Midstream energy company Energy Transfer subsidiary Energy Transfer LNG Export has signed an agreement to supply liquefied natural gas (LNG) to energy major Shell from its proposed Lake Charles LNG export facility in the US.
Under the sale and purchase agreement (SPA), Energy Transfer LNG Export will supply 2.1 million tonnes per annum of LNG to Shell for a period of 20 years.
The supplies will be made on a free-on-board (FOB) basis. The purchase price will be indexed to the Henry Hub benchmark, along with a fixed liquefaction charge.
Energy Transfer LNG president Tom Mason said: “We believe that Lake Charles is the most competitive LNG project on the Gulf Coast.
“We have had a long-standing relationship with Shell and its predecessor BG Group, as a customer of our regasification facility at Lake Charles. It is great to have Shell re-engaged in the project as [an] LNG offtake customer.”
The SPA, however, is contingent on Energy Transfer making a positive final investment decision (FID) on the project, and other conditions.
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Shell Energy Marketing executive vice-president Steve Hill said: “We are very happy to be working once again with Energy Transfer and adding Lake Charles volumes to our global LNG supply portfolio.
“This agreement will enable us to further meet the increasing demand for LNG and positions Shell as a leading buyer of LNG from the US which, in 2021, became the world’s biggest LNG supplier.”
The Energy Transfer’s Lake Charles LNG facility, which is planned to be built on the Gulf coast, has received all necessary permissions.
To be developed on the existing brownfield regasification facility site, the facility will utilise four existing LNG storage tanks, two deep water berths, and other LNG infrastructure.
The facility will also have a direct connection to the Energy Transfer-operated Trunkline pipeline system, which is linked to multiple intrastate and interstate pipelines.
The SPA comes amid surging LNG demand and prices as a result of Russia’s invasion of Ukraine, reported Reuters.
Shell was an original supporter of the proposed LNG facility. The firm exited the project in 2020 due to weaker energy market conditions following the Covid-19 pandemic.