Energy Transfer signs 20-year LNG contract with Shell
By Keefe Borden26 August 2022
A subsidiary of Energy Transfer LP (NYSE: ET) has signed a 20-year agreement to sell 2.1 million tons per year (mtpa) of LNG to Shell from its Lake Charles LNG project.
Under terms of the agreement between the two companies, Energy Transfer will supply the LNG on a free-on-board (FOB) basis with a purchase price indexed to the benchmark Henry Hub price plus a fixed liquefaction charge. The first deliveries are expected to start as early as 2026.
The agreement will become fully effective after a series of conditions are met, one of which is that Energy Transfer will make a final investment decision on the project.
“We believe that Lake Charles is the most competitive LNG project on the Gulf Coast,” said Tom Mason, President of Energy Transfer LNG. “And we are particularly pleased that one of the most prominent LNG industry participants has selected Lake Charles LNG as a supplier.”
Energy Transfer LNG has announced six SPAs in the last five months, bringing the total amount of LNG contracted from its Lake Charles LNG export facility to nearly 8 mtpa.
“We have had a long-standing relationship with Shell and its predecessor, BG Group, as a customer of our regasification facility at Lake Charles,” added Mason. “It is great to have Shell re-engaged in the project as an LNG offtake customer. This SPA demonstrates their belief in the project and their commitment to continuing to deliver much-needed supplies of natural gas to markets around the world.”
“LNG is a flexible energy source, connecting demand and supply centres globally and delivering reliable energy to millions of people. We are very happy to be working once again with Energy Transfer and adding Lake Charles volumes to our global LNG supply portfolio,” said Steve Hill, Shell’s executive vice president of energy marketing.
“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,” he said.
Energy Transfer’s Lake Charles LNG export facility is a fully permitted project on the Gulf Coast having received authorizations from the Federal Energy Regulatory Commission as well as export authorizations from the Department of Energy.
The LNG export facility will be constructed on the existing brownfield regasification facility site and will capitalize on four existing LNG storage tanks, two deep water berths and other LNG infrastructure. Lake Charles LNG will also benefit from its direct connection to Energy Transfer’s existing pipeline system that in turn provides connections to multiple intrastate and interstate pipelines.
These pipelines allow access to multiple natural gas producing basins, including the Haynesville, the Permian and the Marcellus Shale.