Sunday, December 11, 2011

More Gulf Coast LNG Sold

Cheniere Energy Partners has signed another deal to export LNG from Sabine Pass - this time to the Indian utility company Gail, (LINK) and quote:

State-owned gas utility GAIL India today said it has signed an agreement to buy 3.5 million tonnes a year of LNG for 20 years from a US firm to meet India's growing energy needs.
"GAIL has signed a Sales and Purchase Agreement (SPA) for supply of LNG over 20 years with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, USA for supply of 3.5 million tonnes per annum of LNG," the company said in a press statement here.  
Supplies may start as early as 2016."Under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (US gas benchmark) basis after transfer of custody on FOB. LNG will be loaded onto GAIL's vessels," it said.The SPA has a term of 20 years commencing upon the date of first commercial delivery, and an extension option of up to 10 years.
It's interesting to note that the price of LNG under this agreement is indexed to Henry Hub vs. WTI or Brent crude.  That indicates that the buyer believes in long term low Henry Hub prices and sought to de-link their gas price from crude.  For Cheniere, indexing to Henry hub allows them to operate the plant and collect a predictable margin regardless of variations in the crude market.

Of course this is all very interesting for Alaskans.  First - Exporting lower 48 shale gas as LNG is a good thing because it builds support and stabilizes demand for L48 gas.  Second - it shows that long term LNG deals are possible, but the terms of the agreements have to be smart and fair to both parties. Third - I'm interested to see announcements of LNG export deals vs. announcements of new combined cycle power plants.  The export market may beat domestic power producers to the punch.

No comments: