 million mt/year of supply over the past year. Dealmaking has continued in 2023 with LNG prices remaining high compared to historical norms, even with prices softening in Europe in recent weeks amid high storage levels and relatively mild winter weather.

Sempra, along with Cheniere and Venture Global, "have emerged as long-term winners of the US LNG export buildout," analysts at Webber Research & Advisory said in a recent report to clients. Webber Research ranked Port Arthur as the most likely US LNG project to advance among those still awaiting a final investment decision, after Cheniere and Venture Global each commercially sanctioned projects in 2022.

Sempra previously announced it had entered into long-term agreements with ConocoPhillips, chemicals giant Ineos, France's Engie and Germany's RWE for the sale and purchase of LNG from the Port Arthur Phase 1 project.

In aggregate, Port Arthur LNG Phase 1 is now fully subscribed, with 10.5 million mt/year under binding long-term agreements. It is expected to have a capacity of up to 13.5 million mt/year.

Sempra executives have said a critical part of the company's approach was waiting to finalize offtake deals until the October 2022 refresh of the company's engineering, procurement and construction contract with Bechtel Energy. The amended EPC contract included an updated price of about $10.5 billion for building the first phase of Port Arthur, up from about $8.9 billion in 2020.

A similarly sized Port Arthur LNG Phase 2 project is also under active marketing and development, Sempra said.

Poland looks to LNG

Poland has increasingly turned to LNG to meet demand after Russia's Gazprom in April halted gas supplies to Poland under the long-term Yamal contract due to Warsaw's refusal to comply with new ruble-based payment terms.

The contract then expired at the end of 2022.

Lower Russian supplies to Europe last year helped push gas prices to record highs.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26.

Prices have weakened since on the back of healthy storage and demand curtailments with Platts assessing the TTF month-ahead price on Jan. 24 at