Agreement to export US LNG to Europe

Source: press release, 19 December 2018

The Port Arthur liquefaction-export facility is proposed to include two natural gas liquefaction trains capable of processing approximately 11 Mtpa of LNG; up to three LNG storage tanks; two marine berths, and associated facilities
The Port Arthur liquefaction-export facility is proposed to include two natural gas liquefaction trains capable of processing approximately 11 Mtpa of LNG; up to three LNG storage tanks; two marine berths, and associated facilities (illustration: Sempra Energy)

Port Arthur LNG, LLC, a subsidiary of Sempra Energy, and the Polish Oil & Gas Company (PGNiG) have announced they have entered into a definitive 20-year sale-and-purchase agreement for liquefied natural gas (LNG) from the Port Arthur LNG liquefaction-export facility under development in Jefferson County, Texas.

The announcement is an important milestone as Sempra Energy pursues its long-term goal of exporting 45 million tonnes per annum (Mtpa) of North American LNG.

“This agreement marks an important step toward Poland’s energy independence and security,” says US Secretary of Energy Rick Perry. “As demonstrated with the launch of the Strategic Dialogue on Energy in Poland last month, the Trump Administration remains committed to increasing energy diversity, advancing energy security, strengthening national security, and creating a future of prosperity and opportunity in Poland and throughout the region.”

“This agreement with PGNiG represents an important expansion of our portfolio of contracts for LNG exports and major step forward in the development of our Port Arthur LNG project,” says Jeffrey W. Martin, chairman and CEO of Sempra Energy. “Last month, we began the commissioning phase of our Cameron LNG liquefaction-export facility in Louisiana. This agreement, along with the great progress on Cameron LNG, continue to validate our growth strategy as we advance our vision to become North America’s premier energy infrastructure company.”

“Our activities show that we consistently implement our strategy,” says Piotr Woźniak, president of the management board of PGNiG. “Another long-term contract not only allows us to develop LNG portfolio with a view to delivering to Poland, but it gives us, in the near future, the possibility of trading in LNG purchased on a global scale. I am glad that Sempra Energy is among our American partners. I am convinced that we will have good long-term cooperation.”

While financial terms were not disclosed, the agreement is for the sale and purchase of 2 Mtpa, or approximately 2.7 billion cubic metres per year (after regasification) – enough natural gas to meet about 15% of Poland’s daily needs. The agreement is subject to certain conditions precedent, including Port Arthur LNG making a final investment decision.

Under the agreement, LNG purchases from Port Arthur LNG will be made on a Free-On-Board basis, with PGNiG responsible for shipping the LNG from the Port Arthur terminal to the final destination. Port Arthur LNG will manage gas pipeline transportation, liquefaction processing and cargo loading, giving PGNiG flexibility in cargo management. PGNiG plans to deliver cargos to domestic customers in Poland or trade LNG on the global market, once operations commence.

In addition to the PGNiG agreement, Sempra Energy signed a Memorandum of Understanding (MOU) with Korea Gas Corporation last year for potential participation in the Port Arthur LNG project.

Sempra Energy has partnered with Mitsubishi, Mitsui & Co. LTD. and Total S.A. on the construction of the Cameron LNG liquefaction-export project in Hackberry, La. The first phase of this project is currently being commissioned and with the expectation that LNG will be produced from all three liquefaction trains in 2019.

Sempra Energy also has an MOU with Total, S.A. for some export capacity at Cameron LNG Phase 2 and Heads of Agreements (HOAs) with Mitsui & Co. LTD., Tokyo Gas Company and Total, S.A. for all of the export capacity at Energía Costa Azul Phase 1 in Baja California, Mexico. An MOU and HOA define terms and conditions of contracts to be negotiated and do not commit any party to enter into a definitive agreement.

The Port Arthur liquefaction-export facility is proposed to include two natural gas liquefaction trains capable of processing approximately 11 Mtpa of LNG; up to three LNG storage tanks; two marine berths, and associated facilities.

The Port Arthur liquefaction-export facility is scheduled to receive its final environmental impact statement from the Federal Energy Regulatory Commission next month. Earlier this year, Bechtel was selected by Port Arthur LNG to serve as the engineering, procurement, construction and commissioning contractor for the facility, subject to reaching a definitive agreement.

Development of the Port Arthur LNG liquefaction facility is contingent upon obtaining additional customer commitments, completing the required commercial agreements, securing all necessary permits, obtaining financing, incentives and other factors, and reaching a final investment decision.