Cheniere And China’s ENN Energy Lock In 20-Year LNG Deal

The United States largest producer of LNG, Cheniere Energy (NYSE:LNG), has signed a long-term liquefied natural gas (LNG) sale and purchase agreement with China’s ENN Energy Holdings. 

ENN will purchase ~1.8M metric tons/year of LNG on a free-on-board basis at Henry Hub prices for a 20-year term, with deliveries to commence mid-2026 ramping up to 0.9 million tonne per annum (mtpa) in 2027. 

The deal is subject to the completion of Cheniere’s Sabine Pass project, which is being developed to include up to three liquefaction trains with an expected total production capacity of ~20M tons/year of LNG. 

Current;y, Sabine Pass has six fully operational liquefaction units aka ?“trains”, each capable of producing ~5 mtpa of LNG for an aggregate nominal production capacity of ~30 mtpa. Cheniere processes more than 4.7 billion cubic feet per day of natural gas into LNG. Sabine Pass has multiple pipeline connections to interstate and intrastate pipelines, and is located less than four nautical miles from the Gulf of Mexico thus providing easy access to seafaring vessels. 

Last week, Cheinere entered another long-term liquefied natural gas sale and purchase agreement with Equinor ASA (NYSE:EQNR) that will see the Norwegian national oil company purchase 1.75M metric tons/year of LNG on a free-on-board basis for a purchase price indexed to the Henry Hub price, for a 15-year term.

Last year, ENN signed a 13-year deal with Cheniere to purchase 900K metric tons/year, again based on Henry Hub prices.

Henry Hub and European natural gas prices have jumped following turmoil in Russia’s political landscape over the past few days. Henry Hub natural gas was trading up 11.8% to $2.92/MMBtu, the highest level since early March after the Wagner mercenary group staged a short-lived revolt.

“While the immediate supply risks have disappeared, the market will likely have to start pricing in a larger risk premium for oil given the growing instability in Russia,” ING strategists Warren Patterson and Ewa Manthey said on Monday.  

By Alex Kimani for Oilprice.com

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