Freeport LNG inks 20-year export contract with BP


Freeport LNG Expansion signed an agreement allowing a BP subsidiary to export 4.4 million tpy of liquefied natural gas out of its terminal in Freeport, Texas, the company said Monday.

The arrangement shows the continuing progress of the US LNG-export business despite only one company, Cheniere Energy, holding the necessary government permits to ship gas to a majority of foreign countries.

Freeport and competitor Cameron LNG, a subsidiary of Sempra Energy, are waiting for federal approval to ship LNG to countries in free-trade agreements with the US.

Freeport said the 20-year tolling agreement with BP would begin after construction is completed of its second liquefaction unit on Quintana Island near Freeport, Texas. It expects to begin shipments in 2017.

The companies didn't disclose the exact terms of the deal.

Now that Freeport has secured customers for the entirety of its two planned liquefaction segments, the company expects to gain the financing to build them as soon as the company receives the necessary government permits, Freeport LNG CEO Michael Smith said.

"With the first two liquefaction trains of the project fully contracted, we intend to approach the financing markets imminently so that we can begin construction on the initial two-train facility as soon as we receive (government) approval," Mr. Smith said.

Freeport LNG in July signed contracts to supply a combined 4.4 million tpy of LNG to Japanese utilities Osaka Gas Co. and Chubu Electric Power Co.

Utility companies in Japan, South Korea, Spain and elsewhere are eager to buy natural gas from the US. Thanks to a drilling boom brought by new drilling methods, US natural gas prices are among the lowest in the world.

Meanwhile, BP and other North American natural gas producers are eager to reach a global market in hopes of boosting natural gas prices at home. Natural gas futures closed at $3.27/MMBtu Friday, down from $13.69 in July 2008.

"We look forward to serving our LNG customers with even more flexibility from our portfolio of natural gas," Paul Reed, CEO of BP Integrated Supply & Trading, said in a statement.

Dow Jones Newswires

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