Sempra Energy’s liquefied natural gas (LNG) export project in development on the upper Texas coast has finalized a supply and purchase (SPA) agreement to provide Polish Oil & Gas Co. (PGNiG) with 2 million metric tons/year (mmty) over 20 years.
The SPA, for the Port Arthur LNG LLC project in Jefferson County east of Houston, “is an important milestone” as Sempra pursues its long-term goal of exporting 45 mmty from the Lower 48.
The preliminary contract was signed in June at the World Gas Conference in Washington, DC, outlining basic terms and conditions. A final investment decision (FID) has yet to be made on the Port Arthur project, but the SPA is an encouraging sign as it is “one of the first definitive LNG supply contracts between the U.S. and Eastern Europe,” a Sempra spokesman said.
"This agreement with PGNiG represents an important expansion of our portfolio of contracts for LNG exports and major step forward in the development of our Port Arthur LNG project," said Sempra CEO Jeffrey W. Martin.
The liquefaction project is designed to export up to 11 mmty. Last year, a memorandum of understanding also was reached with Korea Gas Corp. (Kogas), providing a framework for cooperation, including engineering and construction, operations, equity ownership and LNG offtake. And in June, Bechtel was selected as the engineering, procurement, construction and commissioning contractor. The ultimate participation of Kogas still requires a definitive agreement.
The Port Arthur facility is proposed to include two gas liquefaction trains, up to three LNG storage tanks, two marine berths and associated facilities. A final environmental impact statement is expected in January from the Federal Energy Regulatory Commission.
The Texas project complement’s Sempra’s Cameron LNG export facility in Louisiana, a 15 mmty facility scheduled for start up next year. In addition, Energia Costa Azul (ECA) is on the drawing board for Baja California, with an FID expected next year.
"Last month, we began the commissioning phase of our Cameron LNG liquefaction-export facility in Louisiana,” Martin noted. “This agreement, along with the great progress on Cameron LNG, continues to validate our growth strategy as we advance our vision to become North America's premier energy infrastructure company."
The Trump administration has been touting that the United States can supply Europe with more U.S. gas, allowing allies to rely less on Russian pipeline imports. Energy Secretary Rick Perry, who rolled out expedited U.S. LNG export rules also on Wednesday, called the SPA with PGNiG “an important step toward Poland's energy independence and security. As demonstrated with the launch of the Strategic Dialogue on Energy in Poland last month, the Trump administration remains committed to increasing energy diversity, advancing energy security, strengthening national security, and creating a future of prosperity and opportunity in Poland and throughout the region."
In November, Cheniere Energy Inc. signed the largest SPA to date with Poland for LNG, a 24-year deal with PGNiG to supply 1.45 mmty beginning in 2019, with the full annual quantity starting in 2023.
PGNiG’s Piotr Woźniak, president of the management board, said the new long-term contract with Sempra “not only allows us to develop LNG portfolio with a view to delivering to Poland, but it gives us, in the near future, the possibility of trading in LNG purchased on a global scale.”
Under the SPA, LNG purchased from Port Arthur LNG will be made on a free-on-board basis, with PGNiG responsible for shipping the gas from Texas to the final destination. Port Arthur LNG is to manage gas pipeline transportation, liquefaction processing and cargo loading, giving PGNiG flexibility in cargo management. PGNiG plans to deliver cargos to domestic customers in Poland or trade LNG on the global market, once operations begin.
For the Cameron LNG project, Sempra is partnering with Mitsubishi, Mitsui & Co. Ltd. and Total SA. Total, a 16.5% stakeholder in Cameron, entered into a memorandum of understanding last month to take up to 9 mmty combined from Cameron LNG Phase 2 and ECA. Sempra also has heads of agreements with Mitsui & Co. Ltd., Tokyo Gas Co. and Total, for all of the export capacity from the first phase of the ECA project.