Tellurian will deliver 1.5 million tonnes per annum of LNG to Vitol for a period of 15 years. Credit: Erin.

Tellurian Trading UK has signed a 15-year memorandum of understanding (MoU) to supply liquefied natural gas (LNG) to energy and commodity trading firm Vitol.

Under the agreement, Tellurian will supply 1.5 million tonnes per annum of liquefied natural gas (LNG) for a period of 15 years from the proposed Driftwood LNG export terminal once operations commence.

Gas will be supplied from Tellurian Trading’s LNG offtake capacity at the terminal.

Under the MOU, the companies will negotiate a LNG Sale and Purchase Agreement (SPA) under which Vitol will be able to buy LNG free on board (FOB).

The SPA will be dependent on Tellurian’s receipt of regulatory approvals and a final investment decision on the construction of the export terminal.

“The LNG business is evolving into a true commodity market.”

The supply deal is based on the Platts Japan Korea Marker (JKM), which is the benchmark price assessment for spot LNG cargoes delivered ex-ship into Japan, South Korea, China and Taiwan.

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Tellurian president and CEO Meg Gentle said: “The LNG business is evolving into a true commodity market, which includes LNG purchases and sales based on actual LNG prices rather than indexing to other energy products.

“Tellurian is proud to work with Vitol, who has long been known for its innovation and creativity in the energy commodity markets, to lead LNG market transformation with a long-term LNG sale at the market index.”

Furthermore, Vitol is considering a potential equity investment in the Driftwood Holdings partnership, according to Tellurian.

Located on the west bank of the Calcasieu River, south of Lake Charles, Louisiana, the Driftwood terminal is expected to have a capacity of 27.6Mtpa. Bechtel is building the terminal and operations are anticipated to begin by 2023.