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Venture Global agrees to sell 4 million mt/year of LNG to China's Sinopec: DOE

Highlights

Oct. 1 letter, now public, says deals signed Sept. 1

High Asian and European prices spur contracting

Venture Global LNG has signed two long-term offtake contracts with China's Sinopec for a total of 4 million mt/year of supplies that will be tied to its proposed Plaquemines LNG facility in Louisiana, a letter it filed with the US Department of Energy that was made public Oct. 19 said.

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The 20-year deals -- one for 2.8 million mt/year of supply and the other for 1.2 million mt/year of supply -- represent by far the largest contract by volume for US LNG agreed to by a single Chinese entity.

The disclosure, in an Oct. 1 letter from Venture Global attorneys to the DOE that was posted on the government agency's website, follows Cheniere Energy's announcement Oct. 11 that a subsidiary of China's ENN Natural Gas had signed a 13-year deal to buy LNG from the US exporter. Combined with two previous supply deals with PetroChina, Cheniere has 2.1 million mt/year of volume under long-term contract with Chinese counterparties.

Venture Global did not issue a statement or announcement about the contracts with Sinopec, formally known as China Petroleum & Chemical Corp. In an email responding to questions, a Venture Global spokesperson declined to comment.

Pricing terms were not disclosed in the letter, which said the contracts were signed Sept. 1.

Volatile Asian, European prices

New LNG long-term contracting between US producers and Chinese buyers comes amid sharply volatile Asian and European prices that remain high, though down from record levels seen earlier in October.

Venture Global's 10 million mt/year Calcasieu Pass facility in southwest Louisiana is being built using modular trains that are smaller than the traditional liquefaction units used at other US facilities. The modular trains are being constructed in Italy and delivered to the site and plugged in one at a time.

Venture Global has said it plans a phased operational startup. If it does begin production and exports by the end of 2021 as it said earlier in the year it could, that would be about a year earlier than originally anticipated. The company has said full operations at the export terminal were expected in mid-2022.

Plaquemines LNG, which would be built in two phases south of New Orleans and have a production capacity of up to 20 million mt/year, has not yet been formally sanctioned, though a Venture Global executive said at an industry conference in September that initial construction activities would begin "imminently."

Destination flexibility

The larger contract between VG's Plaquemines LNG and Sinopec calls for the LNG to be delivered free on board. The smaller contract calls for the LNG to be delivered "DPU," according to the letter, which did not define what that means. Sinopec will have destination flexibility, with the promise that it will only deliver the LNG to countries allowed under Venture Global's permits, according to the letter to the DOE.

LNG supplies under the contracts take effect on the commercial operation date of Phase 1 of the Plaquemines LNG facility, the letter said. Sinopec may extend the contract term for up to 10 years by notice to seller in accordance with specified conditions, the letter said.

As for the sale-and-purchase agreement between Cheniere's marketing unit and the ENN Natural Gas affiliate, that deal calls for the LNG to be delivered on a free-on-board basis from July 2022, with the purchase price indexed to the US Henry Hub price plus an undisclosed, fixed liquefaction fee.

Cheniere also has two long-term contracts with PetroChina for a combined 1.2 million mt/year of LNG. Only a small portion is in effect, with shipments on the balance starting in 2023.