Shell, MET Group LNG term supply agreement for 800,000 mt/year starting 2026-27: sources

Shell's 10-year LNG sales and purchase agreement with Swiss trader MET Group is for a volume of 800,000 mt/year starting in 2026-27, sources told S&P Global Commodity Insights.

The LNG deal was priced around 119% of Henry Hub plus a constant of approximately $2.70/MMBtu, sources said in July post the deal announcement.

MET Group announced(opens in a new tab) July 9 that it had signed a 10-year deal with Shell for securing LNG on a free-on-board basis with the primary objective to supply MET's European customers with US LNG.

"Alongside bolstering security of supply for MET's European portfolio, this flexible LNG supply enables its diversification ambitions, allowing the company to extend its geographical scope to new regions such as Asia," MET had said in the announcement.

Shell declined to comment and MET International did not respond to queries at the time of publishing Aug. 2.

The LNG is expected to be delivered from the US Gulf of Mexico as part of Shell's portfolio, however, MET was unable to specify the contracted volumes, a MET spokesperson had told S&P Global Commodity Insights by email July 9.

The company has long-term regasification capacity bookings in Germany, Croatia and Spain and has imported into eight different countries in recent years in the Mediterranean, Northwest Europe and the Nordic region, delivering 30 cargoes in Europe in 2023.

There were divergent views on the pricing among market participants familiar with LNG origination and long-term contracts.

One source based in Singapore said that the price was low because the contract was beginning relatively earlier and showed a narrower margin, which indicated a risk premium for betting on US projects.

Another market source familiar with long-term contracts said the price seemed fair given that there was no equity component in the deal and so could not be compared with other recently-concluded LNG deals with FOB offtake from the US.

Recently, China's Shenzhen Energy signed a 10-year contract with Glencore for 500,000 mt/year LNG starting in 2026-27 with a price of around 120%-121% HH plus a constant of approximately $4.40-$4.50/MMBtu on DES basis, as reported by Commodity Insights earlier(opens in a new tab).

While the Shenzhen Energy deal is on a DES basis, the price is also higher than other FOB contracts representing a rise in the cost of LNG offtake on an FOB basis.

Considering the forward curve of Henry Hub as on Aug. 1, the price for the deal would imply an average value of $7.02/MMBtu on an FOB basis over 2027, according to data from the Chicago Mercantile Exchange.

As per the forward curve of Platts JKM, the benchmark LNG price for cargoes delivered to Northeast Asia, the average value was assessed at $10.325/MMBtu Aug. 1, Commodity Insights data showed.

Platts assessed the North West Europe Marker, the price for LNG cargoes delivered to Northwest Europe, at $11.475/MMBtu for September on Aug. 1, according to data from Commodity Insights.