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Cheniere Energy Strikes LNG Supply Deal With BASF

The United States’ largest producer of liquefied natural gas (LNG), Cheniere Energy (NYSE:LNG), has struck a deal with Germany’s BASF SE (OTCQX:BASFY) to supply the chemical giant with 0.8 million tonnes per annum (mtpa) of LNG to the chemicals giant. 

The BASF deal is one of several long-term supply deals Cheniere has signed so far this year. Back in June, Cheniere signed a long-term LNG sale and purchase agreement with China’s ENN Energy Holdings. Under terms of the deal, 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. Last year, ENN signed a 13-year deal with Cheniere to purchase 900K metric tons/year, again based on Henry Hub prices.

Currently, 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. 

Also in June, Cheinere entered another LNG 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.

European natural gas prices have been surging, as traders panicked over the possibility of reduced LNG supply from Australia, the world leading supplier of the commodity. Prices of TTF, the European benchmark, climbed nearly 10% to €41 per megawatt hour ($13 per million British thermal units) on Monday’s session before finishing the day up 6.5 per cent at €40 MWh.

Commodity analysts have said that the sudden jump was also likely due to some traders rushing to close their short positions on the news of tightening supplies. Europe has failed to secure enough long-term LNG contracts to offset cut-off Russian gas imports, with Reuters earlier predicting this may prove costly next winter and could sharply tighten the market. 

By Alex Kimani for Oilprice.com

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