EOG to Supply Gas to Cheniere Texas Facility

EOG to Supply Gas to Cheniere Texas Facility
Under the gas sales agreements, EOS will sell up to 440,000 MMBtu per day.

EOG Resources, Inc. has signed long-term natural gas supply agreements with two subsidiaries of Cheniere Energy, Inc., Cheniere reported Monday afternoon.

Under EOG’s gas supply agreements (GSA) with Corpus Christi Liquefaction, LLC and Cheniere Corpus Christi Liquefaction Stage III, LLC, the exploration and production company will initially sell Cheniere 140,000 million British thermal units (MMBtu) per day of gas but ramp up volumes to 440,000 MMBtu per day, Cheniere noted in a written statement. The approximately 15-year GSA period begins in 2020.

Cheniere stated that it will own and market the roughly 0.85 million tonnes per annum (mtpa) of LNG associated with 140,000 MMBtu per day of the gas supply, adding that EOG will receive a price for this share of gas based on the Platts Japan Korea Marker (JKM). EOG will sell Cheniere the remaining 300,000 MMBtu of gas at a Henry Hub-indexed price, the LNG producer noted.

“We are pleased to partner with EOG, one of the largest independent natural gas producers in the United States, on our second Integrated Production Marketing (IPM) transaction which is expected to support Corpus Christi Stage III,” Corey Grindal, senior vice president of Cheniere’s Gas Supply unit, stated. “The IPM commercial structure leverages our world-scale infrastructure platform and capabilities in Corpus Christi, offering domestic natural gas producers efficient access to global LNG prices and long-term flow assurance, while providing Cheniere with reliable delivery of natural gas and commercial support for growth.”

Cheniere also pointed out that a portion of the transaction hinges on a positive final investment decision on the Corpus Christi Stage III project, which would add up to seven midscale liquefaction trains with roughly 9.5 mtpa of capacity. The U.S. Federal Energy Regulatory Commission (FERC) granted the project a positive environmental assessment in March of this year, noted Cheniere, adding that all remaining regulatory approvals are forthcoming by the end of 2019.

 “We look forward to working with Cheniere, the leading U.S. LNG producer, to expand into international natural gas markets where global demand is expected to significantly increase for years to come,” D. Lance Terveen, EOG’s senior vice president for marketing commented. “Adding gas sales agreements linked to LNG prices supports EOG’s portfolio approach to marketing our growing production of low-cost natural gas. These agreements further diversity our access to customers across multiple end markets in order to maximize our natural gas price realizations.”

Cheniere’s Corpus Christi Liquefaction (CCL) facility has also been designed to host three other trains with up to 13.5 mtpa of nominal production capacity, Cheniere stated. Earlier this month, the company reported that CCL’s second train achieved substantial completion on Aug. 28, 2019.

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