Exxon Mobil Corp. and Qatar Petroleum might be trying to lock down long-term off-take contracts for the LNG export terminal they are building in Texas after going a significant distance without them, an Exxon executive said in an interview.
The approach, described by Alex Volkov, Exxon's head of global LNG marketing, reflected the company's strategy of separating the rationale for a final investment decision for natural gas liquefaction projects from the ultimate execution of those projects, something its financial flexibility as an integrated major allows it to do. Volkov spoke with S&P Global Market Intelligence and S&P Global Platts at the Gastech conference in Houston on Sept. 17.
When a positive final investment decision, or FID, was reached in February on the over $10 billion project to convert the Golden Pass receiving terminal into an export terminal, Exxon and Qatar Petroleum went ahead without announcing any long-term agreements. It was a relatively novel approach in the North American market — one also taken by Royal Dutch Shell PLC-backed LNG Canada project in British Columbia in October 2018. Most developers rely on take-or-pay contracts that last 15 to 20 years to allow them to secure billions of dollars in financing.
"We want to sell when the customers want to buy," Volkov said. "We want to FID projects when it makes sense to."

But selling off-take is still important, and Volkov hinted that some off-take and supply deals tied to Golden Pass may already have been signed. He said the partners would "probably" firm up more off-take deals in the future, but he could not talk about volumes. He did say Exxon's strategy with such projects, including one in Mozambique, would not change.
"Who's to say we hadn't firmed up some of those volumes before we FID'd Golden Pass," Volkov said. "We will continue to do so, but will also remain flexible."
China tensions
Exxon's size also means it does not fret about the trade war between the U.S. and China, which is impacting other North American LNG export project developers. Within a decade, China is expected to become the world's biggest importer of LNG, making its market a critical one for LNG suppliers.
But Volkov said if China wants more LNG from Exxon and Qatar Petroleum in the future, the Ras Laffan project in Qatar, which the two partners also jointly own, can ship cargoes to Asia, while Golden Pass could ship cargoes to Europe.
In terms of growth, Volkov said Exxon could be interested in buying off-take from other North American LNG projects or partnering with a project that is being developed. However, he indicated that the number of players Exxon would work with is limited, especially along the crowded Gulf Coast.
"We place a premium on reliability and proven execution," the Exxon executive said.
On the second day of the weeklong conference in Houston, there was an emphasis on how the global LNG market needs buyers and sellers to come together to avoid a forecast for tightening supply during the early to middle part of next decade.
Future development
While many second-wave LNG developers in North America have begun embracing innovative contract models, including destination-price linkages to the Platts Japan Korea Marker or even imported coal prices, Volkov sees crude-linked pricing remaining the dominant contract model into the 2020s. He acknowledged the rise of new price indexes, but he said that some of the commonly referenced measures of so-called spot-market growth actually include short-term contract deals, while true prompt fixed-priced trades only comprise a small volume of that total.
In addition to putting pressure on rival LNG developers, some market observers have warned that the risk of overbuilding supply capacity could be heightened by LNG export projects getting sanctioned without firm offtake agreements.
Volkov downplayed that risk, saying there is a small pool of players that participate in the entire value chain with a strong enough balance sheet to take that route to FID.
"You are dealing with companies that are highly experienced, that are conservative in their decision making," he said.
Harry Weber and J. Robinson are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.
