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Vitol agrees 15-year LNG deal with US exporter Cheniere

Highlights

Contract is for 700,000 mt/year on FOB basis

Cheniere's flexibility helped secure deal

Barcelona — Cheniere Energy said September 17 it had secured a 15-year offtake deal with Switzerland-based global commodity trader Vitol as it looks to boost growth opportunities for its two US export terminals.

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The transaction, for 700,000 mt/year of LNG from Cheniere's marketing unit on an FOB basis starting this year, was announced as energy companies gathered at the annual Gastech conference in Spain.

Cheniere's operations allow it to be a one-stop shop in the LNG value chain, from securing feedgas for LNG production, making the LNG, arranging for tankers to pick up the LNG and then shipping LNG overseas. It exports cargoes on both spot and commercial basis under long-term contracts.

That flexibility is a selling point Cheniere's marketing unit has touted as other US players seek supply deals to finance their facilities along the Gulf, Atlantic and Pacific coasts. About a dozen projects are currently being proposed to US regulators, in addition to the handful of terminals already under construction.

The purchase price for the LNG offtake deal with Vitol is indexed to the monthly Henry Hub price, plus a fee.

Cheniere previously secured an offtake deal with global commodity trader Trafigura. In July, it inked a deal with Taiwanese state-owned oil and gas company CPC, which agreed to buy 2 million mt/year of LNG from Cheniere. The exporter's terminals are at Sabine Pass in Louisiana and Corpus Christi in Texas.

On the sidelines of the conference, Vitol's LNG global head, Pablo Galante Escobar, said his company chose Cheniere for its first long-term LNG offtake deal because of the flexibility Cheniere offered. Up until now, Vitol has been signing short-term LNG offtake deals.

"As a trader, we want to give flexibility to our end-users. We want to give flexibility to our clients. The contract we signed with Cheniere, a pioneer with LNG, allows us to do that," he said.

He added: "We know the LNG world is growing. A lot of that growth is coming from China, India, Pakistan. We can take it to wherever the best netback is."

The fact that Cheniere was the first out of the gate in the US among shale LNG exporters also helped its cause with Vitol.

"We respect them all," Escobar said. "Obviously, we have had a look at the market and seen the difference inside the US and outside the US. I don't think this will be our last deal."

Cheniere, he said, is "proven, reliable."

"Other companies are just starting," he added. "For us, it was very important our first first [long-term] deal wasn't a risky deal. Hopefully, we will do more with Cheniere and with other companies."

Cheniere's chief commercial officer, Anatol Feygin, said the LNG to be delivered to Vitol under the contract can be supplied from either the Sabine Pass or Corpus Christi terminals.

The first Sabine Pass cargo was shipped in February 2016. There are now four trains online there, and a fifth is under construction. At Corpus Christi, two trains are currently under construction and a third is planned. Feygin reiterated Cheniere's previous timing targets for Sabine Pass Train 5 and Corpus Christi Train 1.

"What we have said is we fully expect first LNG at both Sabine 5 and at Corpus 1 by the end of the year, and first cargoes shortly thereafter," Feygin said. "Things are going well, according to plan. Obviously, Corpus is a greenfield site. We're a little more cautious there rather than at Sabine, where all are the same design."

Asked in light of his comments if the timing at Corpus could get pushed back, Feygin said, "No, we're sticking with first LNG by year-end."

-- Harry Weber and Abache Abreu, newsdesk@spglobal.com

-- Edited by Pankti Mehta, newsdesk@spglobal.com