Vitol backs Delfin LNG project offshore Louisiana under 15-year supply deal

The US arm of global trading firm Vitol is placing support behind a floating LNG export terminal under development in the US Gulf of Mexico, on the back of a rising tide for US LNG demand.

Vitol has taken a stake in US LNG infrastructure developer Delfin as part of a long-term supply deal that will see the company offtake 500,000 mt/year in LNG from the Delfin Deepwater Port 40 offshore Cameron Parish, Louisiana, the companies said July 13. The supply agreement is indexed to the Henry Hub, with total proceeds for Delfin estimated at around $3 billion over the deal's 15-year term.

Delfin has struggled to secure sufficient support for the floating Deepwater terminal since proposing the project in 2013. The Federal Energy Regulatory Commission has thrice granted the company one-year extensions to build connected onshore facilities associated with the project as development struggled to gain traction. But Russia's invasion of Ukraine on Feb. 24 has added urgent demand for US LNG exports facilitated by projects such as Delfin's as European buyers attempt to turn away from Russian gas.

"Recent events have only accelerated the need for a wider array of potential buyers to source reliable low-cost energy from the safety of the US at compelling prices," Delfin CEO Dudley Poston said July 13.

Demand for US feedgas headed to LNG export facilities has outstripped year-ago levels throughout 2022, with Russia's invasion of Ukraine and ensuing sanctions against Russian energy likely solidifying that trend moving forward. US feedgas demand has averaged around 12.17 Bcf/d this year up to July 13, a 15.4% increase over the same period a year prior, data from Platts Analytics showed.

Uncertainty in European gas markets caused by dwindling Russian gas deliveries is just one factor supporting the demand outlook for US LNG. The European Union's recent inclusion of natural gas in its sustainable energy taxonomy provides some backbone for what will likely be sustained demand for US-sourced LNG, despite the EU's long-term goal to lean on a larger share of renewables in its energy mix. Contractual commitments to Asian buyers and limited LNG supply growth through 2024 are also likely to spur intensifying competition for supplies in the more immediate future.

Vitol support

While relatively modest in scope, Vitol's offtake deal should bring Delfin's Deepwater project one step closer to addressing this rising demand for US LNG. Delfin said July 13 it is finalizing term agreements with other customers in pursuit of the 2 million-2.5 million mt/year in supply deals the company needs to justify final investment and launch construction on the project later this year.

Delfin declined to comment on the size of Vitol's stake in the project, which is aiming to become the first floating offshore LNG export terminal in US waters. Feedgas from the company's UTOS pipeline as well as the Grand Chenier Pipeline, both offshore Mexico, is expected to reach the development's floating terminals through Genesis Energy's offshore HIOS pipeline.

Delfin's Deepwater Port 40 project is authorized to offer total liquefaction capability of up to 13 million mt/year of LNG, or around 657.5 Bcf/year of natural gas, once fully online in 2026.