Tanker arrives at Freeport LNG to load first export cargo: operator

Houston — An unladen LNG tanker arrived Friday at Freeport LNG to load the first export cargo from the Texas facility, a spokeswoman said.

The Mitsui- and Kansai Electric Power-owned LNG Jurojin had been anchored since August 15 in a queue area for tankers headed to Freeport. It moored at the terminal around 9:30 am CDT. It was being prepared for first loading, Freeport LNG spokeswoman Heather Browne said in an email responding to questions. The tanker has a capacity of 155,300 cu m, according to Platts cFlow trade-flow data, but the size of the cargo was unclear.

S&P Global Platts Analytics netback analysis sees the cargo realizing the best netback in Northeast Asia, based on prevailing delivered prices and market shipping rates. According to a market source, the commissioning cargoes from Freeport LNG, including the first one that was being loaded aboard the Jurojin, are being taken by Shell. This means that the fate of the first few cargoes may be subject to portfolio optimization economics, rather than independent price signals, however.

From the US Gulf Coast, the number of transit days to Northeast Asia is around 23, almost double the approximate 12 days needed to reach Europe.

Higher prices in Asia in late September and early October, however, compensate for the higher shipping costs. Analysis done by Platts shows that utilizing the Panama Canal, a US Gulf Coast cargo loaded in early September would result in a netback price of between $2.705/MMBtu and $2.73/MMBtu. Even with the lower number of shipping days, netback prices to Europe are only between $2.35/MMBtu and $2.38/MMBtu.

A second tanker, the GasLog Partners-owned Methane Heather Sally, remained anchored offshore of Freeport LNG on Friday. That tanker last picked up a cargo at Nigeria 's Bonny liquefaction terminal around August 3 and dropped off that cargo at Mexico's Altamira receiving terminal on August 22, Platts Analytics vessel-tracking data show.

The start of consistent LNG production at the facility was confirmed August 19. Freeport LNG has said that Train 1 would begin commercial operations in September. A third tanker, Soshu Maru, is scheduled to arrive at the terminal around the middle of the month, Platts Analytics data show. That tanker last picked up a cargo around August 2 at Australia's Darwin terminal and unloaded the LNG at Japan 's Negishi receiving terminal on August 12.

COMMERCIAL CONTRACTS

The primary long-term buyers of offtake from Freeport LNG Train 1 are Japanese utilities Osaka Gas and Chubu Electric, which each control 2.2 million mt/year of capacity. Additional long-term contracts were signed with BP for 4.4 million mt/year of offtake capacity for Train 2, and France 's Total and South Korea 's SK E&S, which are splitting another 4.4 million mt/year of offtake capacity at Train 3.

In total, long-term contracts cover roughly 13.2 million mt/year of the proposed 15 million mt/year three-train facility's output, with additional short-term contracts, including a three-year deal with commodity trader Trafigura, covering the remaining supply.

As Freeport LNG operates on a tolling model, buyers of the LNG produced there are responsible for the procurement and delivery of feedgas supply to the liquefaction facility, as well as arranging shipping and deciding where the cargoes are delivered.

-- Harry Weber, Harry.Weber@spglobal.com

-- Luke Stobbart, luke.stobbart@spglobal.com

-- Edited by J. Robinson, newsdesk@spglobal.com