Freeport LNG Development LP made an agreement to support the planned fourth train of its Texas LNG export facility through an expected long-term off-take arrangement with a Japanese conglomerate described as a "foundation customer."
Under the "binding heads of agreement" between subsidiaries of Freeport LNG and Sumitomo Corp., announced Sept. 5, the companies will negotiate a 20-year liquefaction tolling agreement. In the general use of the term, a heads of agreement is the first step toward a legally binding contract.
The agreement is expected to start in 2023, in line with the targeted completion of Freeport's fourth train at the export terminal at Quintana Island on the Gulf Coast of Texas. The deal covers 2.2 million tonnes per annum of LNG production capacity, which would both help Sumitomo Corp. of Americas to expand its U.S. natural gas business and help Freeport find financing for the 5.1-mtpa train 4.
"We are pleased to announce the start of a long-term relationship with Sumitomo as our first train 4 foundation customer," said Michael Smith, chairman and CEO of Freeport LNG, in a joint statement with Sumitomo. "... Sumitomo's 2.2 mtpa of capacity under this [heads of agreement] is a major step toward Freeport LNG contracting the approximately 3.5 mtpa needed for financing and commencing construction of train 4."
Freeport LNG's train 4 was one of 12 LNG projects to get new and updated environmental schedules from the Federal Energy Regulatory Commission on Aug. 31 as part of the agency's effort to speed up reviews of applications to build export terminals. FERC set a self-imposed Nov. 2 deadline to issue an environmental assessment for train 4, which would be a major step toward final authorization.
Shingo Ueno, president and CEO of Sumitomo Corp. of Americas, touted the agreement with Freeport LNG as an important step for the company in the global market. "We believe our ability to learn and grow through this long-term project will allow us to provide real value to the energy industry globally, connecting the growing natural gas supply in the U.S. and the increasing appetite for LNG worldwide," Ueno said.
The Freeport LNG terminal is expected to come online in September 2019 following a delay, with the second and third trains slated to start up in January 2020 and May 2020. The estimated $13 billion venture will be able to produce 15.3 mtpa once all trains are in service, not including the yet-to-be-approved train 4. Freeport has reported that it has contracted about 13.9 mtpa of capacity for the first three trains.
In June, the Freeport LNG developer signed a short-term off-take deal with Trafigura Pte. Ltd., under which the exporter's marketing arm will sell 500,000 tonnes per annum of LNG to the trading company beginning in July 2020.