Energy Transfer Enters into LNG Offtake Agreements for Lake Charles Project

Dallas-based Energy Transfer LP has entered into three long-term offtake liquefied natural gas (LNG) agreements for its Lakes Charles LNG project, the company said in a news release.

The three non-binding heads of agreement (HOAs) combine for 3.6 million metric tons per annum (mtpa) of LNG to be exported to customers in Asia and the USA. The HOAs are subject to the negotiation and execution of definitive agreements, Energy Transfer said.

The first HOA is with an unidentified Japanese consortium for the purchase of 1.6 mtpa for a 20-year term, subject to an option to convert the offtake arrangement to equity participation providing for the same volume of LNG, the news release said.

The second HOA is for Chesapeake Energy Marketing LLC to supply Lakes Charles LNG with volumes of natural gas sufficient to produce 1.0 mtpa of LNG for 15 years, after which Gunvor Singapore Pte Ltd would buy LNG from Chesapeake at a price indexed to the Japan Korea Marker for a period of 15 years, according to the news release.

The third HOA is with an unnamed USA customer and “relates to a tolling arrangement for 1.0 mtpa for a 15-year term”, Energy Transfer said.

“We are pleased with the continued confidence of our customers in the Lake Charles LNG project”, Lake Charles LNG President Tom Mason said. “These HOAs are important for the successful development of the project, along with the continuation of certain pre-FID [final investment decision] work with one of our EPC [engineering, procurement, and construction] contractors.”

The Lake Charles LNG project failed to meet the seven-year construction deadline of the USA Department of Energy (DOE) for LNG export permits. In May, the DOE denied Energy Transfer’s request for a three-year extension of the project, saying it did not meet its criteria for granting second extensions. The company requested a rehearing, and in June the DOE said it would not rehear the request, saying it was not convinced by the company’s arguments. Energy Transfer had sought the extension in part due to a variation in the design of the project to include a major carbon capture and sequestration (CCS) component, according to an earlier report from Reuters.

According to the company website, the Lakes Charles project is for the development of a large-scale LNG export facility in Lake Charles, Louisiana located on the Calcasieu Ship Channel. The project will convert Energy Transfer’s existing Lake Charles LNG import and regasification terminal into an LNG export facility, “providing a cost advantage over other proposed LNG projects on the Gulf Coast”.

The project is fully permitted for three 5.5 mtpa liquefaction trains, which will utilize existing infrastructure. The Lake Charles LNG import and regasification terminal has approximately 15.1 million cubic feet (430,000 cubic meters) of above-ground LNG storage capacity, two deepwater docks capable of handling ships with up to 7.66 million cubic feet (217,000 cubic meters) of capacity, and a deepwater turning basin, according to the company website.

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