Cheniere signs supply deal with Canadian Natural Resources supporting Sabine Pass LNG expansion

Cheniere has signed a 15-year deal with Canadian Natural Resources to market LNG produced from its gas that will be used to support the top US exporter's proposed expansion of its Sabine Pass LNG terminal in Louisiana.

The deal announced on May 28 will see Canadian Natural sell about 140 MMcf/d of natural gas to Cheniere for a 15-year term, expected to commence in 2030. The LNG associated with this gas supply, about 850,000 mt/year, will be marketed by Cheniere.

Canadian Natural will get a price linked to the Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, after deductions for fixed LNG shipping costs and a fixed liquefaction fee for Cheniere.

In terms of volume and duration, the deal is similar to a previous agreement between Cheniere and Canadian upstream producer ARC Resources signed in November 2023 that was also tied to the Sabine Pass expansion.

The model of the gas supply deals -- what Cheniere calls Integrated Production Marketing, or IPM, agreements -- allows the upstream producers to access a global price by selling their gas to world markets through Cheniere's LNG export terminal. In return for marketing the gas to world buyers, Cheniere gets an undisclosed fee that covers liquefaction and other costs.

Under the November deal, ARC will get a price linked to Europe's Dutch TTF gas benchmark price, after deductions for a fixed regasification fee, fixed LNG shipping costs and fixed liquefaction fee for the exporter.

Cheniere also has an IPM agreement tied to the existing Sabine Pass facility. That deal, signed in 2021 with Canadian producer Tourmaline, was originally assigned to Cheniere's Corpus Christi LNG plant in Texas but was reassigned a year later to Sabine Pass. The volumes and duration are similar to the more recent agreements.

Expansion plans

The Sabine Pass expansion would add about 20 million mt/year when including volumes from planned debottlenecking work. The existing terminal has six liquefaction trains in operation, each with a capacity of about 5 million mt/year.

The expansion project would add two larger trains, each with a nameplate capacity of about 7 million mt/year. Cheniere has said it expects to reach a final investment decision on Train 7 in late 2026 or early 2027. The project is awaiting key construction and export permits from US energy regulators.

Additional production capacity would come from a boil-off-gas re-liquefaction unit that could yield a maximum of about 900,000 mt/year and debottlenecking work on the six existing trains at Sabine Pass for about 5 million mt/year.

Cheniere's announcement of the Canadian Natural deal did not specify an expansion train where the volumes would be sourced, although it said the agreement is subject to Cheniere making a positive FID on the expansion project. The ARC deal was subject to Cheniere reaching an FID on Train 7.

Cheniere has signed long-term contracts covering about 7.85 million mt/year tied to the Sabine Pass expansion.

For Train 7, Cheniere has announced binding long-term deals that cover about 5.6 million mt/year of production, including the ARC agreement. Offtakers include Germany's BASF, China's ENN Natural Gas, Norway's Equinor and South Korea's KOSPO.

Cheniere also has a sale and purchase agreement for 850,000 mt/year with Austria's OMV. That deal, announced alongside the ARC deal, suggested the exporter could connect some of the volumes associated with the Canadian driller to the Austrian buyer.

Cheniere has also announced firm offtake deals for Train 8 totaling 1.4 million mt/year, with counterparties including China's Foran Energy and Portugal's Galp.

The recent commercial activity comes as global spot LNG prices remain relatively high.

Platts, part of S&P Global Energy, assessed July JKM at $12.578/MMBtu on May 28, down by 5.20 cents/MMBtu from the prior assessment.