Woodside Petroleum has turned the threat of cheap liquefied natural gas exports from the US into an opportunity for the producer to resell some of that LNG at a higher price.
Woodside Petroleum has turned the threat of cheap liquefied natural gas exports from the US into an opportunity to resell some of that LNG at a higher price.
Woodside announced today it had signed a 20-year contract with a 10-year extension option to buy 0.85 million tonnes of LNG per year from US-based private equity-backed Cheniere Energy.
Cheniere Energy is developing two LNG projects in the US – the more advanced Sabine Pass, along the border between Texas and Louisiana, and the Corpus Christi Liquefaction project in Texas, with which Woodside has signed an agreement.
The deal is a unique milestone for Woodside, which in October last year announced it had opened a Singapore office with the aim to trade LNG from other companies outside Australia to markets in South America or North Asia.
At Woodside’s annual general meeting held in Perth in April, chairman Michael Chaney outlined the threat the US posed due to its competitive costs and trajectory towards becoming a LNG exporter.
In a statement today, Woodside chief executive Peter Coleman said the agreement with Cheniere’s Corpus Christi project provided a new product source that diversified Woodside’s offering.
“This agreement is a demonstration of how we are extending and enhancing our market and trading capabilities and adding value to the portfolio,” he said.
“From a geographic, pricing and specification perspective, we expect this US LNG to be attractive to LNG purchasers, complement our existing LNG portfolio and allow us to exploit new opportunities.”
Woodside will begin buying LNG from the Corpus Christi project when it starts its second production train, expected in 2019.
It will pay 15 per cent above the monthly Henry Hub price plus $US3.50 per million British thermal unit.
Woodside said this was in line with contracts signed with the other buyers from the Corpus Christi LNG project.
Cheniere Energy chairman and chief executive Charif Souki said Woodside would join its portfolio of customers in the Corpus Christi project, which to date had entered into agreements to buy 6 million tonnes per annum of LNG.
The Corpus Christi LNG project is planned to include up to three LNG trains with a combined production capacity of 13.5mtpa.
Woodside has estimated new LNG supplies from the US will approach 40mtpa by 2020.
Mr Souki said Cheniere was in advanced discussions with other parties and was working towards finalising more offtake agreements for the Corpus Christi project.
The agreement with Woodside is subject to certain conditions, including Corpus Christi receiving regulatory approvals, securing necessary financial arrangements and making a final investment decision to build its second train, due to occur by early 2015.
The US is set to become a global LNG exporter by 2016, with a number of aspiring export LNG projects in the pipeline.
Business News has previously reported on the progress of US LNG projects in the pipeline.
Meanwhile, West Perth-based Liquefied Natural Gas Limited announced today its pipeline operator, Kinder Morgan Louisiana Pipeline, had lodged an application with the US Federal Energy Regulatory Commission in relation to transporting gas to its proposed Magnolia LNG project in Louisiana
LNG said it was working towards a final investment decision on the 8mtpa LNG plant by mid-2015.
Woodside's shares were up 0.24 per cent at $41.17 at 1.40pm WST following its announcement.
At the same time LNG's shares were up 6.07 per cent at $2.27 following its announcement.
