Portugal's Galp will buy 500,000 mt/year of LNG from Cheniere under a long-term contract linked to the US exporter's proposed expansion of its Sabine Pass LNG export terminal in Louisiana, the companies said Aug. 5.
The volumes under the 20-year sale and purchase agreement will be sold free-on-board for a purchase price linked to Henry Hub, plus a fixed liquefaction fee. The LNG will be sold by Cheniere's marketing arm, and the deal is tied to the second of two liquefaction trains that the expansion(opens in a new tab) entails.
The agreement also includes access to a limited number of early cargoes, from 2027 and up to the start of the second train, Galp said. Deliveries from the expansion train are expected to start in the early 2030s, Cheniere said.
"This agreement further enhances Galp's LNG sourcing basket with access to competitive US volumes, adding flexibility and diversity to its portfolio," Galp said in a statement.
For Cheniere, the contract is the first long-term offtake deal that top US LNG exporter has announced in 2024 as it pursues expansions of its two export terminals in Louisiana and Texas. It is also the second deal that Cheniere has specifically tied to production from Train 8 at Sabine Pass.
The deal was subject to conditions including Cheniere reaching a positive final investment decision on Train 8.
It showed Cheniere is continuing to build commercial progress in support of the new facilities at the Louisiana terminal, despite the project being among those caught up in the US Department of Energy's "pause" on issuing key LNG export authorizations announced in January. Contracting tied to US LNG has slowed since the permitting freeze, but Cheniere executives have expressed confidence that it would not thwart the company's expansion plans.
Cheniere CEO Jack Fusco said in a statement announcing the deal with Galp that it "reinforces the critical role US natural gas is expected to play in Europe's energy mix into the second half of this century."
"This SPA is expected to provide further support for the SPL Expansion Project, and demonstrates continued momentum as we progress development of the project," Fusco said.
The expansion is expected to produce up to 20 million mt/year, which includes additional output through debottlenecking efforts. It would add two large scale trains, each with a nameplate capacity of about 7 million mt/year and a maximum production capacity of about 8.4 million mt/year. Additional production capacity would come from a boil-off-gas re-liquefaction unit that could yield about 900,000 mt/year.
Six trains are currently in operation at Sabine Pass, each with a capacity of about 5 million mt/year.
Prior to the latest deal, Cheniere signed a series of binding long-term deals supporting the expansion covering about 6.5 million mt/year, which the company has said is enough to commercialize Train 7.
The previous deal(opens in a new tab) tied to Train 8 -- a 20-year SPA for about 900,000 mt/year with Chinese city gas distributor Foran Energy Group – was announced in November 2023.
The deal with Galp comes as delivered LNG prices to southern Europe continue to trade above $10/MMBtu.
Platts, part of S&P Global Commodity Insights, assessed the DES Mediterranean LNG marker on Aug. 5 at $11.401/MMBtu.
The US -- along with Nigeria -- are the main LNG suppliers to the Portuguese market.
So far in 2024, the US has supplied some 890,000 mt of LNG to Portugal, second only to Nigeria (1.08 million mt), according to Commodity Insights data.
In 2023, the US was the leading LNG supplier to Portugal with a total of 1.67 million mt of LNG delivered.
Portugal was also the first European country to receive a LNG cargo from Sabine Pass in 2016.
Cheniere is targeting a final investment decision on the Sabine Pass expansion in 2026 and has said the project could be constructed in a single stage or multiple stages. The exporter is also developing a midscale expansion of its Corpus Christi LNG terminal in Texas that would add some 3 million mt/year. Cheniere is targeting an FID on that project, which also requires a DOE permit, in 2025.
Besides the DOE approvals, Cheniere also requires permits from the US Federal Energy Regulatory Commission to construct the expansions. Cheniere submitted an application(opens in a new tab) at FERC in February for the Sabine Pass expansion.
Cheniere applied at FERC in March 2023 for the smaller expansion Corpus Christi, which received(opens in a new tab) a favorable environmental review from agency staff in June and awaits a decision by the commission.
Cheniere is already building a roughly 10 million mt/year midscale expansion the Corpus Christi plant that is expected to start producing LNG by the end of 2024.
